Bertrandt: Soft Quarter in Q1 FY20
Bertrandt had a soft quarter in Q1 FY20 (corresponding to calendar Q4 2019): revenues were flat (+0.4%) to EUR 263m, impacted by project delays, and reduced utilization rates in its Digital Engineering (DE) unit (-3.0%). DE, Bertrandt’s largest unit (55% of revenues), suffered from Germany OEMs shifting their R&D spending to digital.
Meanwhile, Electric/Electronics (E/E), the “digital” unit of Bertrandt, is gradually accelerating its growth (to +13.4%), a level considered by the group’s management as “decent.” It is nice to see E/E get back to double-digit growth, something the unit had not done since the beginning of FY18.
Finally, Physical Engineering (PE), Bertrandt’s facility-based service business, was down by 2.6%. Bertrandt expects PE to return to a positive momentum with the 2020 launch of its Powertrain Solution Center and its Battery Test Center.
Bertrandt’s profitability was under pressure, with an EBIT margin down 260 bps to 5.6%, impacted by low utilization resulting from project delays, restructuring, and price pressure in DE.
Bertrandt reiterated its guidance for full-year FY20 (a EUR 20-50m revenue increase and an EBIT margin in the range of 5.0-7.5%), despite its soft performance in Q1.
Bertrandt has, in the past, suffered from market conditions and quarterly revenue fluctuations from its largest client and shareholder: VW. The company is looking to diversify its client base to reduce its dependency on VW, which still represents a third of revenues. The revenue diversification is lumpy, with non-VW revenues flat in Q1. Bertrandt is progressing in new areas such as medical devices and new geographies. However, this diversification is taking a lot of time. Investor patience showed its limit on Friday with Bertrandt’s down 4%.