Two Vendors Put on Hold their Financial Guidance. This Is Only the Beginning!
Two ER&D service vendors have updated the market on the impact of Covid-19. Assystem, a French vendor operating mostly in nuclear engineering, has dropped its 2020 financial guidance, eleven days after announcing it. The company is not able to assess the impact of the pandemic on its financial results. Between the guidance issuance and the cancelation of today’s events, the French government decided to confine all inhabitants at home, leading to a severe work from home move acceleration, and an abrupt drop in economic activity. Although it operates mostly in the nuclear engineering industry, Assystem has, like any other vendor, its share of run activities and discretionary spending.
Semcon is a Swedish vendor with a background in automotive engineering, having diversified its client base over the years. Semcon is flagging reduced demand from several clients and is applying temporary lay-off measures. The company is, like Assystem, not able to predict the financial impact of the current crisis.
We are seeing a flurry of firms giving up their financial guidance for 2020. In the ER&D space, only Assystem and Semcon have made official statements. From our early discussions, most vendors have focused on business continuity, with the priority being setting the infrastructure for home working. We now are exiting this phase and starting to see project impact, i.e., projects that cannot be conducted all from home and are suspected, and clients freezing their spending, in anticipation of the crisis. We expect an acceleration in profit warnings in the coming weeks. 2020 will be an ugly year.