SII: Simply the Best this Quarter

/ November 10, 2021/ Financials, France, SII

SII: Simply the Best this Quarter

SII was simply the best this quarter. The France-headquartered ER&D services vendor had its revenues up 24.0% yoy (at cc/cs) in Q3 2021/Q2 FY22. SII matched Alten’s excellent performance (+24.0% at cc/cs) despite relatively demanding comps. Unlike peers, SII had limited exposure to automotive and aeronautics. In FY21, its revenues were only slightly down, by 1.5% at cc/cs. SII, therefore, managed to grow its Q2 FY22 revenues despite relatively demanding comps (-4.5%). Alten’s decline during the same quarter was 9.4% yoy.

France Is Back to Pre-COVID Levels

SII continued its rebound in France, still its first market. Revenues during the quarter were up 19% at cc/cs. The company is now back to the same revenue level (EUR 86m) as in Q2 FY20 (EUR 84m), before the pandemic. SII did not acquire during the period.

Poland Amazingly Strong. Spain Back

In international markets, SII now has two growth engines: Poland and Spain.

The company has three large countries (Poland, Germany, and Spain) and many small geographies. Poland, the largest geo, was up by 33% in Q2 FY22. This is quite a performance, as SII’s Polish operations continued to grow fast during the pandemic (21% in Q2 FY21). SII continues to benefit from Poland’s low-cost value proposition within the EU still.

SII’s performance in Spain is less dramatic than in Poland. During the pandemic, SII’s Spanish operations suffered from their exposure to the automotive sector. Spain is now catching up, with a cc/cs growth of 40% in Q3, in line with Q1 (+46.5%). SII believes it has completed its restructuring in the country and is optimistic about it.

SII’s last challenge is Germany, which continued to decline in Q2 (-8% yoy). Germany, like France, suffered from its aeronautics and automotive client base. For the first time in many quarters, Germany’s decline was in the single-digit number (-8.0% yoy). Client diversification remains a priority in the geo.

A High Market Cap Leaves No Space for Disappointment

Stock markets have loved SII’s resiliency during the pandemic. SII’s market cap is now €900m. With such a high market cap, SII cannot disappoint investors. The company needs to confirm that Spain is back to growth for good. It will also need to raise its profitability level, which remains sub-standard, even by onshore standards.

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