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Tuck-In Acquisitions Continue Despite the Stock Markets Melt-Down
Despite the stock market melt-down, ER&D vendors have continued to make tuck-in acquisitions in the past two weeks. The acquired firms were of small size and not likely to impact the net debt of their new owners. However, should the Covid-19-China-US trade-war-Stock Markets meltdown-oil price crisis degenerate into a recession, we expect suck tuck-in acquisitions to become scarce.
Akka Launches a Mandatory Offer for Data Respons
Akka has launched a mandatory offer for Data Respons (DR) that will provide shareholders the opportunity to sell their DR shares. The company has been active on the stock markets since the end of its tender offer on February 13, raising its stake from 72.9% to 78.1%. Akka is hoping to reach 95% of shares and launch a squeeze-out offer later one.
Covid-19: Slowdown in ER&D Spending Now Likely
Currently, Covid-19 has only affected China significantly, although having spread in South Korea, Japan, and Northern Italy.
Several ER&D vendors have been impacted so far: Ricardo has warned that the situation in the Chinese automotive market would have a “material” effect on its profit.
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.
2020: A Year of Slowdown for ER&D Service Vendors
We are expecting a slowdown in ER&D spending in 2020. Learn more here.
Ricardo Sells Dolphin N2 to CNH Industrial
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KPIT Had A Solid Q2. Strategic Questions Remain
Automotive engineering pure-play KPIT continued on its growth momentum in Q2 FY20 (+15.2% yoy), enjoying a satisfactory EBITDA margin of 13.4%. KPIT’s financial performance was, however, a notch below that of Q1 both in terms of revenue growth (Q1: +19.3%) and margin (14.6%).
EDAG: More of the Same in Q3 2019
EDAG’s financial performance in Q3 2019 was very similar to that of Q2: revenues were down
Wipro Expecting An Acceleration in E&IS from Q3 Onward
During its Q2 FY20 earnings call, Wipro provided some light about the performance of its Industrial & Engineering Services (E&IS) unit.
It is not so long ago that Wipro was corporate India’s strongest name for ER&D services, mostly servicing clients in the network equipment provider industry and also semiconductor manufacturers.
TCS acquires parts of GM’s Technical Center in Bengalore
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Ricardo: the diversification strategy is taking time to bear fruit
Ricardo announced mixed results for full-year FY19. Revenues were up 2% to £384m, with flat CC/CS growth. We estimate that revenues declined slightly (flat to -1%) in H2, impacted by a collapse in Technical Consulting (TC), it ER&D unit.
KPIT: a high-growth automotive pure-play
KPIT published its Q1 FY20, its second quarterly earnings since it became an automotive ER&D pure-play, since the sale of its IT service business to Birlasoft, last year.
UPDATED: Segula finalizes its outsourcing contract with PSA. Reduced scope!
PSA finalized its outsourcing contract with Segula, almost one year after it was announced. Looking at the details, the scope of the contract is much smaller than expected, with the people transfer initially involving 700 employees, rather than the 2,000 expected. Segula has agreed to take over the new engineers and guaranteed similar wages and benefits and also purchasing buildings and facilities.
EDAG issues a profit warning
EDAG issued last night a profit warning for its full-year 2019 operations. The company is now expecting revenue growth by approximately 1% (previous guidance 5%), an adjusted EBIT margin of 4%-5% (previously 5%-7%), and a net profit of EUR 10m.
KPIT returns to the stock market
Last week, KPIT Technologies, returned to India’s BSE and NSE. The company now has a market cap of approximately USD 410m with its share was introduced at a price of INR 99 and traded in the past few days between INR 103 and INR 115. KPIT has succeeded in its IPO and is now an ER&D service pure-play having sold its IT services business to Birlasoft.
Accenture makes a further acquisition for Industry X.0, in Germany
Accenture continues to deploy its M&A strategy and has made its fifth acquisition for Industry X.0. The company acquired Zielpuls, an ER&D vendor servicing the German automotive industry. Zielpuls is an embedded systems specialist.
Segula open a new delivery center in the east of France
Segula Technologies has opened a new delivery center, close to Montbéliard, in the east of France. Segula will use the delivery center for its offsite projects, targeting the automotive industry (i.e., PSA) and its suppliers initially. Over time, Segula wants to diversify its client base to other sectors.
EDAG impresses in 2018 with a 10% growth. Key strategic questions remain
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How will 2019 look like for the ER&D services industry?
We are now entering the season for Q1 earnings, and as always we will look into changes in major trends. The state of the automotive industry will be an area we will be closely monitoring.
Non-linear growth: what’s up with Ricardo’s Performance Products unit?
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Ricardo renews and expands its engine manufacturing contract with McLaren
British ER&D service vendor Ricardo has renewed and expanded its engine manufacturing contract with McLaren. The company will manufacture engines for McLaren’s Track 25 plan. McLaren is expanding its car portfolio and as part of Track 25, will design 18 new models or derivatives of existing models.
Bertrandt accelerate somewhat in Q1 FY19
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Luxoft’s automotive R&D unit accelerates in Q3 FY19: +56%
Luxoft’s Automotive and Transportation unit had a stellar performance in Q3 FY19, with revenue growth of +56%.
KPIT reborn!
KPIT quietly finalized its merger with the privately-owned Birlasoft. The new company is now called Birlasoft and will be an IT service pure-play. Birlasoft has carved out its automotive engineering business that will be called KPIT.