At first glance, SII performed very well during calendar Q3 2020 (corresponding to its Q2 FY21). Revenues were down by only 4.5% yoy at cc/cs. By comparison, Alten’s revenues were down by 19%! SII continued to overperform its French and European peers by a very significant margin.
Europe has now entered its second lockdown. The lockdowns have different restrictions levels and different lengths. The UK and France are running for the full month of November. Officials in the two countries have, however, warned the lockdown might last longer, until Christmas at least.
Alten announced better than expected revenues in Q2 with a CC/CS decline of 18.4% (we expected -23%), after a growth of 4.0% in Q1. During H1, the decline was 7.3% (guidance: -9%).
Sweco had already demonstrated its resilience in Q1, with a +4% organic growth. In Q2, despite COVID-19, the company remained in positive territory (+2%). The performance is a surprise, as Sweco is very sensitive to the number of working days.
ER&D’s largest pure-play globally, Alten, will be announcing its Q2 2020 revenue by the end of July. The company had a very decent Q1, with a 4% CC/CS revenue growth. However, it warned that revenues would be down by ~22% in Q2.
A bit more than two years ago, the share of Bertrandt was above EUR 100 and its market cap above EUR 1bn. Investors liked Bertrandt’s annual growth of 10% and its high-single-digit EBIT margin. Today, Bertrandt’s market cap varies between EUR350-400m, and the financial performance continues to deteriorate.
Cyient surprised, negatively, the markets by announcing a decline of 9.7% in its Q4 FY20 revenues (to USD 149m) and an adjusted EBIT margin down 440 bps (to 8.4%).
Without surprise, French ER&D service vendor SII announced a slowdown in its Q4 FY20 (ending March 31): revenues were up 2.2% at CC/CS during the quarter.
Dassault Systems lowered it Q1 2020: the company is now expecting revenue growth in the range of 14%-17%, down from a 20-23% guidance (that includes the acquisition of Medidata). The company has suffered from weaker than expected new license and services revenues. Meanwhile, revenues of Medidata were on a “momentum and license renewals were up too.
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Two vendors, Assystem and Semcon, have put on hold their financial guidance for 2020. This is only the beginning.
Since we published our last note on the impact of Covid-19 on ER&D spending, the situation has changed with Covid-19, having now spread to Europe and soon the US. Already, The European Central Bank is predicting a GDP decline of 5% in 2020, based on the impact of three months of confinement.
Akka has not provided a guidance for 2020. The company expects to suffer in H1, from automotive, aerospace and Covid-19
The US Federal Reserve yesterday lowered “the target range for the federal funds” by 50 bps to 1%-1.25%. Although the “fundamentals of the US economy remain strong,” “the coronavirus poses evolving risks to economic activity,” communicated the Fed.
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.