Continued High Organic Growth for SII SII truly impressed us with its high organic growth in
In Q3 2022, Sweco achieved its best organic growth of the past ten years. Revenues were up 9% yoy organically, primarily thanks to price increases.
AFRY had double-digit organic growth in Q3 2022. We think that AFRY has completed its transformation initiated with the 2019 Poÿry acquisition
Etteplan To Acquire Semcon to Gain Scale Etteplan, the ER&D services vendor headquartered in Espoo, Finland,
Alten enjoyed high organic growth in Q2 2022, despite challenging comps. Revenue growth was 18.9% yoy at cc/cs. The performance was strong given that Q1 2021 revenues were up +19.7%. This is the fifth consecutive quarter of ~20% organic growth.
lten finished 2021 with an India-growth rate. For the third consecutive quarter, Alten has an organic (cc/cs) revenue growth close to 20%, reaching 23.2% in Q4. The company benefitted from favorable comps (-17.4% in Q4 2020) and HR decisions.
II 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.
Modis came into the light two weeks ago when Adecco announced the acquisition of Akka. Modis is a decently large IT services firm with 2020 revenues of EUR 2,179m. It is little-profitable with an adjusted EBITA margin of 5.7% (2019: 6.3%). Like everyone, the company faced headwinds in 2020, with revenues down 9% in 2020 (2019: -3%).
Following a Reuters news release, European IT services vendor Atos confirmed it had submitted to the Board of DXC an unsolicited non-binding offer to acquire the firm. The offer is at a preliminary stage. Reuters estimated Atos’ offer to USD 10bn.
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.
According to unofficial sources, Renault has now finalized its list of preferred ER&D service vendors, reducing it from nine vendors to four. The four winners are Akka, Bertrandt, Expleo, and Segula. They will now grab 80% of Renault’s ER&D spending and double their market shares.
The Stock Market meltdown resulted in an unexpected outcome: Capgemini secured 98.2% of the shares of Altran, with investors rushing to get EUR 14.5 per Altran share. Capgemini will now launch a squeeze-out procedure.
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.
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.
Alten’s revenues in Q4 slowed down to a growth of +7.3% yoy (at CC/CS ), following double-digit CC/CS growth during Q1-Q3 2019. The company suffered from a demanding comparison basis (+13.7% in Q4 2018), and one lesser working day in several countries (a 0.15% impact on the group’s revenues).
The industry loves to talk about convergence, especially between ER&D and IT services. As an industry analyst, I must say that I have never seen such porosity between IT service and ER&D services vendors.
Wipro announced a mild growth in the revenues of its Industrial and Engineering (I&E) business unit in Q3 FY20: I&E revenues were up by 3.1% only (to USD 151m). Revenues included a small contribution from the recent ITI acquisition and were impacted by the market conditions in the semiconductor industry and softness in 5G adoption.