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Hello and welcome on the occasion of the ALTEN conference reporting on Q3 of 2019 activity. I would like to hand it over to Mr. Bruno Benoliel, Deputy CEO.
Hello and thank you very much for being with us on the occasion of this Q3 communication, the activity of the ALTEN Group. As you've seen, activity has remained satisfactory both in France and internationally. ALTEN has delivered a consolidated turnover of EUR 1.9364 billion, plus 69 -- 16.9% in year-on-year change. Activity in France is up 12.3% in France, 11.7% outside France, business in Q3 growth on a like-for-like basis as we reported in last August. So business has grown on a like-for-like basis. Looking at the business in Q3, business in Q3 grows by 15.8%, 10.2% in France and 20.2% abroad. And Q3 2019 has benefited from 1 more business day and has, therefore, produced 1.4% of additional growth. And we're having -- growth has been slightly hampered and [ 91.4%] compared to previous year and no differential from business days as compared to last year. And so we have overall 0.2% more business day outside of France, 1% more business day in France. So activities has remained sustained. And international operations contribute to 20.7% overall. ForEx has come with a contribution of 0.7%. And with the ForEx effect and organic growth, it's 12.0%, 12%. ALTEN Group is comprised of [ 3,400 ] engineers within the group and 33,700 at the end of September in total. Since the end of 2018, headcounts have grown by 3,200 headcounts. So organic growth has driven the business. And we have, on a per acquisition basis, 903, meaning international acquisition, mainly, 903 additional staff members. Referring to the distribution. On the quarterly result -- engineers result had [ only ] grown by 967 as end of August as a result of number of people leaving as end of May. Q3 recruitment campaign has been very good because ALTEN has made up forward the basis from the number of people leaving, with an additional 970 engineers as end of September. 430 engineers have been recruited in France. So with the exception of 2018, 2018 being an unusual, to Q3, we were talking 900 engineers. This is a much better performance than 2015 or 2016. And transfers have benefited countries like Morocco with full-time equivalent positions as a result of this recruitment drive. So faring not as well as 2018. Well, 2018 had been an exceptional year. Outside France, headcount growth is mostly related to Italy, the U.K., North America, India, China and Morocco. On a per geographical area basis, France has continued growing in a sustained way in excess of 10%, and 12.7% overall. All our business line have grown except -- and with -- spearheaded with the Aerospace; Energy, both in nuclear as well as in oil and gas; as well as Defense & Security, plus 25%. And growth has done particularly well in the automotive industry even if overall the growth of the automotive industry in France is below the average growth at 8.4% as end of September, and it stood at 6.5% as end of June. And they're accounting for 25% of the revenues in France. And lastly, in offshore, growth has been driven by carmakers. Internationally, as usual, growth has been heterogeneous on the base of geographical areas. North America, plus 25%, amongst which 17% in organic. And in the continuity of the first semester, the most dynamic sectors are the automotive industries both for OEMs and carmakers. Energy, plus 50% as well as the boost in oil and gas. And so as well as medical, notably, thanks to pharmaceuticals. In Germany, organic growth stands at, again, 4.4%, the automotive -- the carmakers and OEMs making out for a significant share of the growth. We have Defense and Aerospace, and the activity has grown 30%, accounting for nearly 5% of the German revenues. Even if Germany growth has remained below that of the group, the performance of the sector has done well, especially in the automotive industry, and delivering a satisfactory performance overall. In the Nordic countries, growth stands at 19.6%, amongst which 9.3% in organic growth. And Finland accounting for 20% of the organic of the Nordic countries is maintained, maintaining this growth at plus 8%. In Finland, organic growth stands at 8%, has significantly slowed down as a result of downturn in the heavy truck industry and carmaking industry. [ I suppose ] today the current -- telecommunications sector has gone up 12% and, notably, in industrial equipment as well as service sectors. The [indiscernible] in this field growth, respectively, [ obtained ] a 40% and 38% in Germany. Organic growth stands at 7% as end of September. This is a slowdown since in the second semester. Defense sector is going up 8% in Spain, and growth stands at overall 5% to 8%. In Italy, growth has exceeded the 20% mark and is still driven by financial tertiary sector. And multimedia, plus 14%, as well as industry, plus 31%. In APAC, 8% in organic growth, plus 38. Strong growth in China and India, still, for local markets. And in the U.K., the activity is regaining growth with oil and gas. Oil and gas only accounts 5% of the revenues in the U.K. in nuclear as a result of the EPR. [ Purchase ], plus 15%, significant growth of the Aerospace sector. And automotive industry is confirming its growth, plus [ 8% ], essentially with [ GLR. ] And the financial sector going down over 15% as a result of the economic context related to Brexit. In Belgium, activity has gone up. It's recovering now. And after a difficult start of the year, finance and auto sectors are still going down and -- but made up for by the railway sectors, 37%, as well as media and telecom, plus 7%. In the Netherlands, growth stands at 9.8%, with the slowing down of electronics and semiconductor for the Netherlands. Let us look at our sector-based analysis of activity at, obviously, constant-scope, like-for-like basis. And the growth is still constant and we account, and what has been going down is similar to and in line with what -- and with the first semester with [ SCR, ] Volkswagen, Renault trucks. So BM, Ford and Tata are doing well there. For OEMs sort of growth is remaining stable. And with a highly diverse evolution, Naval sector so significantly going up, nearly 25% in Rail. And Aerospace, sustained growth there, [ 16%, ] Airbus [ wings ] as an aircraft maker, and growth is significant. And with the likes of Safran and Thales in the Aerospace [ still account 2% ] of the revenues. And not significant, but this has slowed down as a result of the decline in the launch of satellite this year. So growth will be slightly over the [ 0% market. ] Activities related to Defense & Security is accounting for 5% of our revenues, still going up 6 -- 17%. Energy, 8.4% of revenues. This has accelerated growth to 12% thanks to oil and gas accounting for 5.5% of revenues, up in Q3, plus 16% as end of September thanks to favorable base effect. But many projects have started up again. [ Flanks and Total ] and the pace of growth has stabilized to 20% in the nuclear sector thanks to the EDF-related business. This sector of Other Industries has seen -- the base [ rate of ] this growth going -- slowing down thanks to -- and related to industrial equipment and the pharmaceutical homogeneous growth there. And with -- and Life Sciences accounting for nearly [ 16% ] of our revenues and nearly accounting for 0% some 5 years ago, now accounting for 7%. Telecoms have slowed down in Q3, cumulated growth at 7.5%. And Ericsson [ new ] accounts to 2% of revenues. And the operators in our heterogeneous all going with the exception of SFR and slowing down as a result of the ending of a number of projects. Electronics, 25% in Q3 thanks to the -- driven by the e-commerce sector. With regards to the financial sector, up 6.7%. We're looking at a slowdown of the pace of growth on a [ background ] basis since the start of the year. No surprise there. So overall, an activity with sectors that are all going up significantly, although some of them are -- some of these are slowing down. And growth rates have remained very, very vigorous. Some external growth news, last year, 7 acquisitions, 7 international acquisitions, as reported last month. And still a number of [ mediums ] in progress as you might gather. There might be a number of closings between now and the end of the year. But see what happens. So growth should be double-digit growth between now and the end of the year with an organic growth of about 10%. So I'd like to leave the floor now to the participants to the meeting. If you want to open the conference, bearing in mind that I have another call at 7 p.m. on different topics. So I'd like to take as many questions as possible in the meantime.
[Operator Instructions] First question from Gregory Ramirez from Bryan Garnier.
Hello, Bruno. Just one clarification. On the hiring on T3 (sic) [ Q3 ]. I ended up with plus 1,000 in total -- on total headcounts, plus 1,150 on engineers. On engineer's headcounts, between what date and what date?
Between 30th of June to 30th of September.
So with a delta of 1,150 overall?
Yes, exactly.
Any acquisitions as announced previously?
Exactly. So we have on Q3 engineers and headcounts at 31,550. We recruited 170 people in France, in net, plus 170; and internationally, plus 249. So that's 664 people. So 170 plus 494, so that's 664. And following the integration, as announced, that's [ 186 ] engineers.
Right. And you were -- for October, you mentioned the recruitment, that have gone smoothly. And the end of the year, we might contemplating that faring in the same vein as what we had on T3 -- on Q3. Because last year, I think it went -- this was very strong indeed.
Q4, we recruited 1,580 people. This was an extremely strong performance, which we never reiterated, never repeated this performance of this recruitment drive on Q4. As recruitment assumptions on France, internationally, we're talking -- taking into account holidays in mid-December, so this will slow down recruitment on France, might generate equivalent of what we did in Q3. So it will be far from being the equivalent of what we did last year.
Apart from that, no signs of changes on the turnover? We're talking 25%, 26%. No changes on the turnover?
It's pretty stable and revenues-wise, so acceleration and deceleration.
[Operator Instructions] We have a new question from Derric Marcon from Societe Generale.
I have 3 short questions. Number one, on Q3, and I think there's been a number of companies that have seen the number of days billed identical to that of last year. So because it was August, because it was the summer recess, there wasn't any beneficial effect that we could have expected in terms of number of worked days.
Well, we look at the number of days billed and the reprocess with the intercontract rates and the number of days billed relates to the calendar. So the impact stands at 1.4% on the growth according to our calculations. That's 1.4%.
Second question related to Germany. I think in your comments, you said 7.3% of year-to-date organic growth. So in terms of that's 4.3% organic growth, excluding the ForEx effect, so plus 34 -- well, I have others in negative water in [ one of listed ] comes the answer.
So Automotive and Aerospace is about [ 90% ] of the global. So we have a tertiary sector negative. So these are sectors that even if there, they don't weigh much overall well. And sector accounting for 5% in Germany [ went down to ][ indiscernible ]. So the -- I was referring to the banking sector overall. And on the training side of things. So that doesn't explain -- that doesn't give you the whole picture but because that doesn't account for a significant share. But Life Sciences accounts for 5.6% overall in revenues, but they are down 15%. So the average of the sum of the pluses exceeds the 4.4%. But then you have a number of small sectors in -- or going down.
And the final question, if you can -- [ How far are these ] the minus 150 of onshore -- via onshore transfer for France, so the minus 150 in headcount. This is the same figure that you mentioned with us for the first 6 months. Or can you tell us a bit more about this now?
That is, by and large, the same figure, the same numbers. We [ service that averaging ] including the number of onshore projects over the past quarter.
So Bruno, there are 2 explanations. As these -- there hasn't been any large projects that have started with the international scope. And the second explanation is that clients and in their R&D management and -- there hasn't been any large projects.
These are projects that [ we ] prefer to have on-site teams. As a result of this, although we had strong growth in Morocco as a result of the automotive industry going up, this effect is -- this phenomenon has led to a slowdown in Q3. So we had 700 people in Morocco as end of June, and we have 709 people in Morocco as end of September. So that, obviously, the -- there are other sectors there. Clear? Okay.
And our final question is, your comment on the annual targets, you said 8% growth? Is it for the whole year? Because in year-to-date, we stand at plus 12%.
Yes. Well, we anticipate the fact that we did a very, very strong Q4 last year. So we had strong recruitment drive last year, and we've opted for quite realistic objectives. And we have -- we're going to have a de-growth of the organic growth rate on Q4. This is where we had a trend. It's no different to what we had anticipated, [ i.e., ] plus slightly over 10% on the full year in organic growth.
Next question from Laurent Daure from Kepler Cheuvreux.
I had two questions as well. First can you update us on telecoms? This has slowed down a bit. I felt that we're could've hoped for an improvement of the sector and to [ kind of forward ] 6, 12 months on a vertical. Second point is really about helping us understanding what's happening in terms of the growth into 2020 and start of the year. So we'd be talking 2,500 headcounts in organic growth over the year -- full year, plus we have a pricing effect, a dilution effect, plus the offshore recruitment effect. So with all these pluses and minuses, what's your view of that? And second question was -- is your visibility on the first semester. Do you have -- what are the verticals where you're pretty sure there'll be deceleration/acceleration? What's your view on that?
In terms of headcount, provisional growth. As things stand as end of September, we're talking plus 850 in organic growth engineers compared to the end of 2018. Are we going to hit the 2,500 mark? I don't know. We're in October, and recruitment wise, it's been a good month. So by and large, plus 650 in Q4, plus 700 in Q3. So the net recruitment assumption is about in the -- that range, so plus 1,500 for H2. And [ indiscernible ] the end of the day, we look at -- we've taken good profiles, good CVs without necessarily having projects for those, and this is identical to September, October, slight increase in intercontracts. So we have a self-regulatory effect. If the intercontracts goes up too much, the business managers will naturally tend to slow down recruitments so as to absorb their intercontracts because this will impact their margins calculations, and this will impact us strongly. And depending on the resolution of intercontracts in November, we'll see whether the dynamic of equipment will go on in November and into December. Let's see the way things work out.
Second question was about what's your assumption on pricing effect and offshore and long-term trends because these are two elements, one making up for the other or we have a slight plus overall.
I would take a slight plus, a slight excess as a result, not necessarily to the same proportion of 2018. Offshore will continue to grow. But if I look at what's happening, we've accelerated relocations a lot in the [ Auto ] sector. [ Indication ] in France started in the Auto sector. In Germany, we don't have the feeling that we are accelerating there. If we take both factors in consideration, there'd be a slight positive effect.
And our final question [ indiscernible ]. I had a question on telecom and on the change of dynamics in one or 2 sectors. So telecoms, it's slowing down because we've almost got no projects, [ indiscernible ] the OEMs we're growing is Ericsson is continuing and 2 American businesses, all other OEMs in the telecoms, [ most are ] even negative. In total, there was 50-50 in the telecom activities. Media and now telecoms is way below, and 2 operators driving growth in 2018 and 2019. Out of those, we have 3 operators that recorded a significant slowdown in Q3, SFR being the first one. They seem to have a policy of reinternalization. And according to the info we've got from the shop floor, [indiscernible] is again and Vodafone [ indiscernible ] with significant slowdown. Although the organic growth in [ indiscernible ] was very strong. So we don't know it's likely that this will continue going down with SFR next year because if this is a corporate policy, then there's no reason why this will not be happening. And in 2020, the only certainty we have is that 5G licenses will be allocated in Q2, and will there be projects into 2020?
We are very clear about that. And in terms of this vertical, the logic will be that we can't go on with 20%, 30%, 40% of organic growth, that's just not sustainable. Banking sector has already started slowing down quite significantly. Automotive, this will be tense. Will this slowing down? We don't know. But -- so it should be -- it's likely to slow down into 2020.
So do you think it seems too pessimistic, or it is negative [ rates ] in 2020?
Well, the turnarounds leading to a negative growth, this is not the assumption we work with right now, maybe we are being optimistic. And then once we've talked about automotive and banking and telecoms, and semiconductors, I think things will slow down. And [ we -- our estimate ] this is a good indicator. We've seen in the U.S. semiconductors, we've seen a slowing down. Other sectors, well, some have continued accelerating, others have slowed down. But again, there'll be base effects which are such that we won't have a -- growth won't be indefinite. And especially when we talk about growth of 40% in some of these sectors, we might come back to more normal growth levels next year.
We have no longer any -- we don't have any [ general ] questions for the time being. [Operator Instructions] We have new questions from Mr. Derric Marcon from Societe Generale.
Yes. I'd like to come back on the results and targets. In the targets you've used, we have an absolute figure below Q3. Are you not being cautious there? That's my first question. And secondly, end of September, did you have [ warrants ] you had in April and June? Maybe more people leaving than anticipated? I know that turnover is significant, but is there something that you're looking at on -- compared to Q2?
No. As end of September, there hasn't been an abnormally high number of people leaving or departing, nothing special there. Then we had tough forecast giving a range. So once again, this will not have a significance on Q4. These are end of the year recruitments, and this might impact the growth of 2020. And as I was telling you about thus far, there'll be self-regulation of the ALTEN ecosystem, and this -- which is quite sensitive. We -- you might opt for assumptions -- come up with assumptions, and then they might not materialize, on the contrary.
Well, I was trying to reconcile this and the [ indiscernible ] optimism at the half year conference, which was very much voluntary in terms of recruitment drive in Q3 and Q4, given what you did in Q2, well, it would be at higher pace I would've thought.
Recruitment, voluntary recruitment drive, yes, but -- sure enough. But when you look at the -- even if we don't have any projects of the profiles that we know that are sought out on the market, and when you see, intercontracts every year has engineers, they need to be embarked on projects, especially on the work packages. You need to have -- to put together teams, I'm talking hundreds of people, so maybe less agile as in the case of small projects. And then things such as that [ French ventures ] bring down their recruitment on the basis and in relation to intercontracts, and it's a logic process. Anyone -- anybody in sales and -- will take similar steps that they will not take any risks to impact their own commissions in taking on board additional staff. So Q3, we had [ brought ] this recruitment drive, recruitment with 170 people in France, in which -- and bear in mind, that we retained 250 end of June. So quite a healthy figure. If we do likewise in Q3, my feeling is that we will be faring well. And -- but we won't repeat last year's results, that's for sure.
Yes. Because your utilization rate is, again, something to look at.
When you say organic growth beyond 10, it will be below (sic) [ beyond ] 10 but not beyond 11. We'll be between -- I mean we -- it wouldn't make sense. We can't know the revenues, but something around 10.5% overall revenues for the full year, 10.5% business growth for the full year, yes. But it will be -- it wouldn't make sense to give specific revenues 3 months before the end of the year, but the annual margins will be comprised between or within a different range. So clearly, even if there's slightly less growth, as expected, this will not hamper the margin. So the margin should float with the 10%.
We don't have any additional questions for the time being. Ladies and gentlemen, you can have a final -- this is your final opportunity to submit your questions with the keypads. We don't have any questions. I would like to hand it over to you for closing remarks. Thank you very much. New questions have just come in from Mr. Anthony Dick from Portzamparc.
Regarding M&A, so quite -- you've been quite cautious as to the acquisition targets on the second semester. Has the market environment changed? Can you give us some indications into 2020? Do you think the number of acquisitions will be similar to that of this year? Any changes there? Any evolution in market?
We've looked at a number of opportunities on this semester. And last semester, and we decided not to go for it for strategic reasons. But no more, no less over this semester. We have other possibilities we're looking at, we're talking end of October here. I don't know if we will manage to get a closing between now and the end of the year. This might be happening at the start of next year. So there's no specific reason why wouldn't buy -- we wouldn't take over companies and might -- between 7 and 10 acquisitions. There's no reason why -- so 7 and 10 this year, and no reason why this wouldn't go on in the same vein last -- well, next year. So even if -- so I'm talking about Spain, with interesting opportunities, we might buy there, if that makes sense. And we have strategic areas that we're looking at, and these are -- we're looking at Asia, the U.S., Germany, Scandinavia and the Nordic countries. We're looking at U.K. as well to strengthen what we're doing. And in many cases, we have [ banks ] that we can look at. They have been identified by our sourcing teams, and they look at markets and they do screening analysis that are pretty precise on M&A. I'm not [ worried -- ] there might be an equivalent number of acquisitions next year comparable to that of this year. But we don't set ourselves -- we don't set out any objectives or budgets in euros that we are spending. So we won't opt for an acquisition because we need to buy EUR 80 million or EUR 100 million worth of revenues per year. I don't know if that answers your questions from the M&A side of things, we've always been pretty cautious with large acquisitions. But if we look at this, we've -- on average, we've managed 7 or 10 acquisitions per year, always going forth, slightly going up in multiples, but not too much. We are in competition, we are indeed, and that is new. We can see that on pretty -- on larger [ sites, ] private equity funds getting in and bidding, and that has been the change. But we've lost very few opportunities as a result of these new competitions, yes. I hope this answers your questions.
Next question from Matthieu Lavillunière from Invest Securities.
One question to come back to what you think coming back growth-wise into more kind of normal levels [ and in midterm ] -- on mid-term -- on a medium-term basis, this will be depending on relative growth. Can you give us a range in terms of growth in terms of the markets we should tend to looking in 2, 3 years ahead?
I wouldn't be able to tell you to looking at 2, 3 years ahead. We've always outperformed the market. And this market, if we look at the macroeconomics, plus 2 points [ standard ] [ indiscernible ]. So [ enormous ] growth of this markets, I'm probably talking 3%, 5%. We'll do better than that next year unless the -- there's a complete turnaround in the economy. But we'll go back to lower-growth [ equation ] simply because we can't just go up and up. And now this will be about increasing [ indiscernible ] rate of [ externalization ] or gaining market shares, and these are kind of long-term perspectives. If we look at the growth of the market, [ standard growth ] will be between -- in lower range will be 3, upper range will be 5. I am not saying this will be next year's growth.
This thing there is taking into account of your France, international and geographic coverage?
Yes. Covering large geographies, France. And we've exceeded 10% growth in France. Germany, an important country. We find it difficult to go to -- go beyond the 5% in organic growth, and we have -- the U.S. and Asia were significantly lower growth rates mostly because markets are not mature. The countries is small, and therefore, this offers more significant perspectives than mature markets. And Italy, 20% a year, we very good management there. We have -- we're gaining market share, [ sales ] accounts there. So you have all factors that are multiplying effects as a result, that's why we're generating 12 -- 20%. And really what matters is the quality of management teams on site, but if the country is not going well, obviously, this will affect in figures. But we can't say in standard growth rates that, say, 8%, 10%. That seems to me to be out of proportion. It would be unreasonable to think that would be the case.
Well, we don't have any additional questions. [Operator Instructions] We don't have any questions. I shall hand over to you for closing remarks.
I'd like to wish you a lovely evening. Next update will be in January on reporting on the 2019 revenues, and we'll be communicating -- the date has already been set. We'll communicate the -- more details as and when. Thank you very much, and have a lovely evening. Goodbye.
The conference is now over. Thank you very much for participating. You can now log off. [Statements in English on this transcript were spoken by an interpreter present on the live call.]