EuroBusiness Media (EBM): Altran, a global leader in engineering and R&D services, reports its full-year results for 2018. Dominic Cerutti, you are the Chairman and CEO of Altran, thank you very much for speaking to us.
Dominic Cerutti: Thank you
EBM: You are reporting a strong set of results for the year. Could you talk us through the highlights?
Dominic Cerutti: 2018 was really a robust year. On the growth side, we posted 8% growth organically for the group and noticeably our main geographies have accelerated in the second half of the year, with France reaching almost 9% organic growth, Germany and North America almost at 20%, so very solid on the growth side. Same on the profit side, our operating margin reached a record level, at 12.1% of revenue, that is to say €352 million of operating margin. And last, we are particularly pleased with the result of our Altran cash programme and we are reaching at the end of the year a leverage which is three times EBITDA, which is quite satisfactory in our view.
EBM: 2018 was a year with quite a few contrasts, you faced a few issues with the newly acquired company Aricent, issues which pre-dated the closure of the deal. Where do we stand now with plans to restore Aricent’s profitability?
Dominic Cerutti: Indeed, 2018 was a year with quite a few contrasts. In the first half, we had to close the Aricent acquisition, a very large deal, raise the debt, go through a capital increase, prepare our strategy for 2022 and sadly, face and unveil an incident that predated the acquisition of course. So we had to work hard to restore the situation, and two things I would say: First the margin. We are really satisfied to report that we exceeded our commitment. The goal was to restore Aricent’s margin north of 18% at the end of the year and in fact we are delivering a margin which is 18.2% for the second semester which is exceeding what we were aiming at. And for the reported period, Aricent will deliver a 17.8% margin. On the integration front, same token. We are quite satisfied at the end of 2018 with what we have done. Aricent has been integrated with Altran North America into one single unit. We are now operating under one banner: Altran.
BM: You opted to incur significant debt in order to finance the acquisition of Aricent. How are we doing with the deleveraging?
Dominic Cerutti: First, our debt level results from the execution of our strategy in the acquisition of Aricent. So it was done purposefully. We are, at the end of 2018, really satisfied with the deleveraging, with the speed of deleveraging, reaching 3 times EBITDA versus 3.7 at deal closure 9 months ago, so that’s quite rapid. As a consequence, we are confirming all guidances that we have issued regarding our cash generation and deleveraging profile.
EBM: The macro-economic environment is now looking more challenging. How confident are you about 2019?
Dominic Cerutti: Indeed, we are hearing a few concerns about the potential deterioration of the macro-economic environment and we are paying attention to that. However, we remain very confident with our business for the following reasons. First, our footprint is quite diversified, both in terms of Geos and industries that make us confident. Second, the underlying of our business is the R&D spending which is still set to grow in 2019 significantly, north of 5% and that’s really what’s fuelling our business. And last, the more we go, the more we see our large clients changing the way they are sourcing their R&D and, in short, using more and more external providers for outsourcing reasons which is exactly what we do. So all in one make us rather confident.
EBM: Let’s talk longer term, and discuss your strategic plan, the High Road Altran 2022. What’s been achieved so far?
Dominic Cerutti: Quite a lot. The year 2018 has been really busy and dense, but fruitful. On the integration side, first, as I said, Aricent and Altran USA have been integrated within Altran North America, a promising business unit, that’s done, that’s good for us. On the team side, team building, we now acting as one unified team under one banner: Altran, and that’s also excellent, we are on track with our plan in that regard. And last, on the business front, we are particularly encouraged with the way our business model resonates versus client demands. On top of our main three businesses, which is our historical business, reflecting a significant client intimacy, second to none in 30 countries, we now see that our so-called high-value business helps clients differentiate every day and create for us significant pro-selling opportunities. Last one. And two, the so-called Industrialised GlobalShore®, which is our 17,000 engineers in 5 global shore locations, is becoming the power house of Altran, helping clients to optimise the cost of their operations in R&D. So this is very promising. In short, we are perfectly on track with the integration and our business looks promising.
Dominic Cerutti, Chairman and CEO of Altran, thank you very much for speaking to us.
Dominic Cerutti: Thank you very much.
