Alten (STU:AN3) (Q2 2024) Earnings Call Highlights: Navigating Growth Amidst Market Challenges

GuruFocus News
4 min read

In This Article:

  • EBIT Margin: 8.4% for the first half of 2024, down from above 9% in previous years.

  • Revenue Growth: 2.9% global growth, with organic growth being flat.

  • Number of Engineers: Increased from 50,000 to 51,480 engineers, including 1,200 from M&A.

  • Operating Margin: 7.6% of revenue, consistent with last year.

  • Free Cash Flow: EUR 98 million, representing 4.6% of revenue.

  • Net Treasury: EUR 267 million at the end of June 2024, down from EUR 297 million in December 2023.

  • Organic Growth Outlook for 2024: Expected between 0.5% and 1%.

  • Operating Margin Outlook for Second Half 2024: Expected to be over 9%.

Release Date: September 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Alten (STU:AN3) reported a growth in the number of engineers, increasing from 50,000 to 51,480, indicating a positive trend in workforce expansion.

  • The company achieved a 2.9% global growth in revenue, supported by mergers and acquisitions.

  • Alten (STU:AN3) maintained a strong presence in the engineering sector, representing 73% of its business, and is ranked among the top five globally for engineering services.

  • The defense, security, and naval sectors showed strong growth, compensating for weaknesses in other areas.

  • The company has a healthy financial structure, generating EUR98 million in free cash flow, which supports its internal and external growth strategies.

Negative Points

  • The EBIT margin declined to 8.4% from the usual target of around 10%, primarily due to a decrease in business levels and increased SG&A expenses.

  • Alten (STU:AN3) faced challenges in the IT services sector, with significant pressure to reduce costs, impacting 27% of its business.

  • The automotive sector experienced postponements and financial constraints, affecting revenue and project timelines.

  • The company encountered difficulties in mergers and acquisitions, with high prices and limited availability of target companies.

  • There is a slowdown in organic growth, with expectations of only 0.5% to 1% growth for the year, reflecting ongoing market challenges.

Q & A Highlights

Q: The new guidance implies organic growth of flat to 1% in the second half. What gives you confidence in this outlook given the headwinds in most end markets? A: We have some countries and customers who have postponed projects that were expected to launch in September-October, mainly in civil aeronautics and auto sectors. We prefer to be cautious as these projects are postponed, not canceled, due to cash management issues. We hope to achieve at least 0.5% organic growth as these projects are expected to resume in 2025.

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