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Author: Dominique Raviart
Alten has reported an operating margin of 14% in 2005, on revenues of €436m. Net profits rose by 41.3% to €38m, yielding a net margin of 8.7%. This comes after the company announced sales growth of 28% in 2005 - of which 22% is organic.
Comment: After a splendid H1, Alten's operating margin in H2 has been under some pressure. It decreased slightly from 14.4% in H1 to 13.6% in H2. Similarly, its net margin is down from 8.8% in H1 to 8.6% in H2. We don't think there is cause for concern. Alten is highly profitable and the company achieves more in net profits than competitors Altran and Assystem do in operating margins!
Of course, organic growth will slow down in France when Altran finalises its reorganisation and transition onto the fixed price model. Meanwhile, Assystem increased its hiring efforts in Q4 2005, and should grow almost as fast as Alten in France in 2006.
The competitive outlook explains to some degree why Alten is performing so well. But in addition, Alten is better positioned in terms of clients. The company has a much smaller presence than its competitors in automotive - a sector with strong price pressure - and in aerospace. In the short to medium term, Alten's limited exposure to automotive should help the company stand apart from its rivals. In 2006 we expect Alten to beat off the competition - again.
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