Assystem - 2015 Registration Document

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MANAGEMENT REPORT

BUSINESS OVERVIEW

3.1 BUSINESS OVERVIEW

3.1.1

ASSYSTEM’S MARKET AND BUSINESS SEGMENTS

latest studies published by the European Federation of Engineering Consultancy Associations (EFCA), the different member countries are conveying a feeling that the sector is “on the road to recovery”. Greece is the only country where the situation has deteriorated. Most member countries are expecting to see order books filling up for the next six months, and to once more enjoy stronger profit growth in 2016. The year was marked by continued consolidation, with the purchase of Grontmij by Sweco in Europe, propelling the Group into 6 th place in the ranking of European engineering firms. ASSYSTEM’S POSITIONING Assystem began as Atem, founded in 1966 by engineers of the French nuclear programme. This business accounted for the majority of its revenue up until the end of the twentieth century. Atem then merged with Alphatem, jointly-owned by Dominique Louis and Cogema, to create Assystem which went public in 1995. Shortly after its stock market flotation the Company then diversified, with the acquisition of an engineering firm specialising in aeronautics and automotive in 1996, which launched the outsourced R&D business. This business drove the Group’s growth as from the year 2000, especially following its merger with Brime Technologies. A series of international acquisitions followed, positioning Assystem among the top 15 European engineering groups in 2015 (2) , and as the 2 nd largest independent nuclear engineering group worldwide (3) . Assystem teams operate in two major lines of business: outsourced R&D, operated by the Global Product Solutions, division and complex infrastructure engineering, operated by the Energy & Infrastructure division. The Group is a major player in the nuclear, automotive and aeronautics engineering markets where it is highly reputed for its specialist know-how. On the outsourced R&D market, Assystem focuses exclusively on services for industrial customers. To a great extent these customers are European champions among the leaders in the worldwide market, for whom the Group provides services throughout a product’s life cycle – from functional analysis to commissioning, including design, industrialisation and supply chain management. Its main competitors in this fragmented market are French companies such as Altran and Alten, as well as Akka, Sogeti and Segula. Supplier panel restrictions that have been applied at global level for the past several years by major purchasers are still in force and have led to a gradual general trend towards fixed-price services that is favoured by large companies such as Assystem. Today, roughly 60% of Assystem

3.1.1.1 Market trends Assystem operates in the engineering market. The role of engineering is to study, design and manufacture all or part of an industrial component or civil engineering structure. Assystem teams assist major industrial companies to reduce their projects’ costs and deadlines, optimise their manufacturing, development and commercialisation processes, and make it possible to design and produce innovations right around the world. According to a Xerfi study (1) , in France the revenues of companies specialising in engineering and technical design rose once more in 2015 (+2.7%). Technological advancement and regulatory changes continued to create substantial needs for specialised engineering in industry and services. In particular there was strong demand from automotive manufacturers and OEMs in the areas of reduction of greenhouse gas emissions and connected cars. However, activity was sluggish in the aeronautics sector, where development of new aircraft such as the A400M, A350 and A320neo is reaching completion. The main engineering firms in the construction industry experienced a slower increase in business in 2015 (+0.5% for the panel), mainly driven by the signature of project management contracts abroad. The major groups fared better than VSEs. Since they are approved engineering suppliers, they enjoy special relations with key account customers, guaranteeing recurring revenue. In addition, their diversified positioning on several markets and international presence meant they were able to avoid a sudden slump in business activity. The leading companies have therefore accelerated their development abroad, attracted by the dynamism of German and American industry and the growth potential of countries in the Middle East and Asia. Competition within the profession is sure to intensify. Operators will have to deal with the mounting strength of increasingly diverse players. This situation results in targeted acquisitions aiming to become stronger on markets with high potential, combined with intensive partnership and external growth operations abroad. In Europe, the average business operating margin for the 300 largest companies improved somewhat from 4.5% to 4.7% between 2013 and 2014 (2) . The revenue per employee has also increased, up from €118,000 in 2013 to €122,000 in 2014. According to the

(1) Source: Xerfi France, Services d’ingénierie, d’étude et de conseil technique Analyse du marché – January 2015. (2) Source: Ranking of the top 300 groups in architecture and engineering consulting by The Consulting Engineering and Architectural Groups – A Swedish and International survey, December 2015. (3) Source: The Top 150 Global Design Firms – Engineering News Record, 2016.

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ASSYSTEM

FINANCIAL REPORT 2015