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Alten SA
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Welcome to the Alten conference regarding the turnover of fourth quarter 2018. I'm now going to give the floor to Bruno Benoliel, the Deputy Chief Executive Officer.
Good evening, everybody. Thank you for being here tonight. This phone conference will look at the business for Alten for the fourth quarter 2018 and more generally about 2018 as a whole. I'm sure that you've received the press release that was published a few minutes ago.As you could see, the growth dynamics in France and abroad is robust. The organic growth that was speeded up in the third quarter was maintained during the fourth quarter, both in terms of sales and recruitment. It went through a sharp increase without any incidence on the business rate. So it's a highest recruitment rate in terms of engineers, 1,560 engineers over the last quarter. As a consequence, for this very dynamic growth for 2018, Alten achieved a consolidated turnover of EUR 2,269,000,000 at the end of December 2018 versus EUR 1,984,000,000 last year. This was reinstated with the IFRS 15, the data last year was slightly below. The increase of the consolidated turnover is 40.5% in relation to last year. In France, our business grew by 11.3%; outside of France, 17.1%.On like-for-like basis, after reinstated, the scope effect and the foreign exchange, the growth is 12%, that is to say plus 11.3% in France and plus 12.7% abroad. The growth curve of Alten in France has actually caught up with the fourth quarter -- during the fourth quarter the international growth, which is rather rare to be highlighted and is a good dynamic. The exchange -- the foreign exchange went down over the year. It represents 1.2% over the whole year, and for 2018, the effect is very weak, 0.4 days in relation to 2017. So 0.4% on the whole year. Over the last quarter, Alten achieved 16.3% altogether.Organic growth has remained robust, 13.7%, 14.1% in France, 13.3% abroad. The organic growth was slightly boosted by 0.7 working days more than last year and positively affected by -- the result by 1.2%. The net recruitment has a sharp increase in France and outside of France, but the activity rate has actually gone to 93.1%, with the last quarter at 90.7%, and the overall year at 19.1%.[Third], we have 33,700 employees; 28,000 engineers at the end of September; 24,007 engineers in 2017, so more than -- while the headcount for the engineers, 4,009 engineers, including 3,930 by organic growth and 2,880 outside of France. So by difference, we have more than 970 people via acquisition. All the acquisition we achieved abroad this year. So a very good organic growth performance. It was achieved in 2018, enabled us to start 2019 with a growth potential that is very satisfactory. I am not going to look at the different geographical areas, with no change in terms of trend in comparison with our last meeting in France. The business growth has reached 11.3% for the full year almost by the mid sectors whereas last year, the aerospace sector plus 16%; especially with Airbus and the space sector that is growing strongly, plus 14%; energy sector is also growing, plus 14%, that is the 10% of the France turnover; oil and gas is growing by 3% at a group level, representing 5.5% of the turnover; and the nuclear activity grew by 18%.Life sciences have gone through a sharp increase. The services sector has recovered plus 16% in France. Telecom have gone through 13% growth, mainly thanks to the operators. The rail and naval is plus 13%, with Alstom and Bombardier. The automotive sector, that is to say 70% of the turnover in France, has slowed down in terms of Valeo, minus 2%. For the automotive manufacturers, our business has grown slightly with a stable figure. In volume actually, our business has grown, but we have delegated quite a few project, PSA in Romania and Morocco, which led to a drop of the average price of invoicing [per hat]. Renault has grown significantly, plus 12%, as well as Volvo. For the OEMs, it's gone down mainly due to Valeo and Faurecia. In 2018, France has gone up in terms of organic growth, all sectors together, even though there was a drop in the automotive sector, mainly due to Renault.Abroad, growth has sped up in most geographical areas. In North America, our business has grown by 18 -- by 28% -- 26% in organic growth. In North America, we have Canada representing 14% of the all area. Organic growth, very robust, 30%, thanks to the bank and finance sector, the service sector, the rail sector and the aerospace sector.In the U.S., 19% for the North America area. The business has grown organically by 18%. The automotive sector plus 30%, energy plus 20%, life sciences plus 35%. Tertiary -- service sector and telecom have gone down slightly because for the telecoms of the OEMs mainly.In Germany, a major area that is rather complicated for Alten and for the competition [taste]. It's the country where we have a positive organic growth, but which is the least robust 3%. The business is growing in the automotive sector, plus 5%; going up with the manufacturers, plus 6%; slightly down for the OEMs. The results are very heterogeneous depending on the customers in Germany. The aerospace has gone up slightly by 1%, in spite of the major drop of the test drop activity for Airbus, Airbus wings or Airbus helicopter. If we were to reinstate with the drop, we hope it will be just a one-off drop in this activity. The aerospace business would have grown by 10% in Germany. And all businesses together, the business would have grown by 6%.In Scandinavian countries, growth 11.5%, Finland representing 1/5 of the turnover of Scandinavia, has confirmed its recovered growth, 9%. Thanks to the equipment goods and the industrial goods in Sweden, plus 7% of the turnover in the area, where it's a positive organic growth 12%. Thanks to the telecoms, plus 20%; the automotive sector, 15% growth; and the industrial sector case.Spain, plus 30% -- plus 12%, thanks to the acquisition. Organic growth by 12% even though there's a 2 -- even though there are 2 working days less; plus 40% in the defense sector; plus 20% for the aerospace sector and plus 20% for the automotive sector.In Italy, the growth risen has gone up in the second semester. Organic growth 14% at the end of December, with 2 less working days, without telecoms, which represent 10% of the turnover in Italy where the business goes down by 6%. All businesses are going up, whether we talk about the automotive sector, plus 18%; electronics, plus -- while 10% of the Italy turnover and the railway and the naval business, plus 20%; the service sector and the finance sector is 25% of the Italian turnover is also growing sharply.In the U.K., the business has stabilized, but the performances per sector are heterogeneous. In oil and gas, which is a sector, that has world businesses representing 80% of the U.K. turnover today. The drop in relation to 2017 is 70%, that's stabilized over the last quarter. The nuclear is growing sharply 5% of the overall businesses. The railway sector is nonexistence -- was not existent 3 years ago, is now 60% of the U.K. turnover. The automotive sector, 25% of the turnover, has grown sharply, plus 40%, better than the aerospace sector, 19% of the U.K. with a 60% growth. Strong oil and gas business. The U.K. has actually grown sharply for the last few years and diversified its activities.In Belgium, organic growth 12%, apart from telecoms, which activity is rather fragile. All the other business sectors are going up. Life sciences, with the pharmaceutical sector, the banking sector, the automotive sector are all growing.In the Netherlands, the growth has also increased 20% in 2018. The business sector growing are the electronics, the multimedia, the semiconductor and the equipment goods, plus 80% for the first one; the second one, 30%. They do represent 60% of the business in the Netherlands.The Asia-Pacific region is growing organically, plus 50%. The growth is very strong in China in the automotive sector and the semiconductor, and in India, slightly lower. In India, the service sector and the automotive sector is mainly for the local markets.Now let us look at our business depending on the activity access on the like-for-like basis and the same ForEx where growth in all sectors, apart from the oil and gas, the automotive sector represents 21% of the turnover has grown by 9%. The manufacturers represent 60% of the sector, the OEM 25%. For the manufacturers, the average growth is 7.5%, but covers every strong disparities among the manufacturers.As I said, the trend is actually contrary for France for Renault and PSA. In Sweden, strong growth for Volvo, not as much for Volvo Trucks. In Germany, business is going up for Porsche, Daimler, modest for BMW and Ford. For the OEMs, the average growth is 13%, with a very different performances, very strong for the OEMs, while others are going down such as Valeo and Faurecia.The railway and the naval industry. Strong growth with a 65% in the railway and in the naval sector. The aerospace has a sustained growth, 16%, and 14% in the [whole]. In the aerospace sector, while the growth is mainly achieved with Airbus wing but also with Dassault. The OEMs are growing [teeth], such as Zodiac, Safran or Rolls-Royce. The aerospace, a strong growth on the fourth quarter. Airbus DS and Iron Gate mainly. A major growth for the defense and security businesses, slightly less than 5% of the turnover with the 25% growth. Energy that is separate from the life sciences.To have a more visible presentation, energy is 10.5% of the turnover, 7% growth. The oil and gas stabilized over the last quarter, with a growth over the last quarter. Sensitive growth in some customer accounts. And to anticipate upcoming question, I do not know if the trend will be confirmed in 2019 given the price of crude oil. So far, there hasn't been any contrary indications, nevertheless, oil has gone down to the level it was in October. In the nuclear sector, representing 2.8% of the turnover, strong growth in the second semester, over 30%, representing 25% over the year.Life sciences, plus 7%, representing 7% of the turnover, mainly thanks to the pharmaceutical sector. The other business is mainly for the equipment goods, plus 20%; telecom, slightly up, plus 3%. Thanks to the operators, representing 70% of the sector. The OEMs are going down, minus 14%.Apart from Sweden, the multimedia and electronic business, plus 11%, representing 6% of the turnover. Thanks to the semiconductor at [indiscernible] mainly.The service and the financial sector, which often had a growth rate that was below the other sectors. Well, this time, our growth has sped up during the second semester, plus 19%, while it was only 9% during the first semester, all together 14% over the year in the bank, finance and insurance sector mainly.In terms of external growth, Alten has achieved 10 acquisitions over the year. In relation to the publication in October, we have achieved 4 acquisitions, additional acquisitions, small acquisitions, a small company in Sweden, 90 consultants in the field of IT. EUR 12 million in Finland in the same IT sector, a small company with 65 consultants, EUR 6.5 million in terms of turnover. The EBIT rate in this company is around 9%. In the Netherlands, we acquired a company in which we were -- in effect that we were not present. It's the engineering sector in the hydraulic port area, EUR 6.5 million and EBIT above 6%. In Germany, an acquisition of a company with a strong presence for one of our major accounts, 90 consultants, EUR 6 million in terms of turnover. The EBIT slightly below 10%, an acquisition that was actually achieved at the very beginning of 2019.So altogether, in 2019, we should have an organic growth that should be satisfactory if the economic background is the same. I'm now going to give the floor to the participants.
[Operator Instructions] We have the first question from Gregory Ramirez.
Bruno, I'd like to talk about recruitments. Indeed, it's working very well. The question can be asked for the turnover. This picking up of the net recruitment, does it go with a drop in the turnover? And when you talk about embedded growth of 6%, can we consider that the rhythm of net recruitment was a constant turnover will have a hard time being maintained with the growth rate we have until now? And should we expect rather a natural slowdown of our current growth in 2019?
It is part of the question is the overall figure, it's still 25%, 24%, 25%. We are stabilized and I do not think that it will go down in 2019. This is a matter of a wage policy and this is the case in the whole sector. We haven't been talking about prices with our customers, and we are not expecting a major increase of our prices. So that will be the same for the wages, that's specific to our sector and the engineers will still be seeing the same customers. So it will be the same in 2019, 25%. The net recruitment rate, we recruited 4,000 people compared with 2,260 last year, it's a sharp increase. Last year, in 2017, we had a higher turnover, as you probably know, slightly less this year. However, the recruitment worked really well. We are sized to recruit a lot of people, but we'll have to wait until the first quarter -- the end of the first quarter to see if our capacity to generate recruitment is maintained. It will depend on the recruitment and the different projects. I mentioned, major recruitment rates in most of our business sectors. Talking about growth rates of 20% is rather exceptional. So I would bet that there will be a slowdown in terms of growth. Now to which extent, I cannot really give you an answer. In January, for sure, the embedded growth with -- on a like-for-like basis, which is actually the snapshot of our headcount on the 1st of January, 2019. If you actually extend the curve, while this organic growth, if the price -- prices are maintained, it will be around 6%. So I hope that the reality will be maintained above that figure.
We have a new question by Anna Patrice from The Berenberg Company.
Bruno, I have another question. I'd like to understand the consequences on our margins. You said that it's not easy to increase our prices for 2019. Do you see an impact of an increase of cost? What do you think about that for the future? And the other question is regarding the margins for 2018. At the time, you were rather cautious, and you indicated that there was some hard win for the margin with such high organic growth. Can you expect the same margin ratio in 2019?
Well, I haven't really communicated precisely about the margins in 2018. I said that they were more or less the same -- they would be more or less the same as in 2017. Though pluses and minuses, we'll tell you more on the 20th of February. We have to wait for few days. But the organic growth, the additional organic growth over the last quarter in relation to what we had anticipated even though we are not that far from it only has a consequence on part of the quarter. So it's not going to generate an additional margin, a major additional margin. I mean, today, I cannot tell you too much in relation to what I already indicated. And we should be slightly below 10%. I answered the question actually regarding the range. But today, I cannot tell you it will be just below or slightly above, it doesn't really matter up to a point. What is important is to look at 2019. In 2019, the negotiations of prices are still going on. Of course, we have taken some better assumptions, but so far, we cannot really communicate about our margins. What we said at the beginning of the year, in general, I mean, as you know, we are monitoring and steering the recruitment and wages very reactively. And logically in 2019, we should maintain the margins that we had in 2018 if we can steer all the operating parameters properly as we do usually. So this year in 2019, we are going to have 1 working day less, we are going to have 250 working days. So if we look at 2018, on the first semester, there was 123.5 working days. In 2018, there would be 123. In 2018, we had 226, which should be at the same level in 2019. Taking into account the geographical mix, which means that we should be slightly below, not see in major proportion. We should not expect major improvements from the working days consequences. Now we're still working on a model for 2019. I would be cautious regarding the margins, and I would say that the margin for 2018 is a very credible assumption.
What about the embedded growth for this year? Are you going to tell us everything about that on the 20th of February?
No, I said it was 6%. I answered to Gregory's question actually. And that's driven by, well, I said 6%. If we do not do anymore net recruitment, and mechanically, if we have the same prices and the same business rate, it should be around 6%. While we assume that we'll continue growing, but which reason and it's complicated to say anything in January, but necessarily, we'll have an organic growth that will be above. Last year, we have an embedded growth that was almost twice that figure.
And the embedded growth in which segment? Is it similar in all the segments?
It's actually broken down in all the business sectors.
Next question is from Derric Marcon from Societe Generale.
I have 5 questions. First of all, the automotive sector in 2019, when we look at 2018, you have a good allocation between France and abroad. Could you tell us about the growth abroad in 2018? I mean, if you look at all the figures, the automotive sector is 16%.
No, 9%.
While France is at 0.
It's minus 2% actually in France.
So a major growth for the businesses abroad. Even though you say that it's not great everywhere, such as with BMW and the OEMs. And could you tell us about 2019, the outlook for 2019 making a difference between France and the international businesses?
I do not really analyzed in details the forecast per sector for 2019. But globally, what we can say is that, France is probably going to have 0 plus in 2019, if the activity is maintained for Renault. It will all depend on the continuation of some de-location of some projects to Morocco. I think, we've done a major part of the work, but I rather remain cautious. So 0 plus is rather consistent. Germany, we achieved 3% growth, organic growth in the automotive sector for this year. We have major programs that were announced by Daimler and BMW in the electrical sector.
Will that show in the prices and in the project?
Well, in the projects, I believe so. In the prices, I don't know. But in Germany, we are also afraid of the request for the offshore businesses. But historically, in Germany, recently, there have been price effect for Volkswagen or BMW, but we find it hard to go below 3% or 4% of organic growth. So out of caution, I would say we'll be more or less around the same level. Now other countries where the automotive sector is growing strongly, clearly, Sweden, I think, we achieved growth above 10%, 13% in Sweden. Spain, we have a growth of more than 40% in the automotive sector, though it has gone down in Spain. We're not going to achieve the same thing. In Sweden, I think, we'll have more or less the same growth rates around 10%. Hopefully, above 5%. In the U.K., strong growth in the automotive sector more than 40%. We're not going to do the same in 2019 because that's a really high figure. And now, automotive represents more than 25% of the turnover in the U.K. And we have the U.S. where we achieved a major growth in the automotive sector, above 30%, knowing that the automotive sector represent 20% of the U.S. sales figure. So same thing, we -- I'm not expecting an equivalent growth, but I think, it will reach 20%. I did not get into the details of the mix, but mechanically, it should lead to a growth, I mean, if France stays at 0, logically, the organic -- the embedded growth should not go above the growth we had in the 2018.
Very interesting. Now can you tell us the consolidation date for the 4 operations you announced? You said that the first one, you mentioned was consolidated on the 1st of January?
Well, we're consolidated at the end of 2018. On the last quarter, the Spanish company that we acquired at the beginning of the year for which we took 6 months to obtain the accounts. It is a company that had EUR 19 million in terms of sales when we acquired it and that we consolidated in October 2018. Then all the following companies, the small company that we bought in September, for example, and the last 3 -- the last 4 actually, they will be consolidated in January 2019. One is, probably it's going to be merged very quickly in the automotive business in Germany.
Okay. So in the 6%, you do not take into account the working day effects because 0.5% is not impactful.
No, it's not going to have a major impact in any way. In the simulation, to tell you the truth, we have several models. There are different approaches that are possible. We modeled the 6% that's minus/plus 0.3% so the working day impact is included in that.
Then do you believe that the participation is going to increase given the end of this CICE? Do you have done some modeling for that?
Yes, it will have an impact on the participation.
In terms of quantity, you don't know how much. So we'll ask you the question in 1 months' time. And the last question, when you look at the growth of the sales figure in France for the finance and service sector. How do you explain such a growth? I mean, if you look at the digital sector, a strong growth indeed. But are you exposed 100% to the digital sector because, I mean, there are needs everywhere beyond the digital sector? Or do you have the magic recipe to grow the market much more quickly?
Well, we have the growth that is higher to market's growth, but for a very long time, we were below the market growth in the field of finance. In 2016 and 2017, especially, the market was growing by 10%, and we were not taking off because of the wages and the selling prices. This question was dealt with. I explained that during our last conference call, which means that by increasing our prices in a targeted manner, we increased our salaries. And therefore, we succeeded in going back to -- coming back in the race. Our main issue was the departures. So we wrapped on the offer. That is to say, we designed offers that were actually adapted to the customer demands. Regarding the functional and infrastructural aspects, major marketing work was accomplished. We have very good managers today on this business. Let us not forget that in our sector, a major part of our sector, it's really related to the quality of the managers, which doesn't mean that the managers were not good before, but we succeeded in increasing our skills. It took us 2 or 3 years. But it's a fundamental work that was achieved, and it's actually bearing fruit now. We are achieving 16%, but we need to also be aware of where we started. And compared to our size also, we're not very big in this sector. Well, for France-only, finance and insurance is 12% of the sales figure in France and that's what leads to the plus 16%, yes.
I mean, I'm not saying that we are not big enough, but we are not representing EUR 15 billion. Many thanks, Bruno. Take care.
Next question comes from Charles Lepetitpas from ODDO BHF.
Bruno, one question on the M&A pipeline. Could you tell us more about that? Are you thinking of some new operations for the first quarter? And second question regarding Germany. You said that the market was complicated for everybody. But I understand that you were mainly affected by the drop of the Tech Doc activity for Airbus [select you]. I understand your comments better.
The M&A as always, we have ongoing deals. We have deals ongoing in India, in Germany, in Portugal, in Northern Europe. So nothing specific, as usual. No major operations either. So if some acquisitions come to light during the first quarter, they will be of identical size as the one we had this year.
Why is it hard in Germany?
Well, the growth rate in Germany for the competition is more or less blunt. And Germany is a country, even though, I mean, they're growing in terms of volumes, since the outsourcing rate is on the increase, nevertheless, the automotive sector is penalized by the price pressure. That's nothing new and was also penalized by the recent laws that were voted, which means that the -- you -- we have to reduce our margins into consulting and technical assistance businesses or we have to move our activities into package, which has a major impact on the cost prices. All this in a market that is really competitive. I mean, there are major, large German companies and a few French companies. In Germany, the aerospace sector represent 80% of the market. Unlike in France, where the market is far more diversified with more vertical companies. And a market in which the customers have decided to copy the French, and therefore, not to reduce the shortlist, which means that it enables players, such as Alten to do quite well because we're part of the referenced panel. So we are going through year-after-year, even though the links are smaller and smaller. In France, the shortlist is 4 or 5 companies. In Germany, it's 20 companies or even more for the shortlist. So that includes a major competitive environment. And therefore, the pricing power is very limited. If you add to that, that the Germans have increased their R&D budget between 2010 and 2014 with a growth rate above 20% and since the rates are rather stable, but they are rather stable, and therefore, the increase of the outsourcing rate does not show in the Eurozone. At the end of the day, we're all on a market that has a so-so growth rate, we're all faced with the same issues.
That's clear. Maybe some follow-up on the aerospace sector. The 14% growth this year, does it include the drop of business in the Tech Doc sector? Do you have an idea of the growth rate reinstated with this impact? And what are the businesses that are driving this growth?
Well, I need to do some calculation to tell you exactly. At the group level, the aerospace businesses represent 16%. I do not have the graph under my eyes, which is out of memory, I think, this is it. The sales figure is EUR 1,969,000,000.
Mr. Benoliel, have you finished answering Mr. Petitpas question? I'm sorry. I will leave you the floor then.
Without the impact of the Tech Doc business, the growth would have been of 17%. In the aerospace sector, the business is about driving the growth are not design activities or not updating technologies businesses, it's the manufacturing and engineering sector. And increasingly, all the projects around data. We have a lot of analytical data project for Airbus. It's a sector where there was very few projects few years ago. It was not structured at all. And now, it represents major needs. And we do not believe that there will be any new program in the near future.
Another question by Laurent Daure from Kepler Cheuvreux.
Bruno, I have 3 or 4 quick questions. In relation to Germany, you've been talking about a strong doc -- a strong drop for Tech Doc over the last few quarters. It still represent a significant sales figure. So it should be a much less, strong drag in Germany. So should we expect a better sales figure in Germany in 2019 via natural value?
No. In growth, yes. Because we are not going to go down forever in the Tech Doc. So we actually reduced our means, but there are quite a few projects, among which part were executed in Germany and all in Romania that are being de-located. So part of the Tech Doc market will not reappear, but I think that the activity is going to be stabilized and the same thing is going to happen as what happened in France. That is to say, it's going up -- it's probably going to go up in volumes but will be stabilized in value.
But that represented a very small part of Germany.
No, not a very small part.
Well, several thousand -- million euros?
No. It's between EUR 15 million and EUR 20 million. So it cannot be that strong a drag for sure. We have experienced the most important decrease. Now, we talk about de-location more than in the past.
Could you take stock of the situation regarding the headcount and the growth strategy for 2019 on the 2 or 3 offshore areas?
Now if we look at our resources offshore and onshore, they're really quite concentrated in 3 areas: India, Morocco and Romania. In India, today, we have 1,200 people that work offshore mainly for the U.S. for 75% of them and 25% for Europe. Then we have Morocco, with a major increase, almost 600 people work in Morocco that work mainly for Europe, mainly for France, even though we have some Altran projects that are self-contracted. And we have Romania. We have 650 people working in Romania. So altogether, 2,400 people work on -- in delivery centers in the onshore, offshore countries. So plus 450 people comparison -- compared with last year, and we expect this to increase. It's going to increase in India and in Morocco. To which extent, well, it's complicated to say because it's along with the projects that we do the ramp-ups. We rarely recruit hundreds of people before the project themselves in order to avoid having to manage local contracts that we don't know how to manage basically. So we stick to the customer needs. Now we have very structured businesses. And therefore, we can ramp up rather quickly. I mean, if we were to add 300 people in Morocco, we would be able to do that. So we might have 3,000 people in 2019. So about 20% in terms of growth for the recruitment.
I also had a question regarding the automotive sector. The growth should not be different at a group level for 2018, what is your visibility so far for the largest accounts? And what is the risk of having at one point in the year a major decline of the workload for some manufacturers? Because in 2009 that happened, for example.
Well, today, in the field, there is no specific warning regarding the automotive sector, which means that the number of tenders is still the same. The managers do not relay any specific message. We have the same conversations with our client, so the overall context has not changed. Now what is true is that, I mean, all factors, but specifically in the automotive sector, the R&D budgets are steered depending on the sales figure. So there are some concerns on the side of the German manufacturers because of the tariffs. It didn't show for us so far because they all have budgets that they have to maintain. The Germans regarding the European standards and also because their move towards electrical cars has really started. They're talking about billion of euros on the table to speed up the development of batteries because so far it's a Chinese technology, and speeding up of the changes in their ranges, hybrids or electrical because they're actually quite penalized by the new European standard. So at the end of the day, I'm not really worried, maybe I'm too optimistic. But I'm not really concerned about the automotive business in 2019.
So you don't see anything happening in the field of sourcing or outsourcing?
Well, they might outsource more, but we see that in our figures. It doesn't mean that our businesses are going to be skyrocketing. We saw this year in Germany, that it was a major business drop in the OEMs. So it hadn't happened over the last few years.
Last question. The sales figure of the acquisition in the Netherlands?
EUR 6.5 million in terms of sales figure.
We have no further question. [Operator Instructions] We have a new question by Anthony Dick from Portzamparc.
Bruno, I have a question regarding the price effect. First of all, would it be possible to have this effect for 2018? And to go back to the expected growth in 2019 and the fact that the embedded growth does not have a price effect so far. I'm sure, you will have an inflation impact on the wages. Do you expect stabilization of the margin and should you not take into account a price effect in 2019?
Calculating a price effect is complicated today because we have EBIT's impact on the offer typology and on the different business sectors, independently from the issues relating to the different geographical areas and to the foreign exchange. As long as the group was in a consulting mode, we could model quite well. Now with the development of the work packages, it's far more complicated. So in fact, we more or less succeed in anticipating the price effect via -- I mean, there are 2 ways of looking at that. You can think in terms of offer typology and then you divide the sales figure by the number of working days or the number of products because it might have an impact. I mean, if you have 3 deals that go badly, it has an impact on the prices, though commercially, you might have been able to negotiate price increases, so that's the first way. You can have an homogenous region, even though that the work -- with the work packages, we have to be very careful regarding the price changes. And another way of looking at that which is more relevant is to look at how the price grades change over time in our clients' companies. In France, it's rather complicated because we have metrics that take into account the seniority, the schools and the skills. Abroad, it's more simple because they do not think in terms of schools as we do in France. So we need to look at these price grades depending on the concentration of our engineers. Some companies have very experienced engineers, while on our side, our engineers are younger, around 30-years-old. But once again, the prices also depend on the changes in terms of population. Now because of the turnover and the strong recruitment, the average age is getting younger, and we have recruited more beginners this year. So the price effect was around 1.5% more or less. But I'd say that with a pinch of salt because in 2018, we cannot really calculate it very accurately. So for 2019 so far, we have taken assumptions of price increases that are in line with the rate increases. So that the price -- the price -- salary ratio does not impact the margins. The rationale underlying all this is that the wages always adjust to the prices because the sales managers, for example, have to maintain their margins and anyway -- even though we -- I mean, given that our teams are younger and given that the wages are adjusted to the prices, we more or less succeed in maintaining the gross margin. Of course, we can improve that by being more efficient in managing productivity in the project, but it has limitations because we cannot have productivity gains of 5% per year, that's not possible.
So if I understand, the price grades were -- they increase by 1.5% or does it include the mix effect in some geographies?
No, it includes the mix effect.
Do you have a mix effect? Or do you expect the mix effect?
Well, there will be one in 2019 because if we look at the different business sectors in the different geographies, we see that things have changed between 2017 and 2018, and it will do so in 2019. But that's not going to radically change the price evolution. It's the price levels among our clients.
We have a new question by Anna Patrice from The Berenberg Company.
Could you tell us the number of engineers in France and abroad at the end of 2018, please?
In France, I don't know if I said it actually. Altogether, 29,600 engineers, 11,000 in France and 18,350 in France -- abroad, sorry.
A new question by Derric Marcon from Societe Generale.
I have a question on the project size. There are some French competitors in France. That say, well, there's an increasing number of tenders for major project, EUR 30 billion (sic) [ EUR 30 million ], EUR 40 billion (sic) [ EUR 40 million ], EUR 50 billion (sic) [ EUR 50 million ] over 3 years. So EUR 10 million per year more or less. Do you think that is going to continue like this or is it going to be different?
I actually think, it is going to be this case. We have increasing higher tenders of several dozens of million euros in the automotive sector, in the railway sector, in the naval sector. So it is tough actually to trace. And we actually have to answer to such tenders increasingly. And these tenders are increasingly complex because with EUR 30 million, usually, part of it is offshore, and therefore, there is a cross-border dimension usually.
And does it increasingly happen?
I don't know actually. But I know that I've seen a few last year for which we had to organize ourselves urgently. There are yearly projects, which sales figure, it's really high on a yearly basis. Then you have a war on prices because the clients feel that the higher the unit price, the higher the discount. In reality, if it's a project of EUR 40 million over 3 years and that we have to have 120 engineers over 3 years, you still have to pay people, but that's the reality.
So in this project over several years, do you have price increase over 3 years or price is frozen right from the start?
Generally, it's a work package, and you have a price per work package in the batch. Usually, prices are fixed, but there can be -- review these prices. For such projects, that require a ramp-up, that is to say the first phase of investment, and then a phase for training the engineers, where clients believe that the price increase is not justified because of the productivity that would be able to generate along the project.
Mr. Benoliel, we do not have further questions.
Well, if there is no further questions, thank you very much for taking part in Alten conference, and I will see you on the 20th of February for the publication of our results. Have a good evening. See you soon.
Ladies and gentlemen, the conference is now over. Thank you for your participation. You can now disconnect.