Could 3, 2020 (Thomson StreetEvents) — Edited Transcript of Alten SA earnings convention name or presentation Friday, April 24, 2020 at 10:59:00am GMT

Alten S.A. – Deputy CEO & COO

* Gregory Okay. Ramirez

So welcome to the convention, Alten, concerning the turnover for the primary quarter 2020.

Now I’ll give the ground to Mr. Bruno Benoliel, the Deputy Normal Supervisor. You could have the ground, sir.

Bruno Benoliel, Alten S.A. – Deputy CEO & COO [2]

Sure, good afternoon. So good afternoon to all of you. Thanks for collaborating in that convention name concerning the exercise of the primary quarter 2020. That first quarter was affected by the start of the well being disaster in China in February, and in Europe mid-March, and within the U.S. That unprecedented disaster worse than the one in 2008 has led to suspensions of tasks. Generally it was huge in some areas, however not so huge in different areas.

The figures that I’ll current now are an proof of that, however they do not make it doable to attract conclusions concerning the developments per sectors of exercise or geographies. After the lockdown that needed to be managed in China with a restricted impression on the group exercise. The turnover was EUR 32 million in 2019 in China. The lockdown measures in Europe have led to the suspensions of a number of industries after which in a while within the U.S.

The turnover for the primary quarter of 2020 is EUR 690.1 million, and it’s progressing by 7% versus the primary quarter in 2019. It was EUR 643.Three million on the time. In France, the exercise is secure. Exterior France, it is progressing by 13.2%. Acquisitions for EUR 20.2 million have contributed as much as 3.3% of the group development. The precise charge have contributed to 0.4% of the expansion of the quarter.

Consequently, in like-for-like exercise and fixed trade charges, the expansion is 4% — at 0.4% in France due to the switch of a associated firm on the finish of 2019 that now we have transferred and the turnover was EUR 2.7 million of turnover. The natural development is 0.4% in France and 6.8% exterior France.

The — there have been 0 — an extra 0.73 working days, 0.6 in France. And this has — of working days, this has contributed to an enchancment. There will probably be 123 working days for the primary quarter versus — properly, an extra of 0.Eight working days. And within the second semester, we’re going to have 50 — 127 working days. It will likely be an extra 0.7 working days in the course of the second semester, it will likely be half a day further day versus 2019.

The primary quarter began in step with final yr in France and overseas. The exercise had a development charge that was extra standardized, like we defined within the assembly in January. As early as January 2020, recruitments have made it doable to compensate for the lead, and we had 32,800 engineers originally of February. That was an extra 300.

March — in March, we had a brutal interruption and we had 32,760 engineers, so we had been at 37,200 on the finish of 2019. There have been 32,750 engineers. So now we have built-in just a little firm in Japan with 115 individuals. In France, the engineers have been lowered by 131 individuals, and out of doors of France, the employees has elevated by 236 individuals. The expansion of the employees was due principally within the U.Okay. and Italy and in North America.

As you may think about, the priority since — at March shouldn’t be recruiting however to maintain the exercise happening. Nearly all Alten engineers can work from their properties if their buyer base makes it doable. However that is fairly totally different, relying on clients and geographical areas. Many purchasers within the business principally have stopped their tasks. They’ve halted them or they’ll resize them. Some clients have determined to shut the location and cease all actions in the course of the time frame. And dealing from properties was — has not been doable even for work-package work as a result of that they had — they did not have the employees vital in a extra pragmatic means.

And so as to anticipate the longer term disaster with the drop of the gross sales, many shoppers have determined to freeze a big share of their tasks in order that they may make a listing and determine on the finish of the lockdown what can be the precedence tasks that they’d proceed, what can be the tasks that they’d proceed by decreasing the scale of the groups and what can be the tasks that they’d cease. At this stage, it’s extremely troublesome to know what the longer term will probably be as a result of we do not know what their tasks are, particularly in business that has been hardly hit just like the automotive sector and the civil aviation.

Since mid-March, in France, in Sweden, in Germany, within the U.Okay. and in Southern Europe, and now within the U.S., many shoppers are taking choices. Wanting on the bench, we’re confronted with this choice every day. In the course of the first quarter, the exercise charge went down by 2 factors versus 91.8% final yr. And in March, the exercise charge was 88%, which is 12% of — into contract.

The start of the well being disaster has hampered by 1/Three the outcomes for Q1 for the primary quarter. Now we’re confronted with totally different conditions relying on the geographical areas, the sectors of actions.

I would like to speak concerning the scenario per geographical space, figuring out that the developments for the primary quarter can’t be extrapolated to the second quarter. Now if I — we will estimate some information for the primary semester, however now we have to be extraordinarily cautious as a result of the scenario is altering in a short time. And now we have no clear visibility for the entire quarter for a big share of our clients.

In France in Q1, the exercise was secure, plus 0.4%. Suspension of tasks in March has penalized the expansion by 2%. So it ought to have been round 3%. The sectors which have grown the place Aerospace, plus 4%; Protection & Safety, plus 10%; vitality, plus 10%; the nuclear business, plus 16%; the rail and naval, plus 19%; and telecom, plus 4%. General, in the course of the first quarter, 2/Three of Alten exercise was rising.

The second quarter will probably be very totally different. The well being disaster with very brutal repercussions in France has led to many mission interruptions, principally in ASD automotive and within the tertiary sector in Amadeus, relying immediately from air transportation, however not on the — many shoppers, all industries included, have closed the websites who haven’t made it doable to work from our properties. The intercontract charge ought to, in France, be at 30% in April after which go down, relying on the resuming of the exercise with our clients. We do not know but that what would be the restoration plans as a result of all industrial methods are being revisited, and we consider that the decline of the exercise can be within the neighborhood of 15% in France for the primary semester, 18% will probably be because of the disaster.

On the worldwide stage, the exercise can be being affected by the well being disaster, however in a unique method relying on international locations. No Q1 information might be extrapolated on Q2. After which to provide you country-per-country an total image of the scenario at this stage and the time to attempt to shield ourselves within the second quarter, in North America, the exercise has grown up by 25%, 16% for natural development. The ForEx was important, it was constructive by 3.3%.

All sectors within the U.S. had been rising in the course of the first quarter. Probably the most dynamic sectors like in 2019 had been the automotive sector, plus 10%; vitality, plus 50%; life sciences, plus 25%; telecom, plus 11%; finance treasury exercise, plus 5%. The well being disaster has affected North America solely in the course of the second quarter with the development of the intercontract charge that was very sturdy within the automotive and heavy weight within the first place the place we had 500 individuals as a result of many tasks had been stopped.

Vitality, the vitality sector, principally the gasoline was affected for the explanations that and the administration and consulting supply follow, [PNO] and agile consulting. We now have 350 individuals, which have been deployed principally within the vitality sector and treasury finance. The intercontract charge within the U.S. might attain 20% in the course of the second quarter, which means that the U.S. exercise might be secure for the primary semester, whereas we did anticipate a development larger than 10%.

In Germany, the exercise has declined by 6.3%. On a like-for-like foundation, Germany was already being affected by the disaster, which weighted by 3% on the decline of the exercise within the automotive sector, 40% of the exercise. The exercise declined by 10%, 15% for tools makers. And for the aeronautic, it is barely rising in the course of the first semester. However in Q2, like in France and for a similar causes, many tasks have been halted.

Let me recall that the automotive sector and the aeronautic interim accounts for 77% of the turnover in Germany. We might have 22% for the intercontract charge, and that is the rationale why the decline that’s anticipated can be within the neighborhood of 20% in Germany, 15% can be because of the disaster.

In Scandinavia, the exercise on a like-for-like foundation is declining by 4% throughout Q1. In Finland, it is rising by 3%, which accounts for 20% of the Scandinavian turnover. However Finland can be being affected throughout Q2 by the disaster. And the actual fact must be declining by 13% for Q2, which for Finland can be an exercise declining by 5%. For the primary time in Sweden, 80% — making up 80% of the Scandinavian turnover. The automotive sector and heavy weight accounting for 52% of the turnover has stopped a majority of their tasks as early as mid-March, and their exercise is declining by 5%, 0.2% because of the disaster. Second quarter with an intercontract charge corresponding to Germany and the decline must be round 20% in Sweden as properly, and 15% can be because of the disaster.

In Spain, the exercise is rising by 6.8% total, however 1.5% are on a like-for-like foundation. However the well being disaster began earlier in February, however some strict lockdown measures have been put in place to the exception of the Safety & Protection sector declining by 20% and automotive declining by 20% as properly. Each sectors accounting for 20% of the Spanish turnover. These sectors have stopped their tasks like in every single place else in Europe.

All the opposite sectors or actions have continued. They’ve pursued their tasks working from residence, and the exercise has continued kind of usually. All the opposite sectors are rising.

Throughout Q2, the tasks that had been stopped due to the disaster can be — will intensify, and this may result in a rise of the intercontract charges. In the course of the first semester, we consider that in Spain, the exercise will probably be declining by 5%, so in a reasonable means. Within the Benelux, the exercise is rising at — rising by 5%. In Belgium, it’s secure, even when the performances are totally different from sector, and there must be a decline by 7% in the course of the first semester.

Within the Netherlands, exercise has grown by 14%, 4% in the course of the first semester to the exception of electronics and semiconductors accounting for 1/Four of the exercise within the Netherlands.

All sectors are rising. The impression of the disaster will probably be felt in the course of the second quarter with an intercontract charge that ought to attain 10%. Consequently, the exercise must be secure in the course of the first semester. That is why we thought we’d have a 3% development.

In Italy, regardless of the pinnacle disaster that has been brutal and began in February, the exercise was completed principally from residence and it has continued regardless of the lockdown. All sectors are rising, even within the automotive sector, plus 11%, even SAD, plus 20%, and the natural development has reached 15%. Nonetheless, anticipating a slowing down of their exercise, clients have lowered in a big method the finances for the second quarter. Due to this fact, we consider there will probably be a powerful slowing down throughout Q2. And in Italy, the expansion must be 8% for the primary semester as a consequence to the slowing down in Q2 and never the anticipated 14%.

In Asia Pacific, the scope has continued to develop, plus 32% and plus 13% in natural development. The expansion of the area was pushed by India as a result of native actions have continued to develop. They make EUR 11 million of turnover in the course of the first semester, with an 18% development. In India, the exercise goes to decelerate throughout Q2 due to the lockdown measures.

China, EUR 5 million of turnover in the course of the first semester is declining by 13%, and that is not stunning as a result of the exercise has stopped between January and starting of March. They have not been again to regular and the automotive gross sales are nonetheless being strongly impacted in China.

And eventually, the U.Okay., the expansion was very rigorous, because of an distinctive 2019, nice — with a really sturdy development in aeronautics, plus 66%; automotive, plus 24%; nuclear, plus 100%; the rail — however there can be a powerful impression within the U.Okay. in Q2. We consider there will probably be a powerful decline. We consider the decline within the automotive and aeronautics sector will probably be within the neighborhood of 20% throughout Q2. So we’re nonetheless going to have a 5% development, however the disaster will value us round 13%.

Sectors of actions. So the primary quarter has confirmed the developments of the newest quarter in 2019, however the disaster has modified all prospects per sector of actions. The automotive is declining by 5%. Throughout Q1, the decline was strengthened by the start of the well being disaster. And it is fairly heterogeneous relying on automobile producers. Some are experiencing some development and others are declining. However the well being disaster goes to have a significant impression on the exercise and in a sustainable method, and that is going to worsen in 2020 with a doable bounce again in 2021 that we hope will occur. The rail/naval continues to be strongly rising, plus 16% for the place the disaster has slowed down the exercise in Q2. However the order books are full, and hopefully, the restoration ought to occur originally of 2021.

For the aeronautics, now we have 16.1% of the turnover. The expansion has been 3% in homogeneous method between the area exercise, the tools makers and plane makers. However well being disaster has had a powerful impression on airline corporations. And that is going to have a sustainable impression on the aeronautics sector. Many tasks have been stopped, the plane manufacturing will go down and the intercontract charge tasks won’t be renewed, make it doable to fulfill the brand new demand. So many tasks will probably be stopped or lowered. And due to this fact, the visibility that we might have may be very restricted.

Now Protection & Safety, 4.5% of the turnover. They’re strongly rising. Even when there’s an impression throughout Q2, that sector ought to bounce again in a short time. Vitality accounts for 11.5% of the Alten turnover. Oil and gasoline, 6% of the turnover. They’ve a plus 25% development, however they are going to be impacted by the lower of crude oil.

Nuclear, 2% of the turnover. The expansion continues to be fairly sustained and the exercise must be preserved.

Life sciences, 7.5% of the turnover, they’re rising by 11%. And on the quick time period, the exercise is being impacted by the disaster, however there must be a bounce again.

Telecommunications, [6.6%] of the turnover. They’re barely rising 6.5%, to the exception of Ericsson in Sweden. The expansion is coming from operators, the 5G migration and the networks which can be being overly used due to people who find themselves working from properties. This could proceed after the disaster. Telecommunication, media exercise is declining in step with what was taking place in 2019, with a big decline at Amadeus, which goes to worsen in the course of the Q2.

Amadeus, I do not know if that is one thing that’s recognized. So I am not going to provide any determine, however the exercise is declining in a big method due to the interruption of the airline exercise. So Q2 digital multimedia, we do anticipate a decline that will be larger than 10%.

Finance and treasury sector, the turnover accounts for 18.4% of Alten exercise, and it’s rising by 3% and it is principally pushed by the banking exercise. Now for exterior development, now we have consolidated on January 1, an organization the place we held a minority shareholding, at 40% in Japan. We went as much as 100%. We had a name on that firm. It is an organization with 115 workers, and their profitability is sort of low, decrease than 5%.

The Chinese language-Japanese firm that we acquired on the finish of the quarter, the closing happened on the finish of final yr. This firm is specialised on safety and software program improvement. There are 400 individuals. Prospects are in Japan, however many of the consultants are situated in China. That firm made EUR 18 million of turnover in 2019, and their margin was barely decrease than 10%

For 2020, I would not dare to make any forecast, not for the second semester, however what now we have seen — that we have seen that the IT actions had been extra protected than different actions while you take a look at the breakdown of the turnover per sector of exercise. That is the rationale why international locations in Southern Europe are doing higher as a result of our exercise is sort of targeted in business with a big share in automotive and aerospace exercise in France and in additionally Northern Europe. We have used a number of — we have taken a number of measures when doable to attempt to hold our margins as a lot as doable as a result of the intercontract charge that now we have to be confronted with are unprecedented, and it could be very pricey if governments couldn’t pay for a big share of it.

Now so far as the exercise for the primary semester is worried, we do consider there will probably be a decline of 9% on a like-for-like foundation. To the perfect of our information at this time, that it is not possible to make any forecast for the second semester as a result of a few of our clients are — can not give us any forecasts for his or her actions.

I’ll provide the flooring so you may ask any questions that you just might need.

In some industries, in gentle of the sophisticated scenario that our clients are confronted with, some negotiations are going down about costs. And so we do have a context that’s extra sophisticated than the one we had in 2008 as a result of it isn’t as a lot targeting one sector of exercise, and it is rather more brutal with penalties that now we have to handle every day.

Having mentioned that, we’ll handle the scenario. Alten is a wholesome firm. We haven’t any debt. We have needed to handle disaster up to now. And so we’re managing the present disaster. And hopefully, as early as subsequent summer season or in all probability in September, there will probably be a rebound.

Now might we open the ground for members?

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Questions and Solutions

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Operator [1]

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(Operator Directions) So now we have first query from Laurent Daure.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [2]

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Sure. The truth is, I had Three questions. The Airbus account, might you please inform us — I do know it is the largest account, however might you inform us what the scenario was final yr? And what would be the scenario for the primary semester?

The second level is on the best way you handle your headcount. What would be the group technique? Are you envisaging social plans or what will probably be — or are you ready after the tip of the lockdown? I assume that you have taken some measures already, and also you do have some potential financial savings. Now for the M&A coverage, in view of the truth that it is troublesome to make any forecast, can — do you suppose we might have offers on the finish of the yr?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [3]

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Now for the Airbus account, it accounts 10% of the turnover — of the group turnover. Making an allowance for that for that account, on Q2, we do count on to see a discount of 40% of the exercise. We have had extra in April, even when the month shouldn’t be over as a result of now we have real-time reporting of intercontract. So we’re at 45% for April, however that is going to go down as a result of after the lockdown actions will begin once more. So possibly 40% is just a little bit excessive, however let’s be cautious. We might go all the way down to 10%, 15% for intercontract charges in June, however I consider we’re going to stay larger than that as a result of a number of the tasks won’t begin once more or they won’t begin with the identical measurement of the groups that that they had earlier than the disaster.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [4]

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So for the market share?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [5]

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No, it isn’t particular to Alten. We’re in all probability the #1 so far as engineering is worried with Airbus. They’re making a exact stock of all their tasks which can be underway.

Now what I mentioned concerning the first semester for the developments or the natural development forecast, we have made an train, which was to attempt to per buyer per mission what the exercise was going to be, and we have taken this into consideration.

Now the turnout had began to say no on the finish of March. In France, we have had lots of of individuals leaving the corporate, however these individuals had resigned earlier than. So we’re going to consolidate on the finish of April on the premise of what companies are reporting what would be the resignations on the finish of April. That is how we’re going to have the ability to measure the turnover. Even when the turnover is declining, the turnover is reflecting the previous in the meanwhile. So now we have to have a look at the habits of engineers for the reason that starting of the lockdown to see what number of resignations now we have acquired on the finish of April.

I haven’t got the determine at this stage. I do not consider that we’re going to go all the way down to Zero as a result of there are all the time individuals leaving. In 2008, simply to provide you an order of magnitude, the worst of the disaster, I feel we had been down to eight% to 9%, which continues to be fairly excessive for the account. The measures that we took concerning the employees, concerning the headcount.

For recruiting, like for everyone else, what are we going to do? There have been labor contracts that had been signed. So we have postpone them, however we’re not recruiting anyone in the meanwhile. Until there are some, clearly, wants for a beginning mission. Let’s not neglect that our clients have lowered their exercise in a strongly method, and due to this fact, the industrial exercise has additionally declined. So we organized our conferences over the telephone or by video, however the variety of industrial conferences have been lowered in a big method. That is going to result in a discount of tasks. And due to this fact, right now, the recruiting insurance policies are on maintain. Whether or not we should always have a [softer] plan. At this stage, we’re utilizing furlough wherever we will to protect the talents as a lot as doable. And we’ll modify — we have used furlough measures, and we’ll see.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [6]

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The query is concerning the intercontracts. Effectively, so typically, you’ve gotten furloughed workers since you get a profit from the federal government. It isn’t the case in every single place in all international locations. So what can be the financial savings in your margin?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [7]

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I haven’t got the precise figures. I’ll have the determine, the precise determine on the finish of April.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [8]

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For March?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [9]

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So it takes a while to place the request, get the approval, et cetera. So it may happen in April. And the precept is identical in all international locations. We make a request in volumes, in hours, or we multiply the — for instance, 5 days over Three days. It is a share. After which on the finish of the month, on the premise of the fact of the tasks, we declare that persons are furloughed. It might be a partial or a full course of. We have requested for furloughed measures within the U.Okay. and Romania, in Sweden, in Germany. We simply filed for it in Belgium, in France, for the principle international locations, in Spain as properly. Finland has additionally requested for the chance to do it. Even Italy, the place the intercontract charge is sort of low. So it is making use of to most international locations the place we do have an issue with the exercise.

The one nation the place there aren’t any furloughed workers is within the U.S. As a result of within the U.S., when you do not want individuals, you lay them off. However now we have determined to not do it as a result of when you recruit individuals, you prepare them, we have determined to not dismiss them, however we’ll see in a month’s time, within the U.S., if now we have to regulate if tasks which have been stopped, like for Volvo, Ford, if they don’t begin once more. However a few of them will begin once more. But it surely’s too early on to take any choices at this stage.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [10]

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Now furlough, relying on international locations, you’ll compensate absolutely or not? In France, for instance, the federal government pays as much as 70% of the gross wage, which total signifies that individuals will get 80% of their web wage.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [11]

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There’s a Syntec conference, which is saying that we should always pay as much as 90% or 100% of the wage. The extra value shouldn’t be being paid by the federal government, clearly, in all international locations on the planet. Furlough will give proper to paid holidays, which aren’t being paid by the federal government. So even when there’s furlough, it isn’t going to neutralize the price of the worker, and it isn’t going to do it in a unified method in all international locations. So furlough is an efficient factor as a result of it makes it doable to carry and to not take hasty choices as a result of our know-how is our engineers. But it surely has penalties on the margin. Not solely there’s some residual value, however the misplaced turnover shouldn’t be going to generate any margins. And that is true for the entire business.

The margin that we’re dropping on our turnover is a margin on tasks. So they’re much larger than the 30% that now we have as a result of this gross margin that now we have consists of intercontract or every thing that’s vital for manufacturing.

Now the M&A coverage. We had a variety of information that had been signed, however had not been closed. And so now we have frozen them in lieu of the scenario. However we’re different information as a result of corporations will probably be offered at a lesser value at this time. However the problem is that it is sophisticated to evaluate an asset as a result of we do not know what the corporate’s exercise will probably be in 2020 and what the margin will probably be in 2020. There won’t be so many individuals promoting as a result of it is an atypical yr. And the query will probably be, if in case of any deal, we must agree on a down cost that’s the lowest doable linked to the foreseeable exercise in 2020. So I do not see any doable offers earlier than Q3, and earnouts will in all probability be larger as a result of they are going to be correlated to the rebounds in 2021, 2022. But it surely might be a chance to make acquisitions in favorable circumstances that we could not have completed in different circumstances. So now we have not frozen our M&A coverage. We’re nonetheless wanting and analyzing targets.

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Operator [12]

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We do have one other query from Gregory Ramirez.

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Gregory Okay. Ramirez, Bryan Garnier & Co Ltd, Analysis Division – Analyst [13]

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Bruno, I would like to return again to value and to not the variable share for bills exterior the pinnacle depend bills. What’s the flexibility that you’ve got carried out for the reason that starting of the disaster? What can be the share of variable value in operational bills? I assume that it’s extremely troublesome to make any budgetary forecast and that there are lots of doable eventualities. However what might be any lending situation by way of operational margin on the premise of the decline on the natural development in 2020? For instance, if you find yourself at 10% of natural development, you may have 4% to five% of operational margin, for instance?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [14]

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Effectively, I can not talk concerning the yr. We began to make simulations. assumptions for S2, whereas there are lots of of them, to make use of chances, it does not imply a lot. So in reality, we can not give any steerage concerning the second semester. Making an allowance for that the uncertainty is what’s going to be the extent of exercise within the automotive sector and the aeronautic sectors which can be essential sectors for us. As a result of as I used to be saying, our clients didn’t know what would be the tasks and what would be the quantity of investments that will probably be made for the tip of the yr. So this can be a huge uncertainty.

And concerning Laurent’s query, so far as the pinnacle depend is worried, that is additionally why now we have no certainty for the variable value at Alten. If I used to be just a little bit provocative, I might say, we haven’t any. As soon as any person is within the intercontract, it turns into a hard and fast value offshore ADC. They’re a hard and fast value as a result of it is captive. All prices are proportionate to the exercise. Engineers, clearly, as a result of relying on the variety of actions with a continuing and customary charge of exercise, which is 92%, 93%. These are proportional prices, however they are not variable value. As a result of to the exception of some subcontractors that we might determine to cease working with if the exercise stops. And this accounts for five% of the conductive earnings and a few of them are linked to some tasks.

So we aren’t going to cease working with them. As a result of once we name upon subcontractors, it is to not have variable value, it is as a result of we do not have the competence in-house. So to the exception of that facet of issues, in actuality, there should not that many variable prices. The variable prices are the bonuses of managers, all features included. So we must modify the construction if vital, relying on the extent of exercise in 2020 — will probably be what we contemplate to be the usual stage of exercise for 2020. If we contemplate that 2020 is sort of a clean yr, relying on the tasks that we’ll have, we must take a look at to measurement the corporate. Clearly talking, the price have been sized for EUR 2.5 billion. Clearly talking, we’re not going to make that determine, we can have an natural development discount. And as I used to be telling Laurent, the lack of the turnover may be very costly as a result of we’re dropping the entire margin.

Now how is it going to translate in operational margin? It will likely be minus 5% in the course of the first semester. Now for the second semester, I don’t know. Effectively, in reality, for the primary semester, it can rely upon Could and June. So it is actually a sophisticated train. We do have totally different eventualities, but it surely’s a sophisticated train. Due to this fact, we aren’t speaking on the margin. Normally, I have a tendency to provide you some totally different ranges. However we do have eventualities that we have constructed exchanging — on the premise of the trade between the operational managers and the shoppers. However the clients has no visibility in anyway, even on how they’ll get well, how the exercise goes to be resumed. The well being plan must be outlined. A few of them haven’t outlined them. We all know that the — we’re going to get out of the lockdown in a progressive method. That will probably be an on-a-zone case. So it may be extra sophisticated in gentle of what has occurred with the social companions even when everyone may be very strict concerning the well being measures to be put in place.

So in reality, that is to let you know that I am actually sorry, however I can not offer you a really exact reply. However 5% shouldn’t be absurd. It might be 6% or 4.2% or 6.5%. The sensitivity, we’re speaking about scores of thousands and thousands of euros, and we do not have that for S2. So EUR 100 million of turnover. So far as the gross margin on a mission is worried, it will likely be about EUR 35 million.

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Gregory Okay. Ramirez, Bryan Garnier & Co Ltd, Analysis Division – Analyst [15]

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So far as buyer’s habits is worried, I assume that you’re having discussions about cost — arduous to increase cost deadlines?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [16]

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We do have a few of these discussions, however they are not crucial one. The truth is, buyer, they do not ship out the orders, and that is how they handle their cost deadline. In our business, now we have a really longer cost occasions. Effectively, that would deteriorate. We’ve not seen it to date. We do get cash on due time. So the invoices for 2019 and 2020 are being paid. Now the discussions that we’re having with them are associated to different matters, costs. Clearly talking, clients are getting again to us telling us that their monetary scenario may be very sophisticated and their money scenario may be very sophisticated. In order that they’re asking the entire business to make important efforts on costs. Some are doing it on a one-off foundation, however some want to evaluate all of the referencing and all the costs. So that is going to provide rise to sophisticated discussions.

Some clients are asking us to provide them the time to get well. Some are asking us to scale back our costs by 30%, others are asking us to scale back by 5% to 7% sooner or later. So in reality, we see every thing. I feel that should you had been to speak to competitors, they’d say the identical factor. Generally additionally, when persons are working from their properties and the engineers should not on website, some clients are saying, we contemplate that productiveness can’t be the identical. So if it can’t be the identical we contemplate that 10%, 15% of productiveness has been misplaced. So we’re asking for a discount of costs by 10% to 20%. We’re not saying sure. However simply to let you know that it is a sophisticated scenario.

Effectively, it isn’t stunning in view of the context. Issues will get again to regular, however that is the present context we live in the meanwhile.

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Operator [17]

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(Operator Directions) We now have a query from Derric Marcon from Societe Normal. So we will take one other query from Stefan Slowinski from Exane BNP.

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Stefan Julien Henri Slowinski, Exane BNP Paribas, Analysis Division – Analysis Analyst [18]

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Bruno, I had 2 questions. The primary one was about China. I feel you mentioned that there was no restoration in China in the meanwhile. And now we have been listening to for the reason that finish of March that issues are choosing up in China, so I would like to listen to what’s your opinion about China?

And the second query, once we’re beginning to consider the reopening in Germany and presumably in France. I do know it is early on however possibly for subsequent yr, do you suppose that tasks will change? How might tasks change in our clients? Now will the kind of tasks would change and what issues for patrons versus the tasks we had earlier than the disaster?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [19]

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So far as China is worried, the exercise has picked up in China progressively beginning in March. So everyone was in a lockdown. Our engineers have labored from their properties for 1.5 months. They usually’ve been allowed to return to the location, both on the clients’ or on our website progressively. In China, usually, our exercise charge is about 95%, 96%. 3%, 4% of intercontract. Intercontract has gone up in the course of the lockdown as a result of some clients cease tasks within the automotive sector, notably. So we went as much as 30%, 35% of intercontract charges and all this has been solved, and now the speed is about 10%. The exercise has began once more, not utterly, however for the automotive sector, we nonetheless have a excessive charge.

Now so far as tasks are involved. As soon as the exercise resumes in France, in Germany and Sweden in every single place, the questions will probably be, what’s the quantity of investments that clients will determine on the finish of 2020, starting of 2021 since their earnings within the automotive sector and the aeronautics sector will decline in a big method. So what they’re doing in the meanwhile, they’re making stock of their tasks. So they are going to determine which tasks will obtain the precedence. If that they had a mission that was completed as much as 80%, they need to end it. In any other case, they are going to lose the funding. However then, they are going to determine both to proceed — hopefully, most of them will proceed, however a number of the tasks will probably be stopped. And a few tasks will probably be resized as a result of a few of our clients are telling us that we should always begin eager about decreasing the staff for the remainder of the mission, and they’re asking us to scale back the specs.

Some tasks might be revisited. For instance, I am eager about engineering, manufacturing actions at Airbus. A few of them had been find out how to meet line velocity, and Airbus mentioned that they had been going to scale back their manufacturing. So Airbus had a month-to-month charge as much as 120, they’ll go all the way down to 40. So the query is find out how to save as a result of they will produce the 40 in the meanwhile.

After which a few of our clients are conducting a examine about what can be the curiosity of continuous a mission or not. And we do rely upon their conclusions. But when there’s a discount of earnings in any sector, a discount of earnings will give rise to a discount of finances, even when they’re R&D budgets as a result of they’re pushed by the highest line.

After all, tasks about standardization, et cetera, besides if the European Union decides to go backward. Usually, these tasks ought to proceed as a result of life won’t cease. The continued revolution within the automotive sector will proceed even when it will likely be postponed by 1 or 2 years. That is why we consider the exercise will actually resume in 2021, 2022. However we consider within the automotive sector, the disaster will probably be long-lasting and the funding stage will probably be lowered.

Now what would be the proportion, we can not communicate on behalf of our clients, however it can occur.

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Operator [20]

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One other query for Derric Marcon with Societe Normal.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [21]

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The primary query is concerning the use charge, you mentioned it went all the way down to 88% in March. You gave us developments for Q2 per nation. Might you inform us about the place you stand for the primary 2 weeks of April or starting of Q2, so we might have an thought?

And my second query, I would like to return again to Laurent’s query. If you end up speaking about intercontract charges which can be very excessive, I assume it is exterior the furlough. Might you give us an thought of the variety of individuals that you just consider might be furloughed? I assume that you’ve got negotiated with the Ministry of Labor already, the variety of furloughed individuals out of those 3,000 individuals. As a result of if we take a look at the glass half full, to generate a 5% margin signifies that you need to get some heads that do compensate for the lack of turnover as a result of with 30% of intercontract means a giant drop of the margin.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [22]

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Sure, that is fairly certain. Now for Q2, we took some assumptions for intercontract charges. That features furlough as a result of it isn’t cumulative. People who find themselves furloughed, they’re accounted for as being furloughed, however we contemplate that they’re exterior tasks. But it surely’s a great factor to ask the query as a result of it isn’t cumulative.

So in March, we had a sophisticated month. For the final 2 weeks, the intercontract charge went up 12%, 13%. The intercontract stage in April is at about 25% on the group stage. And it’ll go down in Could and June, in all probability at just a little bit lower than 20%. However that is a part of our simulations as a result of concretely talking, we do not know what would be the tempo for resuming tasks and what’s going to occur in June.

So when now we have people who find themselves not working — now furlough is to compensate for the lack of exercise in view of the financial context. It does not work precisely the identical means in all international locations although the precept is identical. In some international locations, the place — when persons are not working and there’s furlough, there’s a doable furlough like in Germany. Now if you wish to apply for furlough, in Germany, it is a lot easier than in France, which isn’t stunning. The truth is, we will take a look at what is going on in Europe for furlough and French forms is probably the most environment friendly one, and that is not likely stunning, is it?

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [23]

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No. They made some efforts to simplify issues.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [24]

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Effectively, it is true for small-sized corporations. As a result of I do know a variety of individuals and former workers from ALTEN have began their very own corporations. So small-sized corporations that are in a troublesome scenario, they get an settlement for furlough in a short time. Huge corporations — for giant corporations, it is extra sophisticated.

Now to return again to the way it works. In some international locations, when you meet the circumstances for having the correct to furlough that you would be able to show that there’s a lot of exercise with the interruptions of tasks, et cetera. It isn’t open bucket, that in case you are entitled to furlough that you’ll get the profit both immediately, like in Belgium, or it’s the firm that’s going to advance the cash after which it could be reimbursed by the federal government. So in some international locations, it is 70% of the price or 60% of the price, it actually depends upon international locations. In a number of international locations, when persons are furloughed, we proceed to pay software program fees. In some international locations, it isn’t the case. In some circumstances, you must give some further wage. You could have all conditions, all doable scenario. However in all international locations the place we apply for furlough, should you beat the standards, you will get a sure or a no reply. And if it is a sure, you’re entitled to it. So we filed for furlough in all international locations the place now we have a discount of exercise.

Intercontracts because of the lack of exercise are being compensated by furlough. In France, the federal government is vigilant. They need to keep away from facilities. And due to this fact, now we have filed a request for furlough as a result of in volumes, it’s in France that now we have probably the most — the best variety of workers that might be furloughed workers. Once we speak about 4,000 engineers, should you take a look at Alten and its first subsidiaries, a few of them are utterly unemployed and others are furloughed. We ask for the variety of hours on the premise of the volumes. And actually, we’ll declare on the finish of the month on the premise of actuality. We’re being given the inexperienced gentle for the quantity of hours, however then now we have to justify that. And in France, we contemplate [and this is the normal] that the federal government mustn’t pay for structural intercontract. So we’re not going to use for furlough for people who find themselves in intercontract or standardized intercontract. We do it for people who find themselves in intercontract due to the disaster. So clearly talking, if the intercontract charge is 25%, and normally, we’re at 6%, we’re going to apply for the distinction. And we must be ready to — we must be able to justifying this. After which we’re having discussions with the administration, both we get an specific settlement from the administration or now we have implicit settlement from the administration as a result of they did not have the time to take care of it, and they’re going to validate after 24 hours, then we will come and examine.

We do have questions and solutions. We now have to reply a few of their questions so as to display that we’re in a scenario whereby we have to apply for furlough.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [25]

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Now what I used to be attempting to know, with all these discussions, have you ever carried out — have you ever acquired all of the approvals? Have you ever budgeted your intercontract threat because of the disaster in the course of the first semester? And should you make so, what’s the — so what’s the scenario in France in the meanwhile?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [26]

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We now have filed in all European international locations, and I do not consider there was any downside. In France, now we have filed for furlough in all subsidiaries. All the pieces has gone via an specific or an implicit settlement for Alten as a — I can not provide the figures, however we’re speaking about half of the pinnacle depend for France.

And right here, we’re exchanging questions and solutions. The administration is asking us a variety of questions. Have you ever put in place some measures to protect the exercise? Have you ever organized the truth that individuals might work from their properties? They’re asking professional questions, and now we have to reply them. But it surely’s not as clean as in different environments.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [27]

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Effectively, 50% are being coated. So 50% for France are being coated. However what you have completed already and the remaining 50% are a part of the Q&A session with the administration?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [28]

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Sure, that is proper.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [29]

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We’re solely speaking concerning the productive employees? Have you ever utilized for nonproductive employees?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [30]

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Sure, now we have put a request for nonproductive employees as properly, not as a lot, relying on features. We now have reviewed features one after the other. For instance, the individuals in control of recruiting, they aren’t overwhelmed in the meanwhile. So we have requested for furlough for them, not complete furlough however now we have thought of that almost all of them had been furloughed.

For the finance individuals, it isn’t the identical factor. Some industrial managers, it isn’t the case. They’re working nights and days. So it actually depends upon your operate. Individuals organizing occasions, they’re furloughed. Even when some occasions must be organized for September, however industrial seminars in Could, company conferences, for apparent causes, they’ve all been canceled. So now we have checked out all features, one thing that the France administration is asking. They requested us to enter element for the organizational chart. For corporations of our measurement, it may not be the case, for smaller corporations, however they ask — they take a look at all positions within the organizational chart.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [31]

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One final query, if I could. For those who take a look at what’s going to occur after the disaster, the truth that now we have organized telework out of your properties and from the shopper, is that going to make us take into consideration how we might ship merchandise to clients even after the disaster? Like engineers which can be nonetheless working for Amadeus, they aren’t going to work for Amadeus for a very long time. Do you suppose you may reorganize the truth that they may work from their properties on different tasks in France since distant work is changing into customary? Or is it going to be nonetheless very sophisticated to make use of that workforce in a distant method?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [32]

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So what we’re , in the meanwhile, concretely talking, individuals who had been working for Amadeus, Amadeus goes to cease their tasks. We’ll — we’re how we might use the competencies in different sectors of actions in reference to IT. They won’t essentially be primarily based in Sophia Antipolis. The reply is sure, we will get organized having individuals work remotely. Once they’re engaged on our facet, they’re already working remotely with clients as a result of some steering committees are being held on a weekly or month-to-month foundation. So we might envisage having distant work proceed. And actually, it is fascinating to see that it really works fairly properly. Now we do not know if it’ll proceed to work properly. As a result of so as to work remotely, it’s good to have the correct circumstances. Not everyone has all of the circumstances met as a result of typically you hear that the youngsters are within the again. But it surely saves transportation time. If individuals know find out how to get organized and if they are often autonomous working from their properties, we might envisage on the long term to have much less premises, for instance. As a result of at this time, now we have lots of sq. meters to place with clients’ necessities as a result of they needed their work packages to be situated subsequent to the edges, so they may have smoother human exchanges. We might have much less premises, we might have individuals rotate on websites, work organizations whereby individuals would go to a website for Three days after which they’d stay at residence for two days. And we’d have to prepare these kind of plans when now we have individuals engaged on safety.

For instance, now we have a variety of open area workplaces. And there, we do not have the two meter distance — safety distance. So I do not consider individuals will be capable to work from their properties with out by no means going to the workplace as a result of there’s skilled and social hyperlink that it’s good to hold. At Alten after a number of weeks working from their residence, persons are coming again to the workplace, and so they’re very completely happy to return to (inaudible). However that is going to pressure us to have a unique group. We have seen video conferences with 60 members. That is one thing that we had by no means envisaged up to now. Even 6 months in the past, we would not have considered it and it really works properly.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [33]

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Effectively, I am not listening to individuals slapping their kids. I am listening to individuals enjoying the piano. This morning, I had a convention — video convention and I heard any person slapping their kids.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [34]

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Sure, the principle impediment is the truth that faculties are closed.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [35]

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Sure, it is sophisticated.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [36]

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As a result of it’s good to have the correct circumstances in place. We — our engineers are fairly younger, they’re kind of 30 years outdated. So they simply began their work lives. They do not all have a giant house the place they will isolate themselves. We now have to consider the sensible circumstances.

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Operator [37]

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Thanks. So the ground is yours for the conclusion.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [38]

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Thanks very a lot. Thanks to all of you for attending that phone assembly, which is sort of distinctive. I feel in 2008, we had a sophisticated yr. However the matters are fairly totally different from those that we have been speaking about. Hopefully, now we have given you an image of what the market regarded like. In the course of the publication in July, I’ll be extra exact on the S1 margin as a result of to make any forecast at this stage may be very troublesome. It is going to rely upon the turnover in Could and June and the turnover sensitivity may be very excessive. In July, I am going to offer you a exact image of what we might count on by way of margin for the primary semester. We’ll see whether or not the extent of exercise has declined by kind of 9%. We would have a pleasant shock. However to be sincere with you, we consider that we have been fairly goal in our forecast. And hopefully, we’ll have a transparent imaginative and prescient of what would be the exercise within the second semester. And hopefully, issues will clear up. So I want you a pleasant weekend and see you quickly. Thanks. Bye-bye.

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Operator [39]

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The convention is over. Thanks on your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]



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