Alten S.A. (0O1S.IL) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to ALTEN's conference regarding our revenues for the first quarter 2022. And I'm going to give the floor to Mr. Benoliel. Mr. Benoliel, you have the floor.

Good evening, everybody. Thank you for taking part in ALTEN's conference related to our activity for the first quarter 2022. For this first quarter, I don't know if you received the press release confirmed the recovery for the second semester 2021. Even though the figures were slightly down, the first quarter last year was still affected by the pandemic. The war in Ukraine did not have an impact on our activity. Regarding our own activities in Russia and Ukraine, it's quite marginal, and it's -- it did not have an impact on our client projects. ALTEN revenue at the end of March 2022 is EUR 894.6 million, up by 31% in relation to March 2021. In France, the business has gone up by 18.9% and by 38.6% outside of France. On a like-for-like basis, the business has progressed in a sustained manner with growth exceeding 20%, and it's actually equivalent to the second semester 2021. It goes up by 14.9% in France and 24% outside France. Acquisitions contributed to 33% of the growth this quarter and represents 7% of our revenue. The international business represents 2/3 of our business. The business rate is 92.5%, slightly above the normative rate, with some disparities according to the geography or to the companies. In spite of the departures at the end of the year, there's a high turnover, but the group also managed a very good performance in terms of recruitment with very good figures in terms of recruitment. Acquisitions represented 2,900 engineers. It's the companies acquired at the end of 2021 in China and India that were consolidated on the 1st January. Consequently, or as a consequence, the group had 43,000 employees. Today, we have 47,800 employees. The objective that we had set up at the end of 2019 is reached in spite of the pandemic. Out of the 47,812, [ 1,400 ] are in France, 3,350 are abroad. In France, progress is mainly due to the civilian aeronautics, 26% of our revenue in France, plus 50% in relation to last year. But it hasn't recovered the level before the crisis. It's a progress that is also due to the Life Sciences, thanks to pharmaceuticals and electronics. Reversely, the Automotive sector, 10% of the revenue in France is stable because the growth is mainly via near offshore. This sector in France is 35% below the level pre-COVID crisis. The Energy sector, 14% of the revenue in France is stable because the growth in the nuclear industry and the sectors of equipment for energy is actually eaten up by the drop in oil and gas. So France is minus 5% the level in 2020. Abroad, the business is growing most -- in most countries in the Iberian Peninsula; plus 27% in terms of growth. In Germany, the business is picking up. Well, it was quite late in 2021 because it was very much exposed to the Civilian Aeronautics in the country. It has speeded up at the end of the last quarter, and this acceleration was confirmed this quarter. The Civil Aeronautics is plus 40% in Germany but minus 30% compared with the beginning of 2020, while the Automotive sector, 50% of the German revenue is making a 50% progress and is recovering the pre-level prices. Globally, thanks to the Automotive sector and the other diversification sector, the business level in Germany is above 2020. In Italy, growth is maintained for the third year in a row, all sectors are up. In Benelux, growth is confirmed, thanks to the Netherlands, where the business is really picking up, thanks to the very good results in electronics. In the U.K., the business is growing plus 30%, a business that picked up in the Aeronautics sector that is far above the level at the beginning of 2020, a business that grew by 50%. Automotive sector has grown by 37%, slightly below the level in 2020. The defense and electronic sectors are doing well. The U.K. has gone beyond the level before the crisis, especially in the Automotive sector. In Scandinavia, growth had slowed down in the last quarter of 2020. In Finland, representing 20% of the area, the activities are making 7% growth. In Sweden, the business is making slow progress, even though there are some sectors that are growing and have recovered the level pre-crisis. But the other sectors are slightly down. In Eastern Europe, the business progress is very sustained, thanks to Poland, 60% of the area and has grown by 20%, thanks to the Finance and Automotive sector. In Romania, 40% of the area, plus 20% thanks to the automotive activity. In North America, in the U.S., representing 80% of the area, our business has grown by 25%. In the Automotive sector, the tertiary Finance, Life Sciences, Aeronautics and Telecom, oil and gas, just as for the rest of the group, is going down. In Canada, 20% of the area, growth has reached 20% in the finance sector and aeronautics sector. The Asia and Pacific area is growing still in a very sustained manner, more than 40%. China is growing by 40%, thanks to the Automotive sector that picked up again. Japan, plus 50%, thanks to the tertiary sector and semiconductor as well. I'd like to say that the revenue for countries hosting delivery centers, such as India, well, they provide local revenue because when India is acting as a subcontractor for Germany, France or the U.S., its impact on revenue, and therefore the matching revenue, is taken at the country level, the front office level that manages the relationship with the final client. The growth has remained very strong in most of the geographical areas, except from France and Sweden that are still below the level before the crisis. All the other countries are above the pre-COVID level. The business sectors are all growing, therefore, with a different rhythm. The Automotive sector that is growing up to 17% of the revenue for the group is growing by 25%. More strongly for the OEM, plus 40% for the manufacturers, among the manufacturers, 2/3 of the revenue. The situation is rather contrasted, even though the -- auto manufacturers are slightly down, but most of them are growing. For the OEMs, very strong progress, especially for the German OEMs, all above 50%. The Automotive sector that had fallen because of the crisis is only 4% below the revenue level pre-COVID crisis. For the manufacturers, it's still 15% below the pre-level crisis (sic) [ pre-crisis level ], while the OEMs have gone beyond the situation before the crisis by more than 20%. The naval sector is stable. There has been a reorganization within Bombardier. Aerospace plus 12% -- plus 12.5% or in terms of revenue. In the Civil Aeronautics, the business is picking up. We had seen that at the beginning of 2021, it was confirmed in the fourth quarter and it's far more bullish than anticipated. The business is only 10% below the level before the crisis. So that's quite unexpected. And in a such a tight time schedule, it is therefore very likely that by the end of the year the business level for the Civil Aeronautics will recover the pre-level crisis (sic) [ pre-crisis level ] beginning of 2023 maybe or end of 2022. The other -- Energy, generating 4% of the revenue is up 6%, has come back to the pre-level crisis (sic) [ pre-crisis level ]. Oil and gas, only representing 4% of the turnover, is down by 2%. Given the general situation that everybody is aware of, there should be upturning of this trend. It's not the case yet. The nuclear sector, 2.4% of the revenue, has a 10% growth in a very favorable context. With the shortage of engineers, equipment for the Energy sector, 6% of the revenue, 20% growth, thanks to renewable energies, but not only. The Life Sciences have grown by 12%. It's quite homogeneous between the medical equipment and the pharmaceutical equipment. The rest of the industries for industrial equipment, telecoms are slightly growing, plus 3%, slightly going down for the operators but growing for the OEMs. The specialty finance sector, plus 13.5%, making progress in the bank and finance sector and the retail services as well. In summary, outside of Civil Aeronautics and Automotive, which has a much bigger upturn than expected and were close to their precrisis levels, all sectors have gone beyond the plan and are significantly in growth. Now from the external growth perspective, we have acquired 3 companies at the beginning of this year, one company for which we had announced it last January that they were coming into the group. This was a company situated in Spain, in cloud and digital transformation sectors, 280 consultants and EUR 12 million in turnover figure. During the second quarter, we bought an Indian company that is in product engineering, which is going to reinforce our positioning in terms of embedded software for products in automotive and not only. This is a EUR 12 million turnover figure and 280,000 consultants -- 280 consultants. And we had to delay, because of some authorization issues with antitrust companies in the U.K., a company situated in the cloud services on the public sector services as well, which is not very common for our part. This company should help us in the U.K. to capitalize on its business segment, which is EUR 110 million worth of turnover with 110 consultants, including half who are freelance or external, which is often the case in the U.K. Of course, we also have other cases that we are scrutinizing as you understand, some of which are in LOI phase or simple discussions. At the -- so the beginning of this year is very promising, with a pursuit of the ramping up of activities in all sector, including Automotive and Civil Aeronautics. The health situation, and most especially macroeconomic and political situations, could upset this trend, but the first quarter will be very significantly impacting the results for 2022, which are in any case above the forecast. And financial analysts can ask questions if they wish now.

[Operator Instructions] We have a few questions coming in, the first of which coming from Emmanuel Parot from Gilbert Dupont.

Do you hear me, Bruno?

Yes, indeed.

Okay. So I had a few questions actually, the first of which, to go back to what you said on the M&A with the acquisition of EUR 210 million worth. So this is bigger than usual. So could you give us a little -- a few elements on the margin and the acquisition ratio, and if you have in your pipeline other companies of this size? My other question, more to do with the news in relation to supply chains and industrial clients. This hasn't played into Q1 results, but in relation to what you see in the month of April, is there -- so maybe a few troughs in this curve for certain industries or not at all? And the last question in relation to the business level which is very high because of a very high turnover level and recruitment which was very dynamic for Q1 as well, so do you expect for this to go down again in the quarters to come because this rate is especially high right now?

Now concerning M&A, concerning the companies that are in new deals, these are smaller companies than the U.K. company that was just acquired. So between 150 and 200 people strong. And these are the similar-sized companies that we usually acquire. There is -- no companies of more significant size on the market. Now the U.K. company, the ratios and metrics that we've used are the usual ones with -- so 7x EBITDA with a run out over 2 years. The margin of the company is lower than that of the group. It is around 6 percentage points today. And of course, it's up to them to put in place the ad hoc company to bring back this company into the group standards, in other words, around 10%. Now concerning business in April, whether in terms of recruitment as in terms of the sales activity, for the time being, we have no trough in the trend. Business is still good. And for the time being, we don't have specific warnings on the part of customers. I hope this is going to last. But for the time being, this is the situation that we are seeing. Now concerning the level of operations, we have forecasted a slight decrease in this level, but very slight. For the quarters to come, we believe that this is still going to remain high, however, for the rest of the year because customer demand is there. It's true that it could be higher, but we are recruiting many engineers without projects to be able to answer calls for a tender. But we do not expect, at least as of today, for a -- this level of activity to go down. And if it did, it would be very slightly, so 0.5% to 0.8% at most.

Gregory Ramirez, Bryan Garnier, you have the floor.

I have 2 questions. First, to go back to hires. Are many hires done offshore from now on? And this plays against, I assume, the price/mix. And so can we consider that -- concerning the remuneration inflation on the market plus turnover rates that are still high, we can stay on a price to salaries effect that is still favorable? So this is my first question. And concerning my second question, Emmanuel talked about the U.K. acquisition. So what are the margins of the 2 other companies? I believe that the first one was already mentioned in February -- or January, excuse me.

Yes, indeed, I think that we did tell you that the margin was above 10% for the first company acquired. And for the U.K. company, it's only at 6%. And for the Indian company, it is for the time being -- and stressing this because we're going to have to restructure it, and so it's probable that the margin is going to go down -- but for the time being, it's still above 10% as well and closer to 15% as a matter of fact. And for recruitment, this is a good comment and a good question today. Of the close to 2,000 employees that we've recruited, we have -- so offshore people who are about 500, so 1/4 of them who were recruited, so between India and Morocco to meet the increase of demand, especially in Aeronautics and Automotive and so to manage future ramp-ups. And we do not have recruitment plans for thousands of employees for now for our EDCs, but we are going along the trend basically and trying to stay one step ahead, because we have to integrate people, train them. And so this involves a number of costs, of course. But the rest of the employees were recruited mostly in Europe. The impact in relation to the price to salary mix, well, what's for sure is that we do expect an erosion of the gross margin this year because the fact that we are increasing the offshore share does not necessarily contribute to increasing the margin, contrary to the IT sector, because, as you know, actually these are projects that are offshored with the clients' agreement who has an overall vision of the project approach. And so we do not engage on huge BPOs, contrary to IT, or for lump sums where the client does not understand the breakdown of resources, whereas here they understand the breakdown between front and back office. And so in a sense, they will recoup de facto the additional margin because they asked us for additional productivity, which means that the average price for a certain project would not be affordable on a high [ co-zone ]. And so necessarily, this is going to be limiting the erosion of the margin and allowing us to maintain our margin levels and even improve them, even though in absolute terms, the margin is a little bit lower by offshoring a certain amount of these settlements. And for the rest, we do see that we have put through price increases. But from my point of view, these are not sufficient to be able to offset the future remuneration increases considering that engineers are -- have salary increases, anniversary dates, which allows us to smooth out the increase of salaries considering the increase in the turnover. But we have some customers where prices are negotiated for 2 or 3 years, and these are Tier 1 references for bigger accounts. And for the time being, we have to manage our projects, because in some cases prices have not budged. We do not expect an erosion of gross margin by 2%. This is not what I'm saying, but there will be a slight erosion of gross margins by 50 or 60 percentage points, maybe less. Decimals of percentages.

[Operator Instructions] New question coming in from Derric Marcon, Societe Generale.

Do you hear me?

Yes. Very well.

So I had a technical question on consolidation date of acquisition. I believe that the one in Spain was the 1st of April, but if you give us the consolidation date for the 2 other ones, that would be great.

It should be the 1st of July, normally because this implies that we implement an ad hoc organization. But it should be 1st of July.

Okay. And on the price element, you have the issue of price grid and references negotiating -- negotiated with customers, but you also have the possibility of moving engineers around and renegotiating case by case and coming out of the processes set by purchasing departments, et cetera. And so in the first 3 months of the year, can you measure the amplitude of what was acquired in terms of price increases?

No, we cannot measure this precisely because there's a combination effect as well. What's for sure is that the natural turnover means that for some projects we have to replace engineers, and so moving engineers around over several projects, well, when they are complex projects, this is really complicated because you have the background know-how that you should not lose. And so it does limit this possibility of optimizing the cost of the resource, because people are not necessarily replaceable like that from 1 day to the next considering that the natural turnover is forcing us to call upon this type of replacement on our projects. Now to say -- I mean it's true that there are discussions on prices with purchasing departments, and there's the way projects are organized, which is what we manage with technical departments as well, which could allow us to optimize case by case. But to say to what extent and what impact it may have on prices, I must admit I could not tell you.

Okay.

The only thing that we can measure is the evolution of gross margin rates for a given project, which overlap over several fiscal years because most projects do not end at the 31st of December. And so depending on the improvement or erosion of gross margins, we see clearly going on.

Right now, it's quite heterogeneous. There are some projects for which we see gross margins improving, which means that the financial sale price connected to the project is increasing and the price/salary mix is improving on that project. And for others, it's the opposite. And so that's why when I look today at the snapshot of the first quarter, things should improve over time necessarily because we have -- so this effect of staff renewal. And I'm anticipating -- I could be cautious in this respect, but I do anticipate -- so 50 to 60 basis points of the erosion of the gross margin. So are you talking about annual projects, which are over 2 or 3 years? And so do you have some windows for price increases?

Yes. They could be 1-year project or projects that started 1 year, 1.5 years, 2 years ago, but started second half of '21 and are going to end during this current year or first quarter of '23. And so the window of opportunity to renegotiate the price on the project, if there is a possibility for this, is just once, one shot or every 3 months, because it's a renewable opportunity, which allows you to renegotiate with technical departments the embedded cost on the project. So this also depends on the environment that we're in. There isn't just France. But basically, for bigger work packages, prices are negotiated at the beginning of the work package with customers. And they are set according to price grids per engineer, per category of engineer. From there, either we review the price risk, which allows us to -- so go back on and so fine-tune the price of the team and of the deliverable, ultimately, or there is no potential for price renegotiations because they are frozen for 2 years, for instance, because we do have customers that remind us that they don't want to renegotiate anything. And from there, you can manage things differently when there is a turnover or when the team is going to be changing during the project, because projects teams are not set in stone during the project. There's upstream, development phases, et cetera. So this, I would say, is the specific know-how that we need to put in place to make sure that we play our cards the best to optimize margins.

I have 2 other questions. There's a specific explanation to the drop in margin in the U.K. by 60%. Is it the margin of what has not been sold, overhead costs that have been underestimated? Do you have an explanation? And the second question. You said that you were quite happy about the performance of the first quarter. Do you believe that this performance is good? And do you have indicators? What do we have in the path in terms of growth recruitment -- net recruitment?

Well, I'll answer to your last question. April was a good month of net recruitment. It is, however, always more complicated. I do not think that we'll recruit in the Q2 as many as we recruited in Q1. But there's no red light. I mean there's no red warning anywhere. Then our recruitment policy is very aggressive. We believe that the business is going to remain dynamic. It's to do with the psychology of the business managers who in a slowing down period try to anticipate and slow down their recruitment themselves, while it's not really necessary all the time. The main driver is the commercial activity. When we have requests, tenders, as long as this still going on, there's no reason for a recruitment manager to change. And we still have this rationale in mind to be ahead of the phases in order to win the project. So far, the first quarter is confirmed, this is the 1st of June. The context is as it is. But for April, there is no change. So we should have a second quarter in terms of recruitment that should be quite good. And last, there was something unexpected that take place before the end of June. The company in the U.K. now, the management method and the project steering methods for this company, well, they are great professionals, but it's not the same as what we do when we monitor our project. There is productivity to take into account about the project, and I cannot measure that today because the clients are in the public sector, and there's always some inertia between the moment a project is won and the moment the project starts. So our feeling is that this level of improductivity, that is bigger than ours. Now I do not think that this company is oversized in terms of costs. It's a consultant company. It has a structure, which is not always the case of the companies of 200 people that we buy. This one is quite structured. We'll proceed with some modification, not at the beginning, but we'll try to improve their profitability, and they can only be happy about that because they will get the dividends. We also have a very strong proportion of external employees. So the rough margin is lower than for the in-house employees. So what are we going to do with this company? Will we be able to take it up to 10%? Or is it going to stagnate around 8% or 9%? Well, so far, I cannot say. We just acquired the company. We still have different things to understand from an operational viewpoint. But so far, it's too early stage to have a very precise pictures of the levers we can activate.

You said EUR 100 million for this company -- for the -- in terms of revenue.

EUR 110 million.

Another question by Laurent Daure, Kepler Cheuvreux.

I have several questions. I wanted to talk about the acquisition in the U.K. I think this is the largest acquisition in terms of turnover. The profile of this company, is it supported by a fund? This company has been very dynamic over the last few years. What could you tell us about this company? It would be very useful. The second thing -- the price and the gross margin. You said there were major disparities in terms of prices. From one sector to another, clients do not accept the same prices. They have the maximum rate of use. So as you've been considering arbitrating your resources in a more aggressive way than in the past to better serve the clients. My other question is regarding the gross margin. Could you tell us about the other costs? The travel sector is going to be picking up again. Could you tell us more about that, about what is going on?

The second quarter started well. There's a progress of the use rate that will be not as strong as in the Q1. The head count will be more or less from the first to the second quarter. So the good reasoning, the good way of thinking would be to take a deceleration assumptions of 4, 5 points in the field.

Would that be okay? Or am I missing a few info?

Okay. I'm going to take the questions one by one. In the U.K., the company has had a regular growth, quite a measured growth. It's not a company that had 10% growth every year, but it's growing slowly and surely, about 5% per year. They did better last year, probably because, including in the public sector, there was a general trend that consisted of increasing the digital project. They were not really affected by the crisis. The public -- and the public sectors were not that affected, unlike the companies in the private sector. So this company, that wasn't the case. Now this company does not have a commercial dynamics that is complying with the group standards. Its model is more structured on business managers that are also in charge of the delivery, that is to say the customer relationship. And therefore, they win the project because they feel very close to the client. This is not our organizational model. We have a very commercial organization, people that are in charge of their own branch. But for the big package, we have a team that is in charge of the delivery, and this team is not in charge of the commercial prospection. Our commercial or sales organization is very different from the organization of this company. It's rather a classical organization for a company in this sector. It's not specific to this company. So we'll have to convince them to work slightly differently and to set up an organization in order to be able to pick up some more business to be more dynamic and to diversify their client portfolio. I don't know if it answers your question. Now regarding the pension, there is no investment fund in this company because the price would not have been the same.

Was it a negotiation over-the-counter? Or was it just a difficult negotiation?

It's not really over-the-counter. Very quickly, we were in exclusive negotiation with them. It was not a very structured process, if that was the question. What was the second question? The client preference. Well, this is something that is actually quite difficult to implement, because each manager, each BU manager, manages both the relationship with the clients and the recruitment in a stand-alone manner. So arbitrating between 2 clients in 2 different business sectors, it would mean that at one point an invisible hand decides to steal some resources in 1 BU to give them to the BU just next to it. In our organization, since we're all stand-alone and autonomous, it cannot work like this. Those who have clients with more profitability and more margin, well, they do their best to develop these type of clients such as the -- well, with clients that are not as profitable, they're taken care of by other teams. So each team recruit the resources that they need, and they recruit within the group the resources that they need. There is no regulation -- no internal regulation to arbitrate the dispatch of the resources because we do not have common resources with an arbitration that will be made by the technical department and then allocating the resources to the projects depending on the clients and the needs.

I'm sorry, Bruno. The expectation of employees. At the end of the day, the BU manager and the other departments, how does it take place? Who'd have the final say? Is it the person in charge of the BUs that negotiates directly with the client? My question is, the CEO, does it have the possibility to block?

Well no, because in major projects, the negotiations that are carried out are at the country level or group level and prices are defined within framework contracts that are signed over several years. When there is, for example, the fact that we are now benchmarked with Airbus, negotiation takes place every 2 years or 3 years, but that's negotiated with the general management. It's not a business manager that is going to negotiate the Airbus price grids or the Stellantis price grids. So the Tier 2, Tier 3 clients, that is to say clients for which the business level is quite low, a few dozens of engineers, in that case we don't always have a framework contract that is signed. When the margin is below a specific level of gross margin, it depends on the country, of course, because the gross margin profiles are different from one country to another. And the BU manager -- the BU director must make sure whether or not there is a waiver because the BU director does not have the authorization to offer price that is not compliant with our prices basically. In the Automotive BU, the objective is to develop the business with the automotive players. And since it is -- he is in charge of his own BU, in charge of his own recruitment, we are not going to tell this director, well, you recruited X people for such clients or that amount of people to anticipate the need for such client. We're not going to steal resources from him to give to another sector because we're going to hinder its development capacity, therefore, its own margin and be an hindrance for the communication plan, too. Sorry, the interpreter did not hear. The sound was not very good. So the -- we have different companies which organizational model is different. And you cannot -- I mean the resource allocation is not done via the salespeople. Salespeople are in charge of finding projects. And internal, they have incentives in terms of revenue, but they do not pay [ enter ] contract. The organizational level is -- their organizational model is very different. Now a commercial that has an [ enter ] contract level that is above what he has in his own plan would accept, some will -- might not accept to have some resources stolen. We all have visibility regarding available resources in order to build our teams about 2 or 3 months ahead, but we cannot say we're going to cut off the resources for the Automotive sector for Stellantis or for the benefit of another client because this client is more profitable. If we can take the project at conditions that are compliant with our objectives within Stellantis or Renault, we'll take the project, too. The assumption you're describing is not compliant with a rationale, a Malthusian logic basically. The quarter -- the second quarter, it's 5 points less compared with the first quarter. Well, we need to look at the number of working days, because the mechanism for the working days are not the same. We have a deceleration assumption for the group margin. For the organic growth for the group between first quarter and the second quarter, we can say that given our average headcount last year during the second quarter and the average revenue per person.

What will happen to our average objective for the Q1 if we believe that increases slightly between the beginning of the year and the end of the first quarter?

We can model all this. We can [indiscernible] as a starting point. We had what we have to -- at 1,500, 1,800 during the second quarter in a leaner way. We get a mean, then we have average objectives for the Q2, and that will determine more or less the expected revenue, and we can compare it with the Q2 last year. So mechanically, it will give us an assumption in terms of organic growth for the Q2 that will be lower than the first quarter. And the usage rate, the utilization rate, well, that's exactly what I meant.

In terms of time schedule, can you give us an update for the third quarter to fourth quarter?

So Q1 for '22 on group average, we have 0.5 working days more than last year. So to be precise, we have 62.60 versus 62.10. For Q2 '22, we have 0.4 working days less than last year. And so for the quarter, it's just about the same. And so we have 61.4 sort of Q3, 22.6 days less or fewer, 64 working days. Q4, we have 1 working day less, so bringing it to 62 working days for '22, which is minus 4 or 5, so minus 1 for France and a little bit more internationally. And in France, we have -- so if we look at France specifically, we have 1 more working day for the first half of the year because we had 1 more working day in Q1, which is not the case in Q2. And for Q3, we have 1 working day fewer and Q4 1 working day fewer. And so on average during the year, we do 1 more for the first half, minus 2 for the second half, so minus 1 overall.

Okay. We can modelize with this. That's perfect. And last point in relation to the leverage effect of -- but of course, there's going to be more details this early in the year, but what can you say about this?

So under the gross margin we have everything to do with recruitment costs and sales costs. This is going to increase compared to last year. And necessarily, I mean, you get the picture. To assist the growth, you have to staff managers, integrate them, train them. And this is the same for recruitment teams. And so last year, we had started restaffing and reinvesting on recruitment costs as of the end of the first semester. So this was especially for S2 actually. And this year, we are going to have a cost that's going to be proportionately higher than the one of last year. For the G&As, we are restaffing as well, because we are late, and growth is what you see with the figures. And so we really need to assist this growth. It's quite tense in terms of internal organization right now. We have a number of IT projects that we had frozen that we have to restart. So it's not so much to do with traveling costs that are going to play into this. I think they are going to pick up again a little bit, but the fact is that ultimately -- so engineering traveling costs -- engineers' traveling costs were reinvoiced, and there's fewer trips that are reinvoiced and concerting trips of managers and executives. So in relation to corporate staff, this has picked up again but much less than 2 years ago. And we do have a certain number of work habits for 2- or 3-hour long meetings. People do not travel anymore. They go on Teams or these types of things. And so it's not trips that are going to play into the situation. So every -- it's going to be everything to do with -- so restaffing support functions, in particular HR functions. We've restarted IT projects. We've restaffed communication teams. We are redoing events for engineers, for sales managers. We are going to reorganize the seminar because we hadn't done this for 2 years, et cetera, et cetera. And so the rate of G&A is not going to increase, but we do not expect a big leverage effect on G&As. And so except if the growth is very strong during this year and we continue running after growth, because this is what's going on in ALTEN. We have growth rates that are 20% or 30%. And so we have trouble recruiting the resources that we need. And so we never stop recruitment plans, and so we never manage to reach the level of resources that we need. And so this does impact the level of G&A. And the fact is that if this is the case, we will be lagging behind the restructuring efforts that we need to implement. And that's why I told you at the beginning of the year that we did 19% (sic) [ 10.9% ] at the -- in 2021, which was not standard, and we had to expect a picking up of the margin will be at a 2-digit figure. And -- but the fact is that we will not be at 19% (sic) [ 10.9% ].

[Operator Instructions] Next question, question from Derric Marcon from Societe Generale.

Yes. Bruno, sorry for coming back with another question, but I do have one because I mean it's still hanging, because I wanted to challenge you a little bit on your forecast of the evolution of the gross margin at minus 50 or 60 basis points. And so we do have a certain number of companies, especially in IT, that are seeing today a real positive scissor effect on gross margins with prices increasing much more than what they thought at the beginning of the year and average remuneration that stays on course in spite of this tension on the job market, et cetera. And so I'd like to know if your hypothesis of minus 50 or 60 basis points, is there a difference between France and international? Because this seems that this might be so easier to materialize outside of France than in France. And beyond the geographic effect, would there not be a secular effect? So outside of IT, do you see a gross margin that would be in better shape than the 50 or 60 basis points that you mentioned for the group?

Now in the IT sector and in the banking sector in particular and not only, we have managed to put through a number of price increases without any problem and in spite of the fact that price grids had been set for several years. And because we are speaking to counterparts here who need the resources to have their entities run and manage transformation processes. And so this is undeniable. It's much easier in the world of IT, even though you may be in an industrial setting and that you could be consolidating a [ DSI ] as opposed to a world of engineering where you are speaking to R&D departments which are restricted by purchasing departments, which are much more cautious and keen on the revenue cost of engineering of the project itself than on engineering because engineering is necessary to have the company run. Now on the other side, we always have -- and this is true for France -- a competitor, even when they are Tier 1 competitors, who agree to not change their price to gain additional market shares and who could even agree to reducing them in the case of an aggressive sales strategy. And so this, in spite of the context, is still the behavior that we have to confront, and that comes and pollutes the behavior of buyers. Now there are a number of issues linked to different industries. So we do have industries that are extremely so tough in negotiations and discussions and which I would go to say that they have to take into account the fact that they increase remuneration in-house and ask us to reduce prices. And this is barely a caricature. This is a certain number of things that we've heard. And we've even received e-mails to say that to support the effort that was made in-house, we would ask for suppliers to accept and make efforts, both on the prices and on working capital requirements. And so I will not give the name of the customer, but I found this to be absolutely incredible. And I'm not saying that everyone is like this, but there are a number of players who are in this state of mind. Of course, we don't have to accept, and we don't always accept, but this is just to give you an idea of the way things could take place in the world of engineers. It's true that remuneration does -- is increasing, but they are not booming, either, in France. Since the market is much more concentrated and structured, this is where we see behaviors in some sectors that are the most unacceptable, when internationally in a sector that's very homogenous, the Automotive sector, and where things are going quite -- with lots of difficulties in -- with a certain number of players in Europe, you'll guess which they are. We have fewer difficulties in markets that are less structured. So for instance, in Italy, except for [ Stellantis ], for instance, in the U.K. or the Netherlands where it's much more simple in terms of prices than it is in France. And so when I'm saying so 50 to 70 basis points, it's because I take into account both the price to remuneration effect and also because in some countries, we have to continue structuring technical departments because we're moving fast in the implementation of work packages thinking of Sweden, Germany, et cetera, where we're structuring our technical departments and reinforcing them in certain parts for nearshore, offshore. And so I've taken an assumption which I know is quite conservative, but I don't think that we will manage to renegotiate this gross margin this year for the reasons that I explained. But I do hear what you're saying, and I do observe this in some sectors in France as well, where we have remuneration increasing and prices that sometimes increase at the same percentage as remuneration, which creates a margin increase ultimately, and this is for sure.

It seems we have no further questions. I give you the floor for the conclusion.

Well, if you have no more questions, I'd like to thank you for your attention. Thank you for participating. I believe we have another appointment. I forgot the exact date, but we will meet again for sure at the end of July for the usual meeting on the sales figure -- revenue figure for the first semester of 2022. Have a good evening, and see you soon.

Ladies and gentlemen, the conference call is now finished. Thank you for your participation. You can now log out. [Statements in English on this transcript were spoken by an interpreter present on the live call.]