(Reuters) – Alten (LTEN.PA) said financial services and oil and gas clients in Britain held back on new spending in the first half, as a fall in margins at the French technology and engineering consultancy sent its stock nearly 7 percent lower.
Britain’s financial sector, the biggest in the European Union, has been left guessing by the country’s vote to leave the bloc, while the oil and gas industry has been hit by oil prices, which are more than 50 percent down from their 2014 highs.
“Some of them [UK clients] amongst the banking sector have decided to delay or to freeze some investments,” Alten’s Chief Financial Officer Bruno Benoliel told Reuters on Wednesday, adding it had not seen banks investing more in other countries.
Alten’s revenue in the first six months from the UK, which accounts for around 4 percent of the total, fell by 11 percent, with the its oil and gas subsidiary having the biggest impact with revenue falling by 30 percent in the first half, he said.
However, Alten expects its oil and gas business to decrease by 20 percent in 2017, with some stabilization during the third quarter after hitting a low a the end of July.
MARGINS HURT STOCK
Alten said on Tuesday operating profit from activity rose 4.6 percent to 92.6 million euros in the first half, but the operating margin from activity fell to 9.4 percent from 10.2 percent.
“Operating margin is a bit lower, mainly because of fewer working days, but the profitability of the company remains satisfactory,” Benoliel said.
Gilbert Dupont analysts said Alten would not achieve a double-digit margin for the full year, but nevertheless maintained their “accumulate” rating on the stock.
The Gilbert Dupont analysts also pointed to the evolution of the company’s mix, with the lower-margin automobile segment currently outperforming.
Benoliel said Alten expects organic growth for its automobile business of 17-19 percent in 2017 and around 10 percent organic growth for aerospace.
He added that the company was confident of achieving better full-year organic revenue growth than last year.
Reporting by Michal Aleksandrowicz and Alan Charlish; additional reporting by Camille Raynaud; editing by Alexander Smith