Assystem - Registration Document 2016

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MANAGEMENT REPORT

BUSINESS OVERVIEW

3.1 BUSINESS OVERVIEW

3.1.1

ASSYSTEM’S MARKET AND BUSINESS SEGMENTS

Group’s growth as from the year 2000, especially following its merger with Brime Technologies. A series of international acquisitions then followed, positioning Assystem among the top European engineering groups. Assystem’s teams work in two major lines of business: outsourced R&D, operated by the Global Product Solutions division, and complex infrastructure engineering, operated by Energy & Infrastructure. The Group is a major player in the nuclear, automotive and aeronautics engineering markets where it has a strong reputation for its specialist know-how. In the outsourced R&D market, Assystem focuses exclusively on services for industrial clients. The vast majority of these clients are top European corporations that rank among the world’s leading market players, to which the Group provides services throughout the entire product life cycle – from functional analysis to commissioning, including design, industrialisation and supply chain management. Its main competitors in this fragmented market are French companies such as Altran and Alten, as well as Akka, Sogeti and Segula. Supplier panel restrictions that have been applied at global level for the past several years by major purchasers are still in force and have led to a gradual general trend towards fixed-price services – a format that large companies such as Assystem prefer. Today, roughly 60% of Assystem’s services (excluding Staffing activities) are provided under fixed-price contracts, reflecting clients’ high esteem for the Group’s teams due to their capacity to lead projects, develop know-how and reliably and consistently deliver a high level of productivity. This underlying trend has been accompanied by a more international approach by Assystem towards providing its services, drawing on a stronger network of customer interface, specialised skills and production centres to ensure that services are rendered at the best cost and are constantly in line with client requirements. Assystem brings added value to industrial companies, utilities and contractors operating in nuclear energy, conventional energy, transport infrastructure, life sciences and other complex infrastructure thanks to its long-standing participation in the nuclear industry, and therefore its experience in restricted environments with strong safety requirements. The main role of its experts is to help major players in the energy industry (operators and equipment manufacturers) to manage their industrial investments at every step of the process – from design through to construction, commissioning, maintenance and ultimately decommissioning. Assystem’s competitors in this market are above all UK and North American groups such as Atkins (which is also Assystem’s partner in the Engage and N.triple.a joint ventures), CH2MHill, Amec Foster Wheeler (also a partner of Assystem in the Momentum joint venture) and Jacobs Engineering, as well as French groups including Egis, Systra and Ingérop. During 2016 the Energy & Infrastructure division pursued its investment drive in France and internationally, particularly in Turkey where it

3.1.1.1 Market trends Assystem operates in the engineering market. The role of engineering is to study, design and manufacture all or part of an industrial component or civil engineering structure. Assystem’s teams assist major industrial players with reducing their project costs and lead times, and optimising their development, manufacturing and marketing processes, and enable them to design and produce innovative solutions across the globe. According to an Xerfi market analysis (1) , engineering firms in France performed well in 2016, with revenue up by around 3.5%. Leaders specialised in technology consulting and which are positioned as Tier 1 suppliers saw robust revenue growth as clients are increasingly using outsourced technology consulting services as a way of enhancing their cost flexibility. However price pressure remained strong against a backdrop of weak inflation. In the first half of 2016, engineering services prices for the industry as a whole only rose by 0.4% on a rolling annual basis. Demand for outsourced R&D services was particularly high in the automotive sector. After two years of decline, the construction engineering sector began to pick up, growing by 2% in 2016 according to Xerfi. Design and project management needs increased and the sector also felt the benefits of an upward trend in capital expenditure on transport infrastructure. Conversely, the oil sector contracted as oil companies significantly reduced their capital spending. The latest advance in the construction engineering sector that Assystem will need to effectively master is the increasingly generalised use of digital modelling, which not only leads to major productivity gains (with project management time savings of an estimated 70%) but also improves the quality of the buildings and services delivered. To this end, in June 2016 Assystem signed a partnership agreement with Dassault Systèmes aimed at improving the performance management of nuclear engineering projects through the use of digital technologies. Under this agreement Dassault Systèmes’ 3DExpérience platform will be deployed to handle engineering data and digitise project management processes. ASSYSTEM’S POSITIONING Assystem began as Atem, which was founded in 1966 by engineers of the French nuclear programme in order to serve the engineering needs of the French nuclear industry. This business accounted for the majority of the Group’s revenue up until the latter part of the twentieth century. Atem then merged with Alphatem, jointly-owned by Dominique Louis and Cogema, to create Assystem which went public in 1995. Shortly after its stock market flotation the Company diversified, with the acquisition in 1996 of an engineering firm specialised in aeronautics and automotive, which launched the outsourced R&D business. This business drove the

(1) Source: Xerfi France, Services d’ingénierie, d’étude et de conseil technique Analyse du marché – November 2016.

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ASSYSTEM

REGISTRATION DOCUMENT 2016