(News Bulletin 247) – The outsourced customer relations specialist delivered revenue growth significantly lower than expectations over the last three months of the year. Its margin forecast also disappoints.

In just over a year, Teleperformance has gone from the status of a flagship stock on the Paris market to that of a stock market pariah.

Once adored by investors for its strong growth, its position as a dominant player in a fragmented market and its relevant acquisition policy, the outsourced customer relations specialist lost more than 64% over one year. The fault lies in a major acquisition but poorly received by the market (the Luxembourg company Majorel) and several quarters of disappointing growth. But also to investors’ fears about the impact of generative artificial intelligence on Teleperformance’s activity. Just last week, the stock fell by more than 25% after a Swedish fintech, Klarna, touted the prowess of an AI assistant that would have allowed it to replace 700 full-time equivalents by carrying out simple tasks. customer relationship.

The action plunges once again this Thursday and, this time, AI does not seem to have much to do with it. Around 9:35 a.m., Teleperformance shares collapsed by 20% to 89.38 euros.

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A difficult end to the year

The 2023 accounts and forecasts for the current year are clearly heating up the market.

Teleperformance clearly missed the mark in the fourth quarter of 2023. On a comparable basis, the company’s turnover fell by 0.6% excluding currency and scope effects. Excluding the impact of the drop in the contribution of Covid-related contracts and hyperinflation in certain countries (such as Argentina), organic growth stood at 2.4%.

However, according to Deutsche Bank, the consensus was expecting organic growth of 5.4% when the bank itself predicted a rate of 3.9%. “The fourth quarter turnover is significantly lower than forecasts,” summarizes Royal Bank of Canada.

During a conference call with journalists, Olivier Rigaudy, deputy general manager and financial director of the company, blamed the delicate macroeconomic context to explain the slowdown in growth. To support his point, the manager cited several digital services companies which were also affected by the economic situation (Capgemini’s revenues fell by 0.9% on a comparable basis over the last three months of the year). ). Teleperformance’s turnover is also penalized by the acceleration of “offshoring”, that is to say the transfer of activity to low-cost countries, which accentuates deflationary pressures on the prices of its services.

Over the whole of 2023, operating income before tax, interest charges and depreciation (Ebita) also disappoints, standing at 1.29 billion euros when the consensus expected 1.34 billion euros. The corresponding margin stands at 15.5% compared to a consensus of 15.8%, due, notes Stifel, to a lower contribution from Majorel to the accounts than expected at the end of 2023.

Net profit is also 6% below consensus at 602 million euros. The generation of cash constitutes one of the rare reasons for satisfaction of the publication. Teleperformance generated net free cash flow of 812 million euros in 2023, a figure described as “solid” by Stifel.

Disappointing margin outlook

For 2024, Teleperformance recognizes that its forecasts are “cautious” due to the macroeconomy. The company expects comparable growth of between 2% and 4%. It is also targeting an improvement in its Ebita margin from 10 basis points to 20 basis points (0.10% to 0.20%) on a pro-forma basis, i.e. assuming that Majorel has been integrated over twelve months in 2023 (which drops its margin to 14.9%).

The group also warns that its growth should remain limited over the first three months of the year due to an unfavorable basis of comparison. “In the medium term, Teleperformance intends to maintain growth in its activities above that of the sector and continue to improve its margins,” explains the company.

Oddo BHF notes that the growth forecast for 2024 is relatively in line with expectations (organic growth of 3.4%) but is disappointing on the increase in the margin, since the consensus was counting on an Ebita rate of 15, 5% for 2024.

Ultimately “reading the Teleperformance publication gave us a cold shoulder and we believe that many investors will be in the same state of mind,” wrote Royal Bank of Canada in a note published Wednesday evening.

Riposte on generative AI and its “fantasies”

Alongside these results, the group tried to reassure about the impact of generative artificial intelligence on its activity.

Olivier Rigaudy adopted an offensive tone, castigating the market reaction following Klarna’s announcement last week. The manager assured that the AI ​​tool presented by the fintech was not “generative AI” and that the fall in the group’s share price reflected a “misunderstanding of the market”.

While Klarna explained that it had replaced 700 workstations with its robot, Olivier Rigaudy indicated that Teleperformance had for its part deployed 25,000 robots of the same type for many years for “simple interactions”, which according to him replaces the work of 150,000 people.

“Generative artificial intelligence has generated a lot of talk and provokes fantasies,” he explained. The first of these “fantasies” would be that the machine could replace man, which will not happen according to him. “Artificial intelligence improves humans, it does not replace them,” he insisted, adding that AIs currently fail to integrate the issues of contextualization and localization.

Second “fantasy” according to him: thinking that the Teleperformance market is not changing. Olivier Rigaudy explained that the advent of generative AI would result in new or increased needs in terms of added value, citing for example the verification of “deepfake” or content moderation. “Who would have thought a few years ago that we would make 700 million euros in content moderation?” he argued. The manager assured that Teleperformance was “meeting the challenge” posed by generative AI, with 60 products linked to this technology.

Still, the market is asking Teleperformance to prove itself, and it will probably take time for the group to convince investors. For the moment, with the fall in its price, Teleperformance’s place within the CAC 40 is clearly threatened, in the same way as that of Alstom, while the scientific council of Euronext will make its decision on a possible revision of the composition of the index this Thursday evening. “I don’t have the impression, given the volumes traded and the valuation, that we are in the hot seat,” Olivier Rigaudy nevertheless declared on BFM Business this Thursday.