Applus+ Q3 2024: Stellar Growth, Strategic Wins, and What’s Next?

Key Takeaways

- Strong Growth Across the Board: Revenue reached €1.63 billion, a 7.5% increase YoY, with organic growth at 7.6%.

- Profitability Surge: Adjusted operating profit rose 13.9% YoY to €189 million, boosting margins by 66 basis points to 11.6%.

- Game-Changing IDIADA Contract: Acquisition and 25-year consolidation of the IDIADA business solidify the Group's position in automotive testing.

- Cash Flow Success: Adjusted free cash flow climbed to €157.8 million, marking a robust 32.9% growth.

- Delisting on the Horizon: Final steps in the delisting process are underway, expected to conclude by year-end.

Applus+ has once again demonstrated its strength and resilience in the TIC (Testing, Inspection, Certification) sector with its Q3 2024 results. The Group’s focus on innovation, strategic acquisitions, and portfolio enhancement continues to pay dividends, as evidenced by robust financial and operational performance.

Revenue and Profitability

For the nine months ending September 30, 2024, Applus+ reported a 7.5% YoY revenue growth to €1.63 billion, driven by a remarkable 7.6% organic increase. The company’s strategic acquisitions, including Rescoll and Barlovento, contributed an additional 1.4%, while currency fluctuations slightly dampened results.

Operating profit margins improved to 11.6%, up by 66 basis points, thanks to operational efficiency and portfolio quality upgrades. Adjusted operating profit surged to €189 million, a 13.9% increase from the same period last year.

IDIADA Acquisition: A Strategic Masterstroke

One of the standout achievements was the completion of the IDIADA acquisition, cementing a 25-year partnership. The IDIADA division contributed €265.7 million in revenue, reflecting 12.4% growth—an impressive 13.2% of which was organic. This move not only reinforces Applus+’s dominance in automotive testing but also aligns with global trends in electrification and sustainability.

Cash Flow and Financial Resilience

Adjusted free cash flow reached €157.8 million, a 32.9% jump YoY, driven by strong earnings, disciplined working capital management, and strategic capex investments. The company also maintained a healthy cash conversion rate of 68%. However, higher interest rates and acquisition costs increased financial expenses to €67.5 million.

Outlook and Strategic Direction

With a robust nine-month performance, Applus+ remains confident in its mid to high single-digit organic revenue growth target for 2024. Adjusted operating margins are expected to stabilize around 11.5%. The company also continues to focus on portfolio quality improvement, leveraging opportunities in sustainability and digitalization.

Critical Questions

With rising interest rates impacting financial expenses, how will Applus+ mitigate these costs in the coming quarters?

Can the company sustain its organic growth momentum amidst currency headwinds and geopolitical uncertainties?

How will the delisting impact investor confidence and long-term strategic flexibility?

Conclusion

Applus+ has set the bar high with its Q3 2024 results, delivering on growth, profitability, and strategic milestones. The IDIADA acquisition and its robust cash flow underline the company’s commitment to value creation. However, challenges such as rising interest costs and currency volatility warrant attention.

For a more in-depth analysis of Applus+’s performance and strategic implications, feel free to reach out to us. Let’s decode these results together and explore what they mean for the TIC industry’s future.