Last Thursday, Teleperformance shares took a good slap in the face, like a foot on the skateboard from the 3rd floor landing. The share price fell from \u20ac130 to \u20ac95, before finally stabilising at around \u20ac110 in a volatile week. Yesterday the company published its results, which the market is moderately pleased with: the share price has fallen in a straight line to \u20ac85.<\/p>\n
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So what happened? Last Thursday, Klarna, a Swedish fintech, issued a press release saying that, thanks to AI, it had been able to replace 700 employees in its customer service business - Teleperformance's core business - thereby saving $40 million a year.<\/p>\n
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It was this press release that caused the Teleperformance share price to fall. We also note that Teleperformance's bond prices have fallen - not to the same extent of course, but this shows that the credit market, which is normally more measured in its judgements, is also worried. And US competitor Concentrix has followed the same path, so it's a lack of confidence that's affecting the whole sector.<\/p>\n
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The results published last night were as expected, both in terms of margins and growth forecasts for 2024. The company also made it into the FORTUNE ranking of the best companies for its working conditions, which shows that the scandal with Colombia - a major issue last year - is well and truly over.<\/p>\n
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There are four elements to be taken into account in this action today:<\/p>\n
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1\/ The digestion of last year's acquisition of Majorel for \u20ac3.0bn, financed by debt, bringing total debt to over \u20ac4.0bn, a substantial figure.<\/p>\n
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2\/ Post-COVID digestion. The company was awarded exceptional contracts by governments to manage the pandemic. These contracts are no longer in place, so the basis for comparison is high when assessing growth.<\/p>\n
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3\/ The change of regime of its major clients (Apple, Barclays etc...): after the resounding example of Meta in 2023, which adopted the \"Time To Get Fit\" strategy, which basically boils down to massive cost cutting, all these major companies followed its example. As Teleperformance is a supplier to these companies, the commercial discussions have no doubt been less cheerful than in previous years.<\/p>\n
4\/ Finally, there is the threat of AI: if Klarna's example is true and it really is possible to replace thousands of employees with an algorithm, then Teleperformance's future looks bleak. Admittedly, the company itself is already using AI in its processes - with its partnership with Microsoft - but it will have to face up to new competitors.<\/p>\n
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On point 1, is this acquisition, which came just after competitor Concentrix bought Webhelp, an ego error or a strategic success? Management replies that it is point two - obviously - for the markets brought in by Majorel in France and Germany, as well as in the insurance sector, where Majorel is the leader.<\/p>\n
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We believe that points 2 and 3 are factual and cyclical.<\/p>\n
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