Paris, 28 July 2016 – At its meeting on 27 July 2016 chaired by Pierre Pasquier, Sopra Steria’s Board of Directors approved the financial statements for the first half of 2016. The Statutory Auditors have conducted a limited review of the financial statements.
Comments on business activity and operating performance for the first half of 2016
Sopra Steria Group had a dynamic first-half 2016, with revenue of €1,878.8 million, up 6.3%. Growth at constant scope and exchange rates was 5.4%.
The Group’s operating profit on business activity grew by 25.0% with respect to the first half of 2015, to €134.2 million, yielding a margin of 7.1% – up one point from the previous year.
In France, first-half revenue came to €778.8 million, representing organic growth of 9.5%.
- Consulting & Systems Integration was particularly buoyant, with revenue of €677.6 million, representing organic growth of 11.5%. This momentum was driven in particular by the robust growth in strategic key accounts (up 13%) and in Consulting (up 22%). It was also due to lower levels of consultant downtime in early 2016 and to the three additional invoicing days in the second quarter. This change reflected above all the Group’s capacity to position itself to respond to large-scale global requests for proposals and has been illustrated by the signing of major deals. The highest-performing vertical markets were defence and transport. The activity’s growth was coupled with improved profitability: the operating margin on business activity came to 9.8% in first-half 2016 versus 9.6% in first-half 2015.
- I2S (Infrastructure & Security Services) recorded revenue of €101.2 million. In the IT infrastructure management business, which generated 90% of the entity’s revenue, sales momentum improved, with a tighter focus on higher value-added projects. As such, negative growth in the second quarter was contained at 1.3% (versus negative growth of 4.5% in Q1 2016). Positive growth may resume in 2017. The cybersecurity business continued to record strong revenue growth (up 6.3% in the half-year period). In terms of profitability, I2S continued to pursue its recovery plan in the first half of 2016. At 30 June 2016, the operating margin on business activity had improved as planned to 0.5%, versus -0.5% at 30 June 2015.
The United Kingdom posted first-half 2016 revenue of €483.4 million (26% of Group revenue), representing slightly negative growth of 0.9% at constant perimeter and exchange rate. In this region, 78% of business is based on relatively non-cyclical multi-year contracts (for services such as outsourcing of business processes, IT infrastructure management and application management). Public-sector activities – which generated 68% of the entity’s revenue, half of which was through two joint ventures with the UK authorities – posted organic growth of 0.8% for the half-year period. Private-sector activities, which are currently being reorganised, were down 4.0%. The region’s operating margin on business activity improved in first-half 2016, amounting to 7.3% (6.4% in first-half 2015).
Revenue for the Other Europe region was €355.6 million for first-half 2016, representing organic growth of 5.7%. Continuing the trend seen in the first quarter, nearly all countries posted growth. Spain, Italy and the Benelux (Belgium/Netherlands/Luxembourg) region were particularly buoyant, with organic growth of over 10%. The region’s profitability improved substantially, with the operating margin on business activity reaching 4.4%, versus 0.6% in first-half 2015. Germany was a key driver of this recovery, with an operating margin on business activity of 3.4% in the first half of 2016, versus -4.5% for the same period in the previous year.
Sopra Banking Software posted revenue of €160.2 million for the first half of 2016, representing organic growth of 7.4%. The half-year period was marked by good momentum in services and a strong sales performance for the Platform and Amplitude products. An important milestone was reached in the renewal of La Banque Postale’s IT system, with the first delivery of the account management module a few months after that of the lending module. Another highlight of Q2 2016 was the signing of a strategic partnership with Société Générale and La Banque Postale, through their joint subsidiary Transactis, to process European and international bank transfers and direct debits using the Sopra Banking Platform for Payments software solution. This partnership offers Sopra Banking Software new prospects in the field of payments. Lastly, the integration of Cassiopae, which contributed €14.4 million to revenue for the half-year period, proved promising. For Sopra Banking Software, the operating margin on business activity came to 4.3% in the first six months of the year (7.2% in first-half 2015), reflecting the impact of investments in research and development in the half-year period (up €6 million with respect to first-half 2015). In line with its roadmap for 2017, the entity will continue to target an annual operating margin on business activity of around 10%.
Other Solutions (HR and Real estate solutions) posted revenue of €100.7 million for first-half 2016, representing organic growth of 1.7%. The deferral of some contract signings from the first half to the second half of the year should lead to more buoyant growth in the second part of the year. In terms of profitability, the reporting unit recorded a 0.4 point increase in its operating margin on business activity, which came to 9.2% (8.8% in first-half 2015).
Comments on net profit for the first half of 2016
Profit from recurring operations came to €114.0 million. This includes a €10.2 million expense related to share-based payments following the implementation of an employee share ownership plan, as announced on 22 March 2016, including a portion for shares acquired by employees and a portion for matching employer contributions.
Operating profit was €103.2 million after a net expense of €10.7 million for other operating income and expenses. These included €7.9 million in reorganisation and restructuring expenses, significantly less than in the first half of 2015 (€30.4 million).
The tax expense was €44.4 million in the half-year period, versus €25.2 million in the first half of 2015.
The share of profit of equity-accounted companies (mainly Axway) was €3.8 million (€0.2 million in first-half 2015).
After €0.2 million attributable to minority interests, the net profit attributable to the Group doubled, amounting to €54.0 million, equivalent to 2.9% of revenue (compared with 1.5% of revenue at 30 June 2015).
Basic net earnings per share also doubled, coming to €2.70 (€1.36 at 30/06/15).
At 30 June 2016, the Group’s total workforce consisted of 39,200 people (38,450 at 31 December 2015), with 16.9% working in X-Shore zones.
Changes in scope
The Group made a number of acquisitions in first-half 2016:
- Cassiopae, a developer of specialised finance and real estate management software, which posted revenue of €50 million in 2015 (consolidated in Q2 2016);
- LASCE Associates, a consulting firm specialising in operational excellence for industry and logistics, which posted revenue of €8 million in 2015 (consolidated in Q3 2016);
- EchoSystems, a start-up that develops digital solutions for managing and operating real estate assets, which posted revenue of around €1 million in 2015 (consolidated in Q2 2016);
- An 8.62% stake in Axway’s share capital sold by Société Générale, bringing Sopra Steria’s shareholding in Axway to 33.52%.
Financial position at 30 June 2016
Sopra Steria’s financial position at 30 June 2016 is robust in terms of both financial ratios and liquidity.
Free cash flow for the first half of the year, which is traditionally a period of net cash outflows, improved with respect to first-half 2015 (an outflow of €100.6 million versus an outflow of €163.2 million).
Net financial debt is €719.6 million at the end of June 2016, equal to 2.2x EBITDA (with the bank covenant stipulating a maximum of 3x).
At 30 June 2016, the Group has €1.6 billion in financing, of which €1 billion was available. The Group’s bank facilities were renegotiated on 7 July 2016 for a period of five years (with extensions possible to 2022 and 2023).
Targets for 2016
The Group confirms its targets for the full 2016 financial year:
- organic revenue growth of between 3% and 5%
- an operating margin on business activity of more than 7.5%
- a strong increase in free cash flow
The targets for 2017 remain unchanged:
- revenue of between €3.8 billion and €4 billion
- an operating margin on business activity of between 8% and 9%
The results for the first half of 2016 will be presented to analysts and investors in French on 28 July 2016 at 9:00 a.m. CET, at the Shangri-La Hotel in Paris.
The presentation may be attended remotely via a bilingual webcast in French and English:
Register for the French-language webcast
Register for the English-language webcast
Or by phone:
French-language phone number: +33 (0)1 70 77 09 27
English-language phone number: +44 (0)203 367 9457
Practical information on the presentation and webcast can be found in the “Investors” section of the Group’s website
Next financial release
Thursday, 3 November 2016 (before market open): publication of Q3 2016 revenue