Sopra Steria Group Sa · EURONEXT:SOP
Sopra Steria Group Sa — FY2017 Earnings Presentation
53 slides from Sopra Steria Group Sa's earnings presentation, Feb 19, 2018
Slide 1: Presentation of 2017 Annual Results
PRESENTATION OF 2017 ANNUAL RESULTS Paris, 19 February 2018 Delivering Transformation. Together.
Slide 2: Disclaimer
DISCLAIMER This presentation contains forward-looking information subject to certain risks and uncertainties that may affect the Group’s future growth and financial results. Readers are reminded that licence agreements, which often represent investments for clients, are signed in greater numbers in
Slide 3: Agenda
AGENDA 2017: successful completion 1 of the first phase in the construction of our model 2 2017 operating position Photo 3 2017 financial results 4 Outlook & targets 5 Question & answer session 6 Annexes
Slide 4: 2017: Successful completion of the first phase in the construction of our model
2017: SUCCESSFUL COMPLETION OF THE FIRST PHASE IN THE CONSTRUCTION OF OUR MODEL Vincent Paris – Chief Executive Officer 4 Presentation of 2017 Annual Results – 19/02/2018
Slide 5: Key Events
KEY EVENTS Achievement of 3-year targets set in 2015 following the merger Well-established organic growth dynamic Successful turnarounds for Germany and IT infrastructure management in France Photo Launch of repositioning plan for the United Kingdom Efforts underway to drive up the value of offering
Slide 6: Achievement of 3-year targets set in 2015
ACHIEVEMENT OF 3-YEAR TARGETS SET IN 2015 TARGETS ANNOUNCED FOLLOWING THE MERGER IN MARCH 2015 2017 revenue €3,845m 2017 operating margin on business activity of 8.6% 6 Presentation of 2017 Annual Results – 19/02/2018
Slide 7: Well-established organic growth dynamic
WELL-ESTABLISHED ORGANIC GROWTH DYNAMIC CAGR* BETWEEN THE END OF 2014 AND THE END OF 2017: +3.6% Organic growth over the period 2015–2017 5.2% 3.5% organic growth in 2017 4.2% organic growth excluding SSCL 3.5% • 3.3% for Services business 2.0% • 8.8% for Software business 2015 2016 2017 * CAGR = c
Slide 8: Successful turnarounds for Germany and I2S
SUCCESSFUL TURNAROUNDS FOR GERMANY AND I2S DISTINCT CONTRIBUTION TO GROUP PROFIT IN 2017 Germany Infrastructure & Security Services (I2S) Operating profit on business activity / Revenue Operating profit on business activity / Revenue >9% 5% 6% 0% 2% 0% -6% -1% 2014 2015 2016 2017 2014 2015 2016 2017
Slide 9: A specific plan for the United Kingdom
A SPECIFIC PLAN FOR THE UNITED KINGDOM OBJECTIVES: RETURN TO GROWTH AND A HEALTHY MARGIN Solid position in the public sector (access to decision makers, well-established shared service platforms) Current status High production quality Private sector to be strengthened Strategic priorities Tran
Slide 10: Efforts underway to drive up the value of offerings
EFFORTS UNDERWAY TO DRIVE UP THE VALUE OF OFFERINGS HIGHER CONTRIBUTIONS TO GROUP REVENUE BY CONSULTING AND SOFTWARE CONSULTING SOLUTIONS as % of Group revenue as % of Group revenue 7.5% 16% of revenue of revenue 6.5% 14% of revenue of revenue 2016 2017 2015 2017 Reinforcement in France 2017 R&D
Slide 11: Sopra Banking Software
SOPRA BANKING SOFTWARE TRANSITION TO A SOFTWARE HOUSE MODEL A redesigned range of solutions Digital Experience Business Solutions Core Banking Financing Platform For Retail Banks For Retail Banks For Finance Companies A new organisation by business domains for software development Digital Digital Di
Slide 12: Group transformation in progress
GROUP TRANSFORMATION IN PROGRESS CONSTRUCTION OF THE 2020 MODEL Standardisation of Acceleration of digital, HR business models conceptualised as a continuum transformation • International rollout of the integrated • Playing a think-tank role for disruptive • Skills Consulting model technologies (AI,
Slide 13: 2017 Operating Position
2017 OPERATING POSITION Vincent Paris – Chief Executive Officer 13 Presentation of 2017 Annual Results – 19/02/2018
Slide 14: Key Figures for 2017
KEY FIGURES FOR 2017 Revenue Operating profit on business Net profit – Group share activity €3,845.4m €329.8m €171.4m i.e. organic growth* of 3.5% i.e. 8.6% of revenue i.e. 4.5% of revenue 4.6% growth on a constant exchange rate basis up 9.5% relative to 31/12/2016 up 14.0% relative to 31/12/2016 Fr
Slide 15: Operating performance by reporting unit
OPERATING PERFORMANCE BY REPORTING UNIT STRONG IMPROVEMENT FOR THE OTHER EUROPE REPORTING UNIT Revenue Operating profit on business activity 2016 Organic 2017 2017 2016 Restated* growth (€m) (% of Rev.) (% of Rev.) (€m) (%) France 1,597.0 1,539.7 + 3.7% 8.6% 8.1% United Kingdom 801.7 868.2 - 7.7% 6.
Slide 16: France: Consulting & Systems Integration
FRANCE: CONSULTING & SYSTEMS INTEGRATION CONSOLIDATION OF LEADERSHIP POSITION IN THE FRENCH MARKET France: 2017 2016 Consulting & Systems Integration (C&SI) (€m) (% of Rev.) (€m) (% of Rev.) Revenue 1,396.0 1,327.4 Organic growth (%) + 4.2% Operating profit on business activity 128.0 9.2% 119.0 9.0%
Slide 17: France: Infrastructure and Security Services (I2S)
FRANCE: INFRASTRUCTURE AND SECURITY SERVICES (I2S) SUCCESSFUL REPOSITIONING France: 2017 2016 Infrastructure and Security Services (I2S) (€m) (% of Rev.) (€m) (% of Rev.) Revenue 200.9 200.6 Organic growth (%) + 0.2% Operating profit on business activity 10.0 5.0% 4.4 2.2% Profit from recurring oper
Slide 18: United Kingdom
UNITED KINGDOM LOWER PERFORMANCE IN 2017 2017 2016 United Kingdom (€m) (% of Rev.) (€m) (% of Rev.) Revenue 801.7 927.9 Organic growth (%) - 7.7% Operating profit on business activity 52.8 6.6% 74.7 8.0% Profit from recurring operations 40.7 5.1% 63.1 6.8% Operating profit 36.9 4.6% 59.4 6.4% Weaker
Slide 19: United Kingdom – Update on SSCL
UNITED KINGDOM – UPDATE ON SSCL A YEAR MARKED BY THE POSTPONED MIGRATION OF MPS SSCL in 2017 Revenue: £172m Service and production quality at high levels Significant migration postponement for MPS Migration of MPS successfully completed on 5 February 2018 Operating performance expected to im
Slide 20: United Kingdom – 2018 Action Plan
UNITED KINGDOM – 2018 ACTION PLAN INVESTMENTS AND A COST-CUTTING PLAN Investment plan to bring transformation Recruitment ‐ Sales reps ‐ Consultants Training Digital Cost-cutting plan Cost in 2018: €13m Expected operating cost savings on a full-year basis: €20m 20 Presentation of 2017 Annu
Slide 21: Other Europe
OTHER EUROPE SOLID IMPROVEMENT IN OPERATING PERFORMANCE 2017 2016 Other Europe (€m) (% of Rev.) (€m) (% of Rev.) Revenue 827.6 728.1 Organic growth (%) + 12.0% Operating profit on business activity 67.1 8.1% 41.8 5.7% Profit from recurring operations 62.8 7.6% 39.1 5.4% Operating profit 56.7 6.8% 31
Slide 22: Sopra Banking Software
SOPRA BANKING SOFTWARE CONFIRMED APPEAL OF PLATFORM’S COMPONENT APPROACH 2017 2016 Sopra Banking Software (€m) (% of Rev.) (€m) (% of Rev.) Revenue 402.2 350.9 Organic growth (%) + 11.2% Operating profit on business activity 38.9 9.7% 31.9 9.1% Profit from recurring operations 28.3 7.0% 22.9 6.5% Op
Slide 23: Other Solutions
OTHER SOLUTIONS SOLID PERFORMANCE IN 2017 2017 2016 Other Solutions (€m) (% of Rev.) (€m) (% of Rev.) Revenue 216.9 206.4 Organic growth (%) + 4.7% Operating profit on business activity 33.0 15.2% 29.4 14.2% Profit from recurring operations 31.3 14.4% 28.3 13.7% Operating profit 28.9 13.3% 26.7 12.9
Slide 24: 2017 Financial Results
2017 FINANCIAL RESULTS Etienne du Vignaux – Chief Financial Officer 24 Presentation of 2017 Annual Results – 19/02/2018
Slide 25: Income Statement
INCOME STATEMENT FINANCIAL YEAR 2017 2017 2017 2016 2016 (€m) (% of Rev.) (€m) (% of Rev.) Revenue 3,845.4 3,741.3 Organic growth 3.5% Operating profit on business activity 329.8 8.6% 301.1 8.0% Expenses related to stock options and related items - 21.2 - 12.1 Amortisation of allocated intangible as
Slide 26: Expenses related to share-based payments
EXPENSES RELATED TO SHARE-BASED PAYMENTS A COMPONENT OF THE MERGER’S SUCCESS Change in the IFRS 2 expense due to share-based plans implementation and the rise in the underlying share price Long-term incentive plan subject to the satisfaction of performance conditions measured annually over a 3-yea
Slide 27: Other operating income and expenses
OTHER OPERATING INCOME AND EXPENSES FINANCIAL YEAR 2017 2017 2016 (€m) (€m) Costs related to business combination - 1.3 - 1.3 Restructuring and reorganisation costs - 23.0 - 22.9 Other - 0.7 - 3.5 Other operating income and expenses - 25.1 - 27.7 27 Presentation of 2017 Annual Results – 19/02/2018
Slide 28: Tax
TAX FINANCIAL YEAR 2017 2017 2016 (€m) (€m) Profit before tax and share from 245.1 225.9 equity-accounted companies Effective tax charge 73.5 80.9 Effective tax rate (%) 30.0% 35.8% 2017 2016 (€m) (€m) Net deferred tax assets 98.7 128.9 28 Presentation of 2017 Annual Results – 19/02/2018
Slide 29: Change in net financial debt in 2017
CHANGE IN NET FINANCIAL DEBT IN 2017 STABLE RELATIVE TO 2016 Includes €37m for sale of 506.0 trade receivables with deconsolidation -10.7 510.1 -41.7 -1.2 500 -98.8 450 €m 400 350 +148.4 €111.4m Excl. sale of trade receivables 300 Net financial debt Free cash flow Changes in scope and Dividends Chan
Slide 30: Detail of changes in free cash flow in 2017 vs. 2016
DETAIL OF CHANGES IN FREE CASH FLOW IN 2017 VS. 2016 PERFORMANCE COMPARABLE TO 2016 BUT BELOW TARGET 180 One-off +13.5 unfavourable items 160 150.6 140 -15.6 +25.0 136.4 120 Incl. €20m 111.4 of one-off favourable -32.4 items -4.7 €m 100 80 60 One-off 2017 MPS -€15m 40 Other -€10m 20 0 Free cash flow
Slide 31: A sound financial position at 31/12/2017
A SOUND FINANCIAL POSITION AT 31/12/2017 DEBT COVENANTS AND LIQUIDITY Net financial debt 31/12/2017 31/12/2017 at 31/12/2017: Amount used Amount authorised €510.1m (€m) (€m) Bond 180.0 180.0 Syndicated loan – Tranche A € 144.0 144.0 EBITDA leverage ratio: Syndicated loan – Tranche B £ 64.9 64.9 1.44
Slide 32: Accounting policies
ACCOUNTING POLICIES NEW ACCOUNTING RULES & PRESENTATION CHANGES IN 2018 IFRS 15 Application of the new standard by Sopra Steria as of 1 January 2018 Non-material impact for the Group Decrease of around €30m in Group revenue, but without a material impact on operating profit on business activit
Slide 33: Outlook and Targets
OUTLOOK AND TARGETS Vincent Paris – Chief Executive Officer 33 Presentation of 2017 Annual Results – 19/02/2018
Slide 34: A buoyant market
A BUOYANT MARKET An environment favourable to investment Demand driven by the digital revolution and the need for optimisation Clients increasingly interested in greater agility and rapidity as well as higher added value A market favouring partners able to initiate and accompany transformation progr
Slide 35: 2020 Project
2020 PROJECT An independent project A project to win • Leading shareholder as the • Organic growth project’s guarantor over the long • Targeted external growth term • Focus on Europe for Services and • Significant employee share worldwide ambitions for ownership Software 2020 A project with added va
Slide 36: Ambitions for 2020
AMBITIONS FOR 2020 Operating margin on business activity around 10% Annual organic growth of between Free cash flow of between 5% to 7% 3% and 5% over the period of revenue 2020 36 Presentation of 2017 Annual Results – 19/02/2018
Slide 37: Priorities for 2018
PRIORITIES FOR 2018 Sopra Banking Completion of the Platform programmes for Tier 1 banks, strengthening of the Software software house model United Kingdom Success with the repositioning of Consulting and the private sector portfolio Investments Offerings / Digital / Human Resources / Sales / Struct
Slide 38: 2018 Targets
2018 TARGETS Organic revenue growth of between 3% and 5% Slight improvement in operating margin on business activity (H1 < H2) Free cash flow >€170m (>€133m including 2017 sale of trade receivables) 38 Presentation of 2017 Annual Results – 19/02/2018
Slide 39: Questions & Answers
QUESTIONS & ANSWERS 39 Presentation of 2017 Annual Results – 19/02/2018
Slide 40: Annexes
ANNEXES 40 Presentation of 2017 Annual Results – 19/02/2018
Slide 41: Sopra Steria at 31/12/2017
SOPRA STERIA AT 31/12/2017 A EUROPEAN LEADER IN DIGITAL TRANSFORMATION Top 5 European digital services Top 10 operating in Europe companies 41,000+ Operations in End-to-end 2017 revenue of €3.8bn employees more than 20 countries approach Revenue to 31/12/2017 Rest of the World Business Process Servi
Slide 42: Revenue by country
REVENUE BY COUNTRY FOR THE PERIOD ENDED 31/12/2017 SERVICES REVENUE TO 31/12/2017 SOLUTIONS REVENUE TO 31/12/2017 2017 revenue Other Europe = €828m o/w Germany = 34% o/w Scandinavia = 29% Other Europe o/w Spain = 14% o/w Belux = 9% Rest of the World o/w Italy = 8% o/w Switzerland = 6% 13% 26% France
Slide 43: Solutions revenue
SOLUTIONS REVENUE FOR THE PERIOD ENDED 31/12/2017 SOLUTIONS REVENUE BY PRODUCT SOLUTIONS REVENUE BY BUSINESS LINE Property Management Solutions Managed Services 9% 12% Licences 16% Sopra HR 26% €619M Sopra €619M Software SOLUTIONS SOLUTIONS 51% Banking 65% Software Integration 21% Maintenance Servic
Slide 44: Changes in exchange rates
CHANGES IN EXCHANGE RATES FINANCIAL YEAR 2017 Changes in exchange rates Average rate Average rate Change For €1 / % 2017 2016 (%) Pound sterling 0.8767 0.8195 - 6.5% Norwegian krone 9.3270 9.2906 - 0.4% Swedish krona 9.6351 9.4689 - - 1.7% 0 Danish krone 7.4386 7.4452 + 0.1% Swiss franc 1.1117 1.090
Slide 45: Change in revenue in financial year 2017
CHANGE IN REVENUE IN FINANCIAL YEAR 2017 GROWTH AT CONSTANT EXCHANGE RATES: 4.6% 3900 3,845.4 129.5 3850 Cassiopae = +€13.9m Lasce = +€5.8m Active3D = +€0.8m 3800 Kentor = +€12.7m 2MoRO = +€0.6m Galitt = +€5.1m 3750 3,741.3 -64.3 €m 38.9 3700 Average change vs 2016: 3650 GBP/EUR = -6.5% 3600 3550 20
Slide 46: Movements in segment information at 1 January 2018
MOVEMENTS IN SEGMENT INFORMATION AT 1 JANUARY 2018 RECLASSIFICATION OF CASSIOPAE REAL ESTATE WITHIN OTHER SOLUTIONS Pro forma financial information for 2017 Sopra Banking Software Other Solutions 2017 2017 2017 2017 Reported Restated Reported Restated €m % of Rev. €m % of Rev. €m % of Rev. €m % of
Slide 47: Earnings per share
EARNINGS PER SHARE FINANCIAL YEAR 2017 2017 2016 (€m) (€m) Net profit attributable to the Group (€m) 171.4 150.4 Weighted average number of shares in issue excluding treasury shares 20.21 20.04 Basic earnings per share (€) 8.48 7.50 Basic recurring earnings per share (€) 9.29 8.45 Theoretical weight
Slide 48: Breakdown of change in net financial debt
BREAKDOWN OF CHANGE IN NET FINANCIAL DEBT FINANCIAL YEAR 2017 2017 2016 (€m) (€m) Operating profit on business activity 329.8 301.1 Depreciation, amortisation and provisions (excl. allocated intangible assets) 19.6 42.9 EBITDA 349.4 344.0 Non-cash items - 1.6 - 0.9 Tax paid - 63.9 - 72.0 Change in o
Slide 49: Simplified balance sheet
SIMPLIFIED BALANCE SHEET 31/12/2017 31/12/2017 31/12/2016 (€m) (€m) Goodwill 1,590.6 1,557.0 Allocated intangible assets 161.5 179.7 Other fixed assets 179.7 160.8 Equity-accounted investments 189.1 202.3 Fixed assets 2,120.9 2,099.8 Net deferred tax 98.7 128.9 Trade accounts receivable (net) 1,137.
Slide 50: UK pension fund deficit net of tax at 31/12/2017
UK PENSION FUND DEFICIT NET OF TAX AT 31/12/2017 AVERAGE NET DEFICIT AROUND €200M SINCE END-2014 250 245 221 222 222 200 Deficit net of tax down 31% vs 200 Deficit net of tax (€m) 167 31/12/2016 150 Decrease in commitments, 125 increase in local currency- 100 denominated assets vs 31/12/16 Annual ad
Slide 51: Changes in the workforce
CHANGES IN THE WORKFORCE FINANCIAL YEAR 2017 31/12/2017 31/12/2016 France 18,649 18,227 United Kingdom 6,181 6,508 Other Europe 8,777 7,844 Rest of the World 281 231 X-Shore 7,773 7,003 Total 41,661 39,813 51 Presentation of 2017 Annual Results – 19/02/2018
Slide 52: Ownership at 31/12/2017
OWNERSHIP AT 31/12/2017 A LEADING SHAREHOLDER AS THE PROJECT’S GUARANTOR Pasquier Odin Managers family family 2.4% 69.0% 28.6% Founders & Sopra GMT Interests managed on Treasury management Soderi Free float 19.6% behalf of employees shares 3.0% Shareholders’ agreement 22.6% 7.0% 0.1% 70.4% (33.2%) (
Slide 53: Alternative performance measures
ALTERNATIVE PERFORMANCE MEASURES Restated revenue: Revenue for the prior year, expressed on the basis of the scope and exchange rates for the current year. Organic revenue growth: Increase in revenue between the period under review and the restated revenue for the same period in the prior financial