Sopra Steria Group Sa · EURONEXT:SOP
Sopra Steria Group Sa — FY2019 Earnings Presentation
55 slides from Sopra Steria Group Sa's earnings presentation, Feb 21, 2020
Slide 1: 2019 Annual Results Presentation
2019 Annual Results Presentation PARIS, 21 FEBRUARY 2020
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 01 Key events of 2019 02 Operating position by reporting unit 03 2019 financial results 04 Overview of strategy 05 Targets for 2020 06 Annexes 3 2019 Annual Results Presentation – 21/02/2020
Slide 4: Key events of 2019
01 Key events of 2019 Vincent Paris Chief Executive Officer 4 2019 Annual Results Presentation – 21/02/2020
Slide 5: Satisfactory 2019 results
Satisfactory 2019 results Despite a difficult situation in late 2018, targets for full-year 2019 were met Operating Organic margin on Free cash revenue business flow growth activity Between 4% and 6% Slight improvement In excess of €150m Revised upward to between 6.3% and 6.5% Reinforcement of the G
Slide 6: Key figures for 2019
Key figures for 2019 Financial performance Revenue Operating profit on business Net profit attributable to the activity Group €4,434.0m €354.3m €160.3m equating to organic growth* of 6.5% i.e. 8.0% of revenue up 28.1% Free cash flow Net financial debt UK pension fund deficit net of tax €229.3m €513.
Slide 7: Key figures for 2019: non-financial performance
Key figures for 2019 Non-financial performance Net change in workforce More women in the workforce(2) Reduction of GHG(1) in 2019 +2,131 pers. 32.0% - 10.8 % In 2019 vs 31.6% for financial year 2018 Per employee Employee turnover More women hired(2) Cumulative reduction of GHG(1) since 2015 17.7% 33
Slide 8: Our organic growth outperforms the wider digital services market
Our organic growth outperforms the wider digital services market Average growth of around 5% per year since 2004 6.5% 16-year annual average: 5.2% ~5% 4.9% (2004–2019) 3.5% Volume - Growth in the digital services market 2.0% - Impact of positioning (offerings/approach) Prices - Impact of value-build
Slide 9: Continued improvement in cash generation
Continued improvement in cash generation Higher cash conversion rate Cash conversion rate Days Sales Outstanding (DSO) (3) excluding non-recurring items FCF(1) / OP(2) 70 days 50% 51% 68 days 43% 41% 61 days 20% 55 days 2015 2016 2017 2018 2019 2016 2017 2018 2019 (1) Free cash flow adjusted for non
Slide 10: Reinforced piloting methods to drive transformation
Reinforced piloting methods to drive transformation Preparing for the Group’s future growth Quarterly reviews to guide the transformation of operating entities Use of customer and employee perception barometers Reinforcement of internal control and risk management systems Consolidation of in-house p
Slide 11: Portfolio of offerings transformed
Portfolio of offerings transformed End-to-end approach to guide the shift toward the cloud and digital Optimise and disrupt: Redesigned 02 offering Need addressed: Modernisation and Modernised development transformation of legacy applications by digitising environment with the Digital 01 processes a
Slide 12: Strengthening of Consulting and Software
Strengthening of Consulting and Software Launch of a Consulting brand and continuing investments in Software CONSULTING SOFTWARE Around €440m in revenue and 13.1% growth in the Software 3,400 consultants in Europe division in 2019 Selling prices up 9% in France in Investments in 2019 2019 SAB “Level
Slide 13: Sopra Banking Software on track with its roadmap (1/2)
Sopra Banking Software on track with its roadmap (1/2) Specialised loans: Delivery of V4.7 confirmed for the end of Q1 2020 V4.7 for existing clients Commercial initiatives restarted at the end of 2020 Q1 2021 2020 1. Gradual migration of the portfolio of existing clients 2. Enhancements to V4.7 in
Slide 14: Sopra Banking Software on track with its roadmap (2/2)
Sopra Banking Software on track with its roadmap (2/2) Retail banking: Many successes in 2019 Platform under construction for La Banque Postale 70 migrations to Amplitude’Up in EMEA 31 new clients in 17 countries for the DBEP (1) International success of Platform Selected by 7 Sparda banks in German
Slide 15: Major strategic partnership in Germany
Major strategic partnership in Germany Implementation of a digital platform for 7 German banks (Sparda) – 13-year contract Entity 51% controlled by Entity restructured, Sopra Growth targeted Sopra Steria and managed Banking Platform installed for the “Bank as a Platform” using a “Bank as a Platform”
Slide 16: Ambition confirmed for Sopra Banking Software
Ambition confirmed for Sopra Banking Software 2 markets, 2 offerings, 2 approaches Industrial captives and financial Retail banking institutions Banks of all sizes Markets Automotive / Asset finance / Consumer loans / Corporate loans Sopra Banking Platform Offerings Sopra Financing Platform DBEP Glo
Slide 17: Sustainable, human and guiding corporate responsibility policy
Sustainable, human and guiding corporate responsibility policy Significant progress in 2019 Commitment to combating climate change Ranked on the CDP A List for the 3rd year in a row The Science Based Targets initiative (SBTi) approves the Group’s GHG emissions targets, which aim to limit global warm
Slide 18: Operating position by reporting unit
02 Operating position by reporting unit Vincent Paris Chief Executive Officer 18 2019 Annual Results Presentation – 21/02/2020
Slide 19: Operating performance by reporting unit
Operating performance by reporting unit Operating profit on business Revenue activity 2018 Organic 2019 2019 2018 Restated* growth (€m) (% of Rev.) (% of Rev.) (€m) (%) France 1,813.1 1,699.6 + 6.7% 9.7% 9.1% United Kingdom 771.5 719.0 + 7.3% 7.3% 5.7% Other Europe 1,152.9 1,075.4 0 + 7.2%0 6.7% 8.1
Slide 20: France
France Improved performance in line with medium-term forecasts 2019 2018 France (€m) (% of Rev.) (€m) (% of Rev.) Revenue 1,813.1 1,699.5 Organic growth (%) + 6.7% Operating profit on business activity 175.5 9.7% 155.4 9.1% Profit from recurring operations 167.2 9.2% 139.2 8.2% Operating profit 156.
Slide 21: United Kingdom (UK)
United Kingdom (UK) Improved performance driven by two public-sector joint ventures 2019 2018 United Kingdom (€m) (% of Rev.) (€m) (% of Rev.) Revenue 771.5 783.1 Impact of IFRS 3 – Bond Organic growth (%) + 7.3% Operating profit on business activity 56.1 7.3% 45.0 5.7% Profit from recurring operati
Slide 22: Other Europe
Other Europe Cyclical slowdown 2019 2018 Other Europe (€m) (% of Rev.) (€m) (% of Rev.) Revenue Free cash flow* 1,152.9 997.1 Organic growth (%) + 7.2% Operating profit on business activity 77.4 6.7% 80.4 8.1% Profit from recurring operations 73.0 6.3% 74.9 7.5% Operating profit 66.1 5.7% 68.5 6.9%
Slide 23: Sopra Banking Software (SBS)
Sopra Banking Software (SBS) A satisfactory year in a difficult climate 2019 2018 Sopra Banking Software (€m) (% of Rev.) (€m) (% of Rev.) Revenue 438.9 373.7 Organic growth (%) + 2.9% Operating profit on business activity 4.9 1.1% -13.3 -3.6% Profit from recurring operations -8.9 -2.0% -24.2 -6.5%
Slide 24: Other Solutions
Other Solutions Solid performance 2019 2018 Other Solutions (€m) (% of Rev.) (€m) (% of Rev.) Revenue 257.5 241.8 Organic growth (%) + 6.0% Operating profit on business activity 40.3 15.7% 40.4 16.7% Profit from recurring operations 39.1 15.2% 38.4 15.9% Operating profit 35.9 14.0% 36.5 15.1% Robust
Slide 25: 2019 financial results
03 2019 financial results Étienne du Vignaux Chief Financial Officer 25 2019 Annual Results Presentation – 21/02/2020
Slide 26: Income statement
Income statement Financial year 2019 26 2019 Annual Results Presentation – 21/02/2020
Slide 27: Other operating income and expenses
Other operating income and expenses Financial year 2019 2019 2018 (€m) (€m) Costs related to business combination - 3.3 - 2.4 Restructuring and reorganisation costs - 31.6 - 30.0 Other 3.9 - 1.8 Other operating income and expenses - 31.0 - 34.2 27 2019 Annual Results Presentation – 21/02/2020
Slide 28: Tax
Tax Financial year 2019 2019 2018 (€m) (€m) Profit before tax and share from equity-accounted companies 258.7 207.2 Effective tax charge - 87.3 - 82.0 Effective tax rate (%) 33.8% 39.6% 2019 2018 (€m) (€m) Net deferred tax assets 98.1 79.6 28 2019 Annual Results Presentation – 21/02/2020
Slide 29: 17% reduction in net financial debt in 2019
17% reduction in net financial debt in 2019 Strong free cash flow (FCF) performance 650 620.9 600 550 -37.0 -7.3 513.9 €m 500 -94.9 +16.9 Impact of the initial application 450 of IFRS 16 400 +229.3 (vs restated 2018 FCF: +173.1) 350 Net financial debt Free cash flow Changes in scope and Dividends Ch
Slide 30: Detail of movement in free cash flow (FCF)
Detail of movement in free cash flow (FCF) Increase in EBITDA and moderate change in working capital requirement (WCR) Change calculated +8.2 before IFRS 16 +2.2 240 impact +4.9 +4.8 229.3 +53.7 -17.6 220 €50m favourable 50.0 €m 200 impact of non- Incl. €20m in recurring items exceptional cash recei
Slide 31: Solid financial position at 31/12/2019 (1/2)
Solid financial position at 31/12/2019 (1/2) Diversified funding sources and comfortable liquidity 31/12/2019 31/12/2019 Equity Amount Amount €1,422.2m used authorised (€m) (€m) Bond 250.0 250.0 Net financial debt Syndicated loan – Tranche A € 112.0 112.0 €513.9m Syndicated loan – Tranche B £ 52.7 5
Slide 32: Solid financial position at 31/12/2019 (2/2)
Solid financial position at 31/12/2019 (2/2) Net financial debt lower than 2x EBITDA Net financial debt/EBITDA(1) 3x Financial covenants 2x 1.8x 1.7x 1.5x 1.4x 1.3x 1x 2015 2016 2017 2018 2019 (1) Pro forma EBITDA before the impact of IFRS 16 32 2019 Annual Results Presentation – 21/02/2020
Slide 33: Overview of strategy
04 Overview of strategy Vincent Paris Chief Executive Officer 33 2019 Annual Results Presentation – 21/02/2020
Slide 34: Our mission
Our mission Together, building a positive future by making digital work for people Our goals Our commitments Make our contribution to society sustainable, human and guiding • Benchmark employer • Constructive, transparent dialogue with stakeholders • Long-lasting partnerships for our Use innovation
Slide 35: Our business model
Our business model Independent and value-creating Expanding European - Organic growth …in services and worldwide in - External growth software Independent - Reference shareholder - Employee shareholding Added Value Differentiation - End-to-end approach - Development of Software - Strong consulting b
Slide 36: Our strategic ambition
Our strategic ambition Medium-term targets Preferred partner in Europe for large public authorities, financial and industrial operators, and strategic companies, driving the digital transformation of their business lines (business model and operating model) and their information systems, and helping
Slide 37: Our strategic levers – IT services
Our strategic levers – IT services Transforming service lines using digital and cloud technologies Focus-driven strategy Offering strategy Production model 100 key accounts in End-to-end approach Industrial approach Europe Strengthening of (methods and tools) 8 key verticals, with an consulting (in
Slide 38: Our strategic levers – software
Our strategic levers – software A software business with a pro-forma revenue of around €750m Sopra Banking Software HR and Real Estate Solutions Retail banking Digital Digital End-to-end approach Bank as a Platform Performance and growth Specialised lending Sopra Financing Platform 38 2019 Annual Re
Slide 39: Proposed acquisition of Sodifrance
Proposed acquisition of Sodifrance Creation of a French leader in digital services dedicated to insurance and social security Rationale for the transaction Sodifrance Combination creates a leader, in France, in insurance and social security market, Founded in 1986 with €200m in revenue Listed on Eur
Slide 40: Financial targets for 2020
05 Financial targets for 2020 Vincent Paris Chief Executive Officer 40 2019 Annual Results Presentation – 21/02/2020
Slide 41: Financial targets for 2020
Financial targets for 2020 Organic revenue growth of between 3% and 5% Slight improvement in operating margin on business activity Free cash flow > €180m 41 2019 Annual Results Presentation – 21/02/2020
Slide 42: Annexes
06 Annexes 42 2019 Annual Results Presentation – 21/02/2020
Slide 43: Sopra Steria at 31/12/2019
Sopra Steria at 31/12/2019 A European leader in digital transformation Among the top 5 European digital services companies Among the top 10 operating in Europe 2019 revenue 46,000 Operations in End-to-end of €4.4bn employees 25 countries approach Revenue to 31/12/2019 2% 11% 11% 3% 24% 29% 6% 16% 4%
Slide 44: Breakdown of Group revenue by country
Breakdown of Group revenue by country At 31/12/2019 SERVICES REVENUE TO 31/12/2019 SOLUTIONS REVENUE TO 31/12/2019 2019 revenue Other Europe = €1,153m o/w Germany = 33% 14% o/w Scandinavia = 29% o/w Spain = 13% 31% o/w Belux = 7% o/w Italy = 7% o/w SFT = 7% o/w Switzerland = 4% €3,738m €696m SERVICE
Slide 45: Breakdown of Solutions revenue
Breakdown of Solutions revenue At 31/12/2019 SOLUTIONS REVENUE BY PRODUCT SOLUTIONS REVENUE BY BUSINESS LINE Sopra Banking Software 12% 2019 revenue = €439m o/w France = €180m 14% o/w Outside France = €259m 11% €696m €696m 25% SOLUTIONS SOLUTIONS 48% 63% 27% Sopra Banking Software Integration Servic
Slide 46: IFRS 16
IFRS 16 Recap: Impact of the initial application of IFRS 16 Change in accounting for leases (IFRS 16) Elimination of the distinction between operating leases and finance leases (IAS 17) and change in the definition of a lease All leased assets and liabilities recognised in the balance sheet Exceptio
Slide 47: Changes in exchange rates
Changes in exchange rates Financial year 2019 Changes in exchange rates Average rate Average rate Change For €1 / % 2019 2018 (%) Pound sterling 0.8778 0.8847 + 0.8% Norwegian krone 9.8511 9.5975 - 2.6% Swedish krona 10.5891 10.2583 - 3.1% Danish krone 7.4661 7.4532 - 0.2% Swiss franc 1.1124 1.1550
Slide 48: Change in revenue in financial year 2019
Change in revenue in financial year 2019 Growth at constant exchange rates: 8.2% 4 500 270.3 4,434.0 4 400 Sparda = +€59.7m SAB = +€31.6m Apak = +€20.4m BLUECARAT = +€13.9m 4 300 it-economics = +€10.7m NeoSpheres = +€1.1m O.R. System = +€0.2m Recruitment business: -€70.3m €m 4 200 67.3 4,095.3 1.1 4
Slide 49: Earnings per share
Earnings per share Financial year 2019 2019 2018 (€m) (€m) Net profit attributable to the Group (€m) 160.3 125.1 Weighted average number of shares in issue excluding treasury shares 20.23 20.18 Basic earnings per share (€) 7.92 6.20 Basic recurring earnings per share (€) 8.97 7.43 Theoretical weight
Slide 50: Breakdown of change in net financial debt
Breakdown of change in net financial debt 2019 under IFRS 16 and 2018 before IFRS 16 2019 2018 (€m) (€m) Operating profit on business activity 354.3 307.9 Depreciation, amortisation and provisions (excluding allocated intangible assets) 159.3 55.8 EBITDA 513.6 363.7 Non-cash items - 3.0 - 8.1 Tax pa
Slide 51: Simplified balance sheet
Simplified balance sheet 2019 under IFRS 16 and 2018 before IFRS 16 31/12/2019 31/12/2018 (€m) (€m) Goodwill 1,813.9 1,708.5 Allocated intangible assets 181.5 183.0 Other fixed assets 267.9 234.9 Right-of-use assets 320.4 - Equity-accounted investments 195.0 195.1 Fixed assets 2,778.8 2,321.5 Net de
Slide 52: Pension fund deficit net of tax in the United Kingdom
Pension fund deficit net of tax in the United Kingdom Deficit net of tax down €10m to €113m at 31/12/2019 Deficit net of tax (€m) 245 200 167 125 123 113 52 2019 Annual Results Presentation – 21/02/2020
Slide 53: Workforce
Workforce Financial year 2019 31/12/2019 31/12/2018 France 19,502 19,013 United Kingdom 6,305 6,407 Other Europe 10,868 10,095 Rest of the World 510 344 X-Shore 9,060 8,255 Total 46,245 44,114 53 2019 Annual Results Presentation – 21/02/2020
Slide 54: Ownership at 31/12/2019
Ownership at 31/12/2019 A key shareholder backing the corporate plan Pasquier Odin Managers Family Family 3.4% 68.3% 28.3% Founders & Sopra GMT Interests managed on Treasury Management Soderi Free float 19.6% behalf of employees shares 2.8% Shareholders’ agreement 22.4% 6.6% 0.1% 70.8% (33.6%) (8.4%
Slide 55: 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 restated revenue for the same period in the prior financial year