Sopra Steria Group Sa · EURONEXT:SOP
Sopra Steria Group Sa — H1 2019 Earnings Presentation
50 slides from Sopra Steria Group Sa's earnings presentation, Jul 26, 2019
Slide 1: Presentation of First-Half 2019 Results
PRESENTATION OF FIRST-HALF 2019 RESULTS Paris, 26 July 2019 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 1 Key events for the first half of 2019 2 Operating position at 30 June 2019 3 Financial results for the first half of 2019 4 Priorities and objectives 5 Questions & answers 6 Annexes 3 Presentation of H1 2019 results – 26/07/2019
Slide 4: Key Events for the First Half of 2019
KEY EVENTS FOR THE FIRST HALF OF 2019 Vincent Paris – Chief Executive Officer 4 Presentation of H1 2019 results – 26/07/2019
Slide 5: Key Events First Half 2019
KEY EVENTS FIRST HALF 2019 Robust growth in business activity Operating performance in line with full-year targets Continuing implementation of the value-enhancement strategy Confirmation of the Sopra Banking Software project 5 Presentation of H1 2019 results – 26/07/2019
Slide 6: Strong Growth in a Market Driven by Digital
STRONG GROWTH IN A MARKET DRIVEN BY DIGITAL ORGANIC REVENUE GROWTH* OF 7.4% IN THE FIRST HALF +7.4% +5.2% +4.9% +3.5% +2.0% 2015 2016 2017 2018 H1 2019 * Alternative performance measures are defined at the end of this presentation 6 Presentation of H1 2019 results – 26/07/2019
Slide 7: Performance in Line with Full-Year Targets
PERFORMANCE IN LINE WITH FULL-YEAR TARGETS OPERATING MARGIN AND FREE CASH FLOW Slight rise in the operating margin on business activity Improvement in free cash flow in the first half of 2019 in the first half of 2019 6.8% H1 2018 €m H1 2019 6.6% -21.8 H1 2018 Operating margin H1 2019 -77.3 on busin
Slide 8: Value-Enhancement Strategy
VALUE-ENHANCEMENT STRATEGY PROGRESS OF THE INVESTMENT PROGRAMME CONSULTING PRODUCTION TOOLING Consulting DevOps hybrid cloud platform brand Value ‐ Developed and implemented in H1 2019 propositions ‐ International pilot projects under way Marketing ‐ Full-scale rollout in Q4 2019 Centre of digital N
Slide 9: Confirmation of the Sopra Banking Software Project
CONFIRMATION OF THE SOPRA BANKING SOFTWARE PROJECT CORE BANKING: TARGET MARKET AND ADOPTED APPROACH Core banking Market Transformation projects for core banking systems of Europe/Middle East/Africa (EMEA)-based retail banks regardless of size (T1 to T4) Approach End-to-end model: solution–implementa
Slide 10: Progress in Core Banking in 2019
PROGRESS IN CORE BANKING IN 2019 DEVELOP PLATFORMS AND SYNERGIES VIA INSTALLED BASE ACQUISITION PARTNERSHIP • Market-leading position for Sopra • Construction of a digital platform to Banking Software in France serve 7 Sparda Banken • Synergies realised through installed base • End-to-end model: sol
Slide 11: Specialised Loans: Target Market and Approach
CONFIRMATION OF THE SOPRA BANKING SOFTWARE PROJECT SPECIALISED LOANS: TARGET MARKET AND ADOPTED APPROACHED Specialised loans Market Specialised financial institutions (equipment manufacturers and lenders) around the world: - Automotive loans - Consumer loans - Corporate loans - Equipment loans Appro
Slide 12: Progress in Specialised Loans in 2019 (1/2)
PROGRESS IN SPECIALISED LOANS IN 2019 (1/2) A BETTER LEVEL OF CONTROL AT 30 JUNE 2019 CLIENT PORTFOLIO RESILIENCE DEVELOPMENT OF V4.7 • Around 10 challenging projects Standardised version • Specific client support during the Industrialisation of production current period • Unique source code • API c
Slide 13: Progress in Specialised Loans in 2019 (2/2)
PROGRESS IN SPECIALISED LOANS IN 2019 (2/2) A CLEARLY DEFINED PLAN Full diagnostic Strengthening of Release of v4.7 organisation and v4.7.0 management brought to market Q4 2018 Q1 2019 Q4 2019 Q1 2020 2020 Recovery plan: 1. Product strategy Restart of sales Launch - Development of v4.7 Weekly review
Slide 14: Operating Position at 30 June 2019
OPERATING POSITION AT 30 JUNE 2019 Vincent Paris – Chief Executive Officer 14 Presentation of H1 2019 results – 26/07/2019
Slide 15: Key Figures
KEY FIGURES FIRST-HALF PERFORMANCE IN LINE WITH FULL-YEAR TARGETS Revenue Operating profit on business Net profit attributable to the Group activity €2,207.1m €151.0m €60.9m organic growth of 7.4% i.e. 6.8% of revenue, up 58.8% and total growth of 9.6% up 0.2 pt compared with H1 2018 compared with H
Slide 16: Operating Performance by Division
OPERATING PERFORMANCE BY DIVISION Revenue Operating profit on business activity H1 2018 Organic H1 2019 H1 2019 H1 2018 Restated* growth (€m) (% of Rev.) (% of Rev.) (€m) (%) France 914.9 849.1 + 7.7% 9.3% 9.0% United Kingdom 429.6 385.7 + 11.4% 6.1% 4.5% Other Europe 534.9 498.5 + 7.3% 6.5% 6.9% So
Slide 17: France
FRANCE GOOD PERFORMANCE DESPITE INVESTMENT PROGRAMME H1 2019 H1 2018 France (€m) (% of Rev.) (€m) (% of Rev.) Revenue 914.9 849.1 Organic growth (%) + 7.7% Operating profit on business activity 85.2 9.3% 76.0 9.0% Profit from recurring operations 81.7 8.9% 60.5 7.1% Operating profit 76.1 8.3% 56.1 6
Slide 18: United Kingdom
UNITED KINGDOM SITUATION BUOYED BY PERFORMANCE OF THE TWO JOINT VENTURES H1 2019 H1 2018 United Kingdom (€m) (% of Rev.) (€m) (% of Rev.) Revenue 429.6 382.8 Organic growth (%) + 11.4% Operating profit on business activity 26.4 6.1% 17.1 4.5% Profit from recurring operations 20.4 4.7% 10.5 2.7% Oper
Slide 19: Other Europe
OTHER EUROPE CONTINUED STRENGTHENING OF FUNDAMENTALS H1 2019 H1 2018 Other Europe (€m) (% of Rev.) (€m) (% of Rev.) Revenue 534.9 475.5 Organic growth (%) + 7.3% Operating profit on business activity 34.5 6.5% 32.9 6.9% Profit from recurring operations 32.7 6.1% 28.9 6.1% Operating profit 28.6 5.4%
Slide 20: Sopra Banking Software
SOPRA BANKING SOFTWARE MANY SUCCESSFUL GO-LIVES IN THE FIRST HALF H1 2019 H1 2018 Sopra Banking Software (€m) (% of Rev.) (€m) (% of Rev.) Revenue 204.0 187.4 Organic growth (%) + 0.9% Operating profit on business activity - 9.5 -4.7% - 8.4 -4.5% Profit from recurring operations - 15.6 -7.6% - 14.6
Slide 21: Other Solutions
OTHER SOLUTIONS SOLID OPERATING PERFORMANCE H1 2019 H1 2018 Other Solutions (€m) (% of Rev.) (€m) (% of Rev.) Revenue 123.6 119.2 Organic growth (%) + 3.7% Operating profit on business activity 14.5 11.7% 15.1 12.7% Profit from recurring operations 13.9 11.2% 13.9 11.7% Operating profit 11.9 9.6% 12
Slide 22: Financial Results for the First Half of 2019
FINANCIAL RESULTS FOR THE FIRST HALF OF 2019 Étienne du Vignaux – Chief Financial Officer 22 Presentation of H1 2019 results – 26/07/2019
Slide 23: Income Statement
INCOME STATEMENT FIRST HALF 2019 H1 2019 H1 2019 H1 2018 H1 2018 (€m) (% of Rev.) (€m) (% of Rev.) Revenue 2,207.1 2,014.0 Organic growth 7.4% Operating profit on business activity 151.0 6.8% 132.8 6.6% Share-based payment expenses - 4.3 - 22.1 Amortisation of allocated intangible assets - 13.6 - 11
Slide 24: Other Operating Income and Expenses
OTHER OPERATING INCOME AND EXPENSES FIRST HALF 2019 H1 2019 H1 2018 (€m) (€m) Costs related to business combination - 2.3 - 0.4 Restructuring and reorganisation costs - 14.3 - 18.0 Other - 1.2 - 0.7 Other operating income and expenses - 17.8 - 19.1 24 Presentation of H1 2019 results – 26/07/2019
Slide 25: Tax
TAX FIRST HALF 2019 H1 2019 H1 2018 (€m) (€m) Profit before tax and share from 103.2 73.2 equity-accounted companies Effective tax charge - 34.4 - 34.9 Effective tax rate (%) 33.4% 47.8% Effective annual tax rate for 2019 estimated at about 35% 25 Presentation of H1 2019 results – 26/07/2019
Slide 26: Stability of Net Financial Debt in H1 2019
STABILITY OF NET FINANCIAL DEBT IN H1 2019 FREE CASH FLOW GENERALLY NEGATIVE IN THE FIRST HALF +21.8 +2.3 640 -2.9 -0.8 620 -16.9 Seasonal effects: Impact of the initial 600 first half usually a period of application of IFRS 16 net cash outflows €m 580 620.9 624.3 560 136.1 540 520 500 Net financial
Slide 27: Detail of Movement in Free Cash Flow
DETAIL OF MOVEMENT IN FREE CASH FLOW IMPROVED EBITDA AND STABLE WORKING CAPITAL CONSUMPTION 120 -114.3 Sale of trade receivables with deconsolidation carried out in 2017 -37.0 -37.0 100 37.0 80 Including about €20m in early €m payments 60 Change calculated +20.2 before IFRS 16 impact 40 136.1 -77.3
Slide 28: Sound Financial Position at 30 June 2019 (1/2)
SOUND FINANCIAL POSITION AT 30 JUNE 2019 (1/2) DIVERSIFIED FUNDING SOURCES AND COMFORTABLE LIQUIDITY 30/06/2019 30/06/2019 Amount used Amount authorised Equity (€m) (€m) €1,292.7m Bond 180.0 180.0 Syndicated loan – Tranche A € 128.0 128.0 Syndicated loan – Tranche B £ 57.1 57.1 Net financial debt Mu
Slide 29: Sound Financial Position at 30 June 2019 (2/2)
SOUND FINANCIAL POSITION AT 30 JUNE 2019 (2/2) NET FINANCIAL DEBT LOWER THAN 2X EBITDA Net financial debt/EBITDA(1) 3x Banking covenants 2.1x 2x 1.8x 1.8x 1.8x 1.6x 1x June 15 June 16 June 17 June 18 June 19 (1) Pro forma EBITDA on a 12-month rolling basis 29 Presentation of H1 2019 results – 26/07/
Slide 30: Changes in Scope
CHANGES IN SCOPE CONSOLIDATIONS AND DIVESTMENTS IN H2 2019 Recruitment business in the United Kingdom: divested at 28June 2019 SAB: fully consolidated within Sopra Banking Software since 1July 2019 Captive Sparda Banken: to be fully consolidated within Other Europe in the course of Q3 2019 30 Presen
Slide 31: Priorities and Objectives
PRIORITIES AND OBJECTIVES Vincent Paris – Chief Executive Officer 31 Presentation of H1 2019 results – 26/07/2019
Slide 32: Priorities for 2019
PRIORITIES FOR 2019 Focus on delivery SOPRA BANKING SOFTWARE Synergies with the services arm of the company VALUE ENHANCEMENT Investments in all entities STRUCTURE Reinforcement to prepare for future growth Benchmark employer CORPORATE RESPONSIBILITY Gender balance and equal treatment 32 Presentatio
Slide 33: Raising of Annual Growth Target and Confirmation of Other 2019 Targets
RAISING OF ANNUAL GROWTH TARGET AND CONFIRMATION OF OTHER 2019 TARGETS Organic revenue growth equal to or greater than 6% Previously announced as “between 4% and 6%” Slight improvement in operating margin on business activity Free cash flow > €150m 33 Presentation of H1 2019 results – 26/07/2019
Slide 34: Medium-Term Objectives
MEDIUM-TERM OBJECTIVES Organic growth of between 4% and 6% per year REV Acquisition strategy OP Operating margin on business activity of around 10% FCF 5% to 7% of revenue 34 Presentation of H1 2019 results – 26/07/2019
Slide 35: Questions & Answers
QUESTIONS & ANSWERS 35 Presentation of H1 2019 results – 26/07/2019
Slide 36: Annexes
ANNEXES 36 Presentation of H1 2019 results – 26/07/2019
Slide 37: Sparda Banken: A Key Strategic Partnership
SPARDA BANKEN: A KEY STRATEGIC PARTNERSHIP PROJECT WITH REVENUE POTENTIAL > €1.1BN OVER 13 YEARS Construction of a digital platform to serve the German banking market Background Project Strategic implications Revenue > €1.1bn over 13 years • Initial context: information • Sopra Steria to acquire 51%
Slide 38: Recognised Approach to Corporate Responsibility
RECOGNISED APPROACH TO CORPORATE RESPONSIBILITY COMMITMENT TO THE GLOBAL COMPACT (ADVANCED LEVEL) 2019 ESG ratings AA Outperformer Gold medal (Advanced level) for CSR performance Ranked in the top 1% of companies 2019 environmental assessed rankings 2019 workforce-related rankings Sopra Steria: Rank
Slide 39: Sopra Steria at 30/06/2019
SOPRA STERIA AT 30/06/2019 A EUROPEAN LEADER IN DIGITAL TRANSFORMATION Among the top 5 European digital Among the top 10 operating in Europe services companies 45,000 Operations in End-to-end 2018 revenue of €4.1bn employees 25 countries approach Revenue - 30/06/2019 Rest of World Business Process O
Slide 40: Revenue by Country
REVENUE BY COUNTRY FOR THE PERIOD ENDED 30/06/2019 SERVICES REVENUE - 30/06/2019 SOLUTIONS REVENUE - 30/06/2019 Other H1 2019 revenue Other Europe = €535m Europe Rest of World o/w Germany = 36% o/w Scandinavia = 31% o/w Spain = 14% o/w Belux = 7% o/w Italy = 8% o/w Switzerland = 4% 14% 28% France Fr
Slide 41: Solutions Revenue
SOLUTIONS REVENUE FOR THE PERIOD ENDED 30/06/2019 SOLUTIONS REVENUE BY PRODUCT SOLUTIONS REVENUE BY BUSINESS LINE Real Estate Management Managed Services Solutions 12% 14% Licences 7% Sopra HR 26% €328M Sopra €328M Software SOLUTIONS SOLUTIONS 52% Banking 62% Software 27% Integration Maintenance Ser
Slide 42: Changes in Exchange Rates
CHANGES IN EXCHANGE RATES FIRST HALF 2019 Changes in exchange rates Average rate Average rate Change For €1 / % H1 2019 H1 2018 (%) Pound sterling 0.8736 0.8798 + 0.7% Norwegian krone 9.7304 9.5929 - 1.4% Swedish krona 10.5181 10.1508 - 3.5% Danish krone 7.4651 7.4476 - 0.2% Swiss franc 1.1295 1.169
Slide 43: Change in Revenue in the First Half of 2019
CHANGE IN REVENUE IN THE FIRST HALF OF 2019 TOTAL GROWTH OF 9.5% 2 250 152.5 2,207.1 2 200 2 150 Apak = +€14.1m BLUECARAT = +€13.9m it-economics = +€10.7m O.R. System = +€0.2m 2 100 €m 38.9 2 050 2,014.0 1.7 2 000 1 950 1 900 Revenue Currency impact Scope impact Organic growth Revenue H1 2018 H1 201
Slide 44: Earnings per Share
EARNINGS PER SHARE FIRST HALF 2019 H1 2019 H1 2018 (€m) (€m) Net profit attributable to the Group (€m) 60.9 38.4 Weighted average number of shares in issue excluding treasury shares 20.22 20.16 Basic earnings per share (€) 3.01 1.90 Basic recurring earnings per share (€) 3.61 2.60 Theoretical weight
Slide 45: Breakdown of Change in Net Financial Debt
BREAKDOWN OF CHANGE IN NET FINANCIAL DEBT FIRST HALF 2019 H1 2019 H1 2018 (€m) (€m) Operating profit on business activity 151.0 132.8 Depreciation, amortisation and provisions (excluding allocated intangible assets) 81.5 22.9 EBITDA 232.5 155.7 Non-cash items - 4.6 - 3.5 Tax paid - 34.3 - 34.9 Chang
Slide 46: Simplified Balance Sheet
SIMPLIFIED BALANCE SHEET 30/06/2019 30/06/2019 31/12/2018 (€m) (€m) Goodwill 1,710.3 1,708.5 Allocated intangible assets 169.2 183.0 Right-of-use assets 284.1 - Other fixed assets 211.2 234.9 Equity-accounted investments 193.0 195.1 Fixed assets 2,567.8 2,321.5 Net deferred tax 97.8 79.6 Trade accou
Slide 47: UK Pension Fund Deficit Net of Tax at 30/06/2019
UK PENSION FUND DEFICIT NET OF TAX AT 30/06/2019 AROUND €150M ON AVERAGE SINCE 2017 180 167 160 149 Deficit net of tax (€m) 140 123 60 bp drop in the discount rate since 120 31 December 2018 100 88 80 Annual additional cash contribution 60 of £20m unchanged until August 40 2020 20 0 déc-17 juin-18 d
Slide 48: Global Workforce
GLOBAL WORKFORCE FIRST HALF 2019 30-06-19 31-12-18 France 19,343 19,013 United Kingdom 6,352 6,407 Other Europe 10,268 10,095 Rest of the World 360 344 X-Shore 8,636 8,255 Total 44,959 44,114 48 Presentation of H1 2019 results – 26/07/2019
Slide 49: Ownership at 30/06/2019
OWNERSHIP AT 30/06/2019 A KEY SHAREHOLDER BACKING THE CORPORATE PLAN Pasquier Odin Managers family family 3.1% 68.4% 28.4% Founders and Sopra GMT Interests managed on Treasury management Soderi Free float 19.6% behalf of employees shares 2.8% Shareholders’ agreement 22.5% 6.9% 0.2% 70.5% (33.7%) (8.
Slide 50: 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