Sopra Steria Group Sa · EURONEXT:SOP
Sopra Steria Group Sa — FY2018 Earnings Presentation
58 slides from Sopra Steria Group Sa's earnings presentation, Feb 22, 2019
Slide 1: 2018 Annual Results Presentation
2018 ANNUAL RESULTS PRESENTATION Paris, 22 February 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 of 2018 2 2018 operating position by reporting unit 3 2018 financial results 4 Overview of strategy 5 Targets for 2019 6 Question & answer session 7 Annexes 3 2018 Annual Results Presentation – 22/02/2019
Slide 4: Key events of 2018
KEY EVENTS OF 2018 Vincent Paris – Chief Executive Officer 4 2018 Annual Results Presentation – 22/02/2019
Slide 5: 2018, a transitional year…
2018, A TRANSITIONAL YEAR… BOLSTERING THE GROUP IN RESPONSE TO A CHALLENGING WORKLOAD Heavy workload resulting in delivery issues Internal growth Acquisitions Transformations underway at all entities Licence revenue lower than expected Investments to improve the model ➢ Reinforced organisation
Slide 6: …and a year of big leaps forward
…AND A YEAR OF BIG LEAPS FORWARD Robust growth in business activity Structural improvement in cash generation Continued progress in raising the value of offerings First encouraging signs in the United Kingdom Significant headway for Sopra Banking Software’s products External recognition for our sust
Slide 7: Robust growth
ROBUST GROWTH ORGANIC REVENUE GROWTH OF 4.9% IN 2018 +5.2% +4.9% +3.5% Q4 2018: +5.5% +2.0% 2015 2016 2017 2018 15-year annual average: +5.5% (2004–2018) 7 2018 Annual Results Presentation – 22/02/2019
Slide 8: Structural improvement in cash generation
STRUCTURAL IMPROVEMENT IN CASH GENERATION Cash conversion ratio Days Sales Outstanding (DSO) FCF(1) / Operating profit on business activity 50% 43% 41% 70 days 68 days 20% 61 days 2015 2016 2017 2018 2016 2017 2018 (1) Free cash flow excluding sales of trade receivables and after adjusting for non-r
Slide 9: Continuing to raise the value of offerings
CONTINUING TO RAISE THE VALUE OF OFFERINGS IN 2018, CONSULTING ACCOUNTED FOR 10% OF GROUP REVENUE CONSULTING ACTIVITIES Highlights of 2018 as % of Group revenue 10% 2,950 consultants in the of revenue Group (up 23% from 2017) Successful launch of Consulting business in the United Kingdom (200+ 7.5%
Slide 10: First encouraging signs in the United Kingdom
FIRST ENCOURAGING SIGNS IN THE UNITED KINGDOM H2 MARKEDLY BETTER THAN H1 Organic growth Seasonality of revenue in 2018 0.4% 3.2% -0.7% -0.1% H1 2018 H2 2018 -7.7% -3.4% 2015 2016 2017 2018 Operating profit on business activity Seasonality of 8.1% operating margin 7.3% in 2018 6.9% 7.0% 4.5% 5.7% H1
Slide 11: Substantial progress made building up Sopra Banking Software
SUBSTANTIAL PROGRESS MADE BUILDING UP SOPRA BANKING SOFTWARE Last module (Enterprise Several go-lives illustrating our Account Management) ability to successfully complete delivered to La Banque major transformation projects in Postale the financial world Initial successes for the Digital eXperience
Slide 12: Sopra Steria singled out for sustainability progress
SOPRA STERIA SINGLED OUT FOR SUSTAINABILITY PROGRESS HIGH RECOGNITION FROM TWO KEY ORGANISATIONS IN EARLY 2019 Latest achievements CDP Climate Change Workforce Ethics and Values January 2019: Sopra Steria is named to the A List in recognition of its environmental performance Promoting equal Behaving
Slide 13: 2018 Operating position by reporting unit
2018 OPERATING POSITION BY REPORTING UNIT Vincent Paris – Chief Executive Officer 13 2018 Annual Results Presentation – 22/02/2019
Slide 14: Key figures
KEY FIGURES 2018 Revenue Operating profit on business Net profit attributable to the Group activity €4,095.3m €307.9m €125.1m Organic growth* of 4.9% Taking into account a tax rate of 39.6 % due to i.e. 7.5% of revenue Growth at constant exchange rate of 7.4% non-recurring items for around €15m (8.6
Slide 15: Operating performance by reporting unit
OPERATING PERFORMANCE BY REPORTING UNIT Revenue Operating profit on business activity 2018 2017 Organic 2018 2017 IFRS 15 Restated* growth IFRS 15 IFRS 15 (€m) (€m) (%) (% of Rev.) (% of Rev.) France 1,699.5 1,623.5 + 4.7% 9.1% 8.6% United Kingdom 783.1 784.1 - 0.1% 5.7% 6.9% Other Europe 997.1 871.
Slide 16: France
FRANCE SOLID PERFORMANCE 2018 2017 IFRS 15 IFRS 15 France (€m) (% of Rev.) (€m) (% of Rev.) Revenue 1,699.5 1,597.7 Organic growth (%) + 4.7% Operating profit on business activity 155.4 9.1% 138.1 8.6% Profit from recurring operations 139.2 8.2% 123.8 7.8% Operating profit 131.8 7.8% 111.4 7.0% Robu
Slide 17: United Kingdom (UK)
UNITED KINGDOM (UK) FIRST ENCOURAGING SIGNS WITHIN ONGOING TRANSFORMATION PROGRAMME 2018 2017 IFRS 15 IFRS 15 United Kingdom (€m) (% of Rev.) (€m) (% of Rev.) Revenue 783.1 791.5 Impact of IFRS 3 – Bond Organic growth (%) - 0.1% Operating profit on business activity 45.0 5.7% 54.7 6.9% Profit from r
Slide 18: UK: SSCL moving towards a normal situation
UK: SSCL MOVING TOWARDS A NORMAL SITUATION CLEAR IMPROVEMENT IN PERFORMANCE IN H2 2018 Features of the 2018 Medium-term objectives joint venture operating position 75/25 joint venture with Service and production Revenue: €200m per year Cabinet Office quality at high levels A trusted partner for the
Slide 19: UK: uncertainty over Brexit but no service continuity risk
UK: UNCERTAINTY OVER BREXIT BUT NO SERVICE CONTINUITY RISK No service continuity risk Measures taken to limit risks Activity built on sales of services and Brexit Working Group led by the CFO in the solutions UK analysing risks in 18 different categories (HR, taxes and duties, purchasing/suppliers,
Slide 20: Other Europe
OTHER EUROPE ROBUST GROWTH 2018 2017 IFRS 15 IFRS 15 Other Europe (€m) (% of Rev.) (€m) (% of Rev.) Revenue Free cash flow* 997.1 824.7 Organic growth (%) + 14.4% Operating profit on business activity 80.4 8.1% 66.5 8.1% Profit from recurring operations 74.9 7.5% 62.2 7.5% Operating profit 68.5 6.9%
Slide 21: Sopra Banking Software (SBS)
SOPRA BANKING SOFTWARE (SBS) SIGNIFICANT HEADWAY DESPITE DELIVERY ISSUES 2018 2017 IFRS 15 IFRS 15 Sopra Banking Software (€m) (% of Rev.) (€m) (% of Rev.) Revenue 373.7 381.7 Organic growth (%) - 3.6% Operating profit on business activity - 13.3 -3.6% 36.3 9.5% Profit from recurring operations - 24
Slide 22: SBS: 2018 position and 2019 challenges by business area
SBS: 2018 POSITION AND 2019 CHALLENGES BY BUSINESS AREA CONTINUED PROGRESS ON ROADMAP Specialist loans Core banking Platform Amplitude Target market World Europe MEA Clients 380+ clients in 60 countries 300+ 200+ Offering Dedicated solution for specialist Modules by business area Integrated solution
Slide 23: SBS: Decisions taken for 2019
SBS: DECISIONS TAKEN FOR 2019 FOCUS ON EXECUTION Reorganisation in terms of business areas to strengthen alignment between market/product strategy and execution plans Staff increases for project teams Expansion of training programmes and internal control Standardisation of the lead product versions
Slide 24: Other Solutions
OTHER SOLUTIONS EXCELLENT PERFORMANCE 2018 2017 IFRS 15 IFRS 15 Other Solutions (€m) (% of Rev.) (€m) (% of Rev.) Revenue 241.8 235.5 Organic growth (%) + 2.7% Operating profit on business activity 40.4 16.7% 35.1 14.9% Profit from recurring operations 38.4 15.9% 32.9 14.0% Operating profit 36.5 15.
Slide 25: 2018 Financial results
2018 FINANCIAL RESULTS Etienne du Vignaux – Chief Financial Officer 25 2018 Annual Results Presentation – 22/02/2019
Slide 26: Income statement
INCOME STATEMENT FINANCIAL YEAR 2018 2018 2018 2017 2017 IFRS 15 IFRS 15 IFRS 15 IFRS 15 (€m) (% of Rev.) (€m) (% of Rev.) Revenue 4,095.3 3,831.1 Organic growth 4.9% (*) Operating Bond profit on business activity 307.9 7.5% 330.7 8.6% Expenses related to stock options and related items - 22.8 - 21.
Slide 27: 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 the implementation of share-based payment plans and the movement in the underlying share price LTI plan tied to meeting performance conditions measured annually over a 3- year period
Slide 28: Other operating income and expenses
OTHER OPERATING INCOME AND EXPENSES FINANCIAL YEAR 2018 2018 2017 IFRS 15 IFRS 15 (€m) (€m) Costs related to business combination - 2.4 - 1.3 Restructuring and reorganisation costs - 30.0 - 23.0 Other - 1.8 - 0.7 Other operating income and expenses - 34.2 - 25.1 28 2018 Annual Results Presentation –
Slide 29: Tax
TAX FINANCIAL YEAR 2018 2018 2017 IFRS 15 IFRS 15 (€m) (€m) Profit before tax and share from 207.2 247.4 equity-accounted companies Effective tax charge - 82.0 - 73.9 Effective tax rate (%) 39.6% 29.9% including €15m of non-recurring items 2018 2017 IFRS 15 IFRS 15 (€m) (€m) Net deferred tax assets
Slide 30: Change in net financial debt in 2018
CHANGE IN NET FINANCIAL DEBT IN 2018 STRONG RISE IN FREE CASH FLOW 650 Sale of trade receivables with -23.4 -2.6 620.9 deconsolidation carried out in 2017 -47.3 600 547.1 -173.5 550 37.0 37.0 500 €m 450 136.1 510.1 400 +173.1 350 (vs +111.4 in 2017) 300 Net financial debt Free cash flow Changes in s
Slide 31: Detail of movement in free cash flow (FCF)
DETAIL OF MOVEMENT IN FREE CASH FLOW (FCF) SIGNIFICANT REDUCTION IN WORKING CAPITAL REQUIREMENT 180 +71.1 173.1 160 €71.3m 37.0 37.0 drop in 140 WCR = DSO decrease of +7.8 +0.4 7 days 120 34.1 111.4 -9.6 €m 100 -8.0 Sale of trade receivables with deconsolidation carried out in 80 2017 60 136.1 €62m
Slide 32: Sound financial position at 31/12/2018 (1/2)
SOUND FINANCIAL POSITION AT 31/12/2018 (1/2) COMFORTABLE STRUCTURE AND LIQUIDITY 31/12/2018 31/12/2018 Equity Amount used Amount authorised €1,329.2m (€m) (€m) Bond 180.0 180.0 Syndicated loan – Tranche A € 128.0 128.0 Net financial debt Syndicated loan – Tranche B £ 57.2 57.2 €620.9m Multi-currency
Slide 33: Sound financial position at 31/12/2018 (2/2)
SOUND FINANCIAL POSITION AT 31/12/2018 (2/2) NET FINANCIAL DEBT LOWER THAN 2X EBITDA Net financial debt/EBITDA(1) 3,0x 3.0x Banking covenants 2,0x 2.0x 1.8x 1.7x 1.5x 1.4x 1,0x 1.0x 2015 2016 2017 2018 (1) Pro forma EBITDA on a 12-month rolling basis 33 2018 Annual Results Presentation – 22/02/2019
Slide 34: Accounting policies
ACCOUNTING POLICIES EFFECT OF IFRS 16 APPLICATION 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 ‐ Exceptions o
Slide 35: Strategy reminder
STRATEGY REMINDER Vincent Paris – Chief Executive Officer 35 2018 Annual Results Presentation – 22/02/2019
Slide 36: An independent, value-creating corporate plan
AN INDEPENDENT, VALUE-CREATING CORPORATE PLAN Expanding European Ethics and Values - Organic growth …in services and - Targeted worldwide in external growth software Independent - Key shareholder - Employee Added Value shareholding Unique - Consulting - Software - End-to-end - Entrepreneurial - Vert
Slide 37: Reaffirmed strategic ambitions
REAFFIRMED STRATEGIC AMBITIONS Services Strategic partner for large public authorities, financial and industrial players, and strategic companies in Europe, providing end-to-end support for the transformation of their business and operating models, making the best possible use of digital and the G
Slide 38: Strategic levers
STRATEGIC LEVERS Strengthening of consulting Upstream positioning: Operational and digital strategy Geographic expansion Success of the Sopra Banking Software project Offering Integration of digital in offerings Development of centres of excellence to capitalise on new technologies (AI, blockc
Slide 39: Integration of digital in offerings
INTEGRATION OF DIGITAL IN OFFERINGS Market Vision / Convictions Value proposition Transformation across all industries Business-oriented transformation Consulting in the areas of operational strategy, digital, cloud Digital and Towards the platform enterprise and security security by design End-to-e
Slide 40: Strategic objectives
STRATEGIC OBJECTIVES Organic growth of between 4% and 6% per year Revenue Acquisition strategy Operating margin Operating margin on business activity ~10% FCF 5% to 7% of revenue 40 2018 Annual Results Presentation – 22/02/2019
Slide 41: 2019 Objectives
2019 OBJECTIVES Vincent Paris – Chief Executive Officer 41 2018 Annual Results Presentation – 22/02/2019
Slide 42: 2019 Objectives
2019 OBJECTIVES Organic revenue growth of between 4% and 6% Slight improvement in operating margin on business activity Mainly in H2 Free cash flow > €150m 42 2018 Annual Results Presentation – 22/02/2019
Slide 43: Questions & Answers
QUESTIONS & ANSWERS 43 2018 Annual Results Presentation – 22/02/2019
Slide 44: Annexes
ANNEXES 44 2018 Annual Results Presentation – 22/02/2019
Slide 45: Sopra Steria at 31/12/2018
SOPRA STERIA AT 31/12/2018 A EUROPEAN LEADER IN DIGITAL TRANSFORMATION Top 5 European digital services Top 10 operating in Europe companies 44,000+ Operations in End-to-end 2018 revenue of €4.1bn Employees 25 countries approach Revenue to 31/12/2018 Rest of the World Business Process Services Other
Slide 46: Revenue by country for the period
REVENUE BY COUNTRY FOR THE PERIOD ENDED 31/12/2018 SERVICES REVENUE TO 31/12/2018 SOLUTIONS REVENUE TO 31/12/2018 2018 revenue Other Europe = €997m o/w Germany = 36% o/w Scandinavia = 30% Other Europe o/w Spain = 14% o/w Belux = 8% Rest of the World o/w Italy = 8% o/w Switzerland = 4% 15% 29% France
Slide 47: Solutions revenue for the period
SOLUTIONS REVENUE FOR THE PERIOD ENDED 31/12/2018 SOLUTIONS REVENUE BY PRODUCT SOLUTIONS REVENUE BY BUSINESS LINE Property Management Solutions Managed Services 12% 14% Licences 10% Sopra HR €616M Sopra €616M Software 27% SOLUTIONS SOLUTIONS 52% Banking 61% Software 24% Integration Maintenance Servi
Slide 48: Changes in exchange rates
CHANGES IN EXCHANGE RATES FINANCIAL YEAR 2018 Changes in exchange rates Average rate Average rate Change For €1 / % 2018 2017 (%) Pound sterling 0.8847 0.8767 - 0.9% Norwegian krone 9.5975 9.3270 - 2.8% Swedish krona 10.2583 9.6351 - 6.1% Danish krone 7.4532 7.4386 - 0.2% Swiss franc 1.1550 1.1117 -
Slide 49: Change in revenue in financial year 2018
CHANGE IN REVENUE IN FINANCIAL YEAR 2018 GROWTH AT CONSTANT EXCHANGE RATES: 7.4% +192.8 4,095.3 4 100 Kentor = +€21.5m 2MoRO = +€1m Galitt = +€25.9m 4 000 BLUECARAT = +€24.1m IT Economics = +€10.1m OR Système = +€1.3m Sword Apak = +€5.7m +89.4 3 900 €m 3,845.4 -14.2 3 800 -18.1 3 700 2017 revenue Im
Slide 50: Earnings per share
EARNINGS PER SHARE FINANCIAL YEAR 2018 2018 2017 IFRS 15 IFRS 15 (€m) (€m) Net profit attributable to the Group (€m) 125.1 172.5 Weighted average number of shares in issue excluding treasury shares 20.18 20.21 Basic earnings per share (€) 6.20 8.53 Basic recurring earnings per share (€) 7.43 9.34 Th
Slide 51: Breakdown of change in net financial debt
BREAKDOWN OF CHANGE IN NET FINANCIAL DEBT FINANCIAL YEAR 2018 51 2018 Annual Results Presentation – 22/02/2019
Slide 52: Simplified balance sheet
SIMPLIFIED BALANCE SHEET 31/12/2018 31/12/2018 31/12/2017 IFRS 15 IFRS 15 (€m) (€m) Goodwill 1,708.5 1,590.6 Allocated intangible assets 183.0 161.5 Other fixed assets 234.9 179.7 Equity-accounted investments 195.1 189.1 Fixed assets 2,321.5 2,120.9 Net deferred tax 79.6 99.1 Trade accounts receivab
Slide 53: UK pension fund deficit net of tax
UK PENSION FUND DEFICIT NET OF TAX DEFICIT NET OF TAX DOWN €44M TO €123M AT 31/12/2018 Deficit net of tax down €44m vs 31/12/2017 Decrease in local currency Deficit net of tax (€m) 245 commitments exceeds that of 200 assets due to the increase in 167 the discount rate (up 30 bp vs 31/12/2017) 125 12
Slide 54: Global workforce
GLOBAL WORKFORCE FINANCIAL YEAR 2018 31/12/2018 31/12/2017 France 19,013 18,649 United Kingdom 6,407 6,181 Other Europe 10,095 8,777 Rest of the World 344 281 X-Shore 8,255 7,773 Total 44,114 41,661 54 2018 Annual Results Presentation – 22/02/2019
Slide 55: Ownership at 31/12/2018
OWNERSHIP AT 31/12/2018 A KEY SHAREHOLDER BACKING THE CORPORATE PLAN Pasquier Odin Managers Family Family 3.1% 68.4% 28.4% Founders & Sopra GMT Shares managed on Treasury Management Soderi Free float 19.6% behalf of employees shares 2.8% Shareholders’ agreement 22.4% 7.0% 0.2% 70.3% (33.0%) (8.3%) (
Slide 56: Impact of IFRS 15
IMPACT OF IFRS 15 INCOME STATEMENT 2017 2017 before IFRS 15 after IFRS 15 (€m) (€m) Revenue 3,845.4 3,831.1 Operating expenses -3,515.6 -3,500.4 Operating profit on business activity 329.8 330.7 Profit from recurring operations 286.8 287.7 Operating profit 261.7 262.6 Other financial income and expe
Slide 57: Impact of IFRS 15
IMPACT OF IFRS 15 BALANCE SHEET 31/12/2017 before IFRS 15 31/12/2017 after IFRS 15 (€m) (€m) Deferred tax assets 115.4 115.1 Non-current assets 2,247.1 2,246.8 Trade accounts receivable 1,137.8 1,147.1 Other current assets 256.4 246.3 Current assets 1,556.6 1,555.8 Total assets 3,803.8 3,802.6 Conso
Slide 58: 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