Clear improvement in operating
performance
On track to achieve medium-term
targets
- Revenue for H1 2023: €2,840.1m, equating to total growth of
11.6% and organic growth1 of 8.1%
- Organic revenue growth of 7.1% in Q2
- Operating margin on business activity of 8.8%, up 0.8 points
from H1 2022
- Integration of CS Group and Tobania under way
- Net profit attributable to the Group stable at €112.5m, due
in large part to a temporary rise in non-recurring costs
- Robust free cash flow totalling €122.9m (€66.3m in H1
2022)
- Full-year 2023 revenue guidance revised upward: organic
growth of at least 6% (compared with “between 3% and 5%”
previously)
Regulatory News:
At its meeting on 26 July 2023, Sopra Steria’s
(Paris:SOP) Board of Directors, chaired by Pierre
Pasquier, approved the financial statements for the first half of
2023. The Statutory Auditors have conducted a limited review of the
financial statements.
Sopra Steria: 2023 Half-year results H1 2023 H1
2022 Amount Margin Change Amount
Margin Key income statement items Revenue €m
2,840.1
11.6%
2,543.8
Organic growth % +8.1% Operating profit on business activity
€m
251.1
8.8%
23.6%
203.1
8.0%
Profit from recurring operations €m
207.8
7.3%
20.8%
172.0
6.8%
Operating profit €m
177.1
6.2%
9.3%
162.1
6.4%
Net profit attributable to the Group €m
112.5
4.0%
0.2%
112.3
4.4%
Weighted average number of shares in issue excl. treasury
shares m
20.20
20.22
Basic earnings per share €
5.57
0.3%
5.55
Recurring earnings per share €
6.80
14.8%
5.92
Key balance sheet items 6/30/2023
6/30/2022 Net financial debt €m
558.9
62.1%
344.9
Equity attributable to the Group €m
1,794.9
-1.6%
1,823.1
__________________________________
1 Alternative performance measures are
defined in the glossary at the end of this document.
Cyril Malargé, Chief Executive Officer of Sopra Steria Group,
commented:
“I’m pleased with the good performance in the first half of
2023. Business activity was buoyant in both volume and sales price.
Organic revenue growth was 8.1%. Our substantial presence in the
public sector, aerospace and defence helped achieve this
performance. The 0.8 basis point improvement in our operating
margin on business activity to 8.8% shows that we are well on track
to achieve our announced target of around 10% in 2024.
This performance reflects the impact of our strategy to
transform our offerings and move them further up the value chain
while boosting our operational efficiency, to which Sopra Steria’s
teams are devoting their full attention.
We are also stepping up our efforts in the field of generative
AI, for example by integrating all AI tools and methodologies
within our Ingine software engineering platform, which has already
been rolled out to all of the Group’s 10,000 developers
worldwide.
The integration processes for CS Group and Tobania are well
under way. Alongside this, the Ordina acquisition is proceeding in
line with the original schedule, with the public offer by Sopra
Steria launched on 19 July 2023 and the closing expected during the
second half of 2023. These acquisitions are aimed at strengthening
the Group’s positions in the defence and security sector as well as
in the BeNeLux region, where we plan to create a benchmark player
in digital services generating around €700 million in pro forma
revenue and employing over 4,000 professionals.
The Group’s performance in the first half of the year and our
visibility into the second half have enabled us to raise our
full-year revenue guidance for 2023. We now expect organic revenue
growth to reach at least 6%, up from the previous guidance of
between 3% and 5%.”
Detailed breakdown of operating performance in H1
2023
Revenue totalled €2,840.1 million, an increase of 11.6%
relative to H1 2022. Changes in scope had a positive impact of
€129.6 million, and currency fluctuations had a negative impact of
€45.2 million. At constant scope and exchange rates, revenue grew
8.1%. In the second quarter alone, organic growth remained robust
at 7.1%, despite a less favourable calendar (two fewer days than in
the second quarter of 2022) and the start of a slowdown,
particularly in the consulting business, which nevertheless
recorded growth of 7%.
The Group’s operating profit on business activity rose 23.6%
to €251.1 million, equating to a margin of 8.8%, up 0.8 points
from H1 2022.
In France (42% of the Group total), revenue grew sharply
(17.1%) to €1,198.9 million. CS Group has been consolidated in
Sopra Steria’s accounts for four months and contributed revenue of
€106.5 million, corresponding to a growth rate of 8.7%. Excluding
changes in scope, organic revenue growth for the reporting unit was
6.9%. The best-performing vertical markets were defence, the public
sector, aerospace and transport. Operating margin on business
activity stood at 9.1% (9.7% in the first half of 2022). The
initial consolidation of CS Group diluted the operating margin on
business activity for the first half.
Revenue for the United Kingdom (16% of Group total) was
€461.0 million, representing organic growth of 8.3%, driven by the
aeronautics, defence and security sector, for overall growth of
around 30%, as well as the two joint ventures specialising in
business process services for the public sector (SSCL and NHS SBS),
which delivered double-digit growth. Operating margin on business
activity (11.4%) was up 0.9 points from the first half of 2022.
The Other Europe (29% of the Group total) reporting unit
posted €819.8 million in revenue, representing positive organic
growth of 11.4%. The fastest growth was seen in Scandinavia, Spain,
Italy and, to a lesser extent, BeNeLux and Germany. The reporting
unit’s operating margin on business activity came to 8.9%, compared
with 5.0% in the year-earlier period, fuelled by the return to a
normal level of operating performance in Germany and improvements
at several other entities.
Revenue for Sopra Banking Software (8% of Group total)
came to €218.0 million, representing organic growth of 4.0%. The
confirmation of a return to growth over the first two quarters of
the year was driven by the performance of digital offerings
(Digital Banking Suite and Open Banking Platform, Regulatory
Reporting, Wholesale Digital Audit, Instant Payment…). This
resulted in a 9.7% increase in subscription revenue. Meanwhile,
licence sales rose 5.3%. Overall, software revenue (60% of the
total) was up 3.4% while services revenue grew 5.0%. Efforts
focused on the return to growth for sales resulted in a higher
level of R&D investment than expected during the first half and
lower operating profit than in the year-earlier period (1.3% vs
4.1%).
The Other Solutions reporting unit (5% of the Group
total) posted revenue of €142.4 million, representing organic
growth of 5.3%. Human resources solutions posted growth of 4.2%.
Property Management Solutions posted a 7.6% increase in revenue.
The reporting unit’s operating margin on business activity came to
10.0%, up 1.2 points from its level at 30 June 2022.
Comments on the components of net profit for H1 2023
Profit from recurring operations came to €207.8 million,
up 20.8% relative to the first half of 2022. It included a €28.4
million share-based payment expense (mainly due to the rise in the
Sopra Steria share price compared with the first half of 2022) and
a €14.9 million amortisation expense on allocated intangible
assets.
Operating profit was €177.1 million, up 9.3%, after a net
expense of €30.7 million for other operating income and expenses
(compared with a net expense of €10.0 million in the first half of
2022). The year-on-year increase in expenses was largely due to the
temporary rise in non-recurring costs relating to business
combinations (CS Group, Tobania and Ordina) and the discontinuation
of low-margin businesses.
Net interest expense was €12.5 million (versus €3.9
million in the first half of 2022).
The tax expense was €42.5 million in the half-year
period, versus €43.2 million in the first half of 2022, translating
to a Group-wide tax rate of 25.8%. For the 2023 financial year as a
whole, the tax rate is estimated at 26%.
Net profit from associates (including Axway) amounted to
an expense of €0.1 million (compared with profit of €0.1 million in
the first half of 2022).
After deducting €9.5 million in non-controlling
interests, net profit attributable to the Group came to
€112.5 million (compared with €112.3 million in the first half of
2022).
Basic earnings per share came to €5.57 (up 0.3%),
compared with €5.55 per share in the first half of 2022.
Financial position at 30 June 2023
Free cash flow was very strong in H1 2023 at €122.9
million (compared with €66.3 million in the first half of 2022). It
includes early net inflows amounting to about €50 million.
Net financial debt totalled €558.9 million at 30 June
2023. It includes outflows early in the half-year period due to the
closing of the CS Group and Tobania acquisitions. It equated to
1.03x pro forma 12-month rolling EBITDA before the impact of IFRS
16 (with the financial covenant stipulating a maximum of 3x).
Acquisition and external growth transactions
Following the proposed acquisition of Ordina announced on
the 21 March 2023, a public offer was launched on 19 July 2023. The
offer will remain open until 26 September 2023. This public offer
was approved by the Dutch Authority for the Financial Markets (AFM)
on 17 July 2023. It is also supported by Ordina’s two largest
shareholders as well as by each of the members of Ordina’s
Supervisory Board and Management Board. Ordina’s two largest
shareholders, together representing approximately 26% of Ordina’s
share capital, have agreed to tender their shares to the offer.
Workforce
The Group’s net headcount stood at 53,954 employees at 30
June 2023, up from 49,690 employees at 31 December 2022 and 48,707
employees at 30 June 2022. A total of 9,400 staff were employed at
international service centres (India, Poland, Spain, etc.) in the
first half of 2023, versus 9,000 staff in the same period of the
previous year.
At 30 June 2023, the subcontracting rate was 2.3
percentage points higher than the low point reached in 2020, at the
end of a period deeply affected by the Covid-19 pandemic.
The workforce attrition rate was 15.7% (vs 19.3% in the
first half of 2022).
Upward revision to full-year 2023 revenue organic growth
guidance
In a global macroeconomic environment expected to be less
favourable in the second half, but fairly resilient given its
characteristics, Sopra Steria is revising upward its revenue growth
target for financial year 2023 while confirming all of its other
targets:
- Organic revenue growth of at least 6% (versus “between 3% and
5%” previously);
- Operating margin on business activity slightly over 9%;
- Free cash flow of at least €300 million.
Medium-term targets
In the medium term, Sopra Steria is targeting annual organic
revenue growth of between 4% and 6%. The Group has also set targets
to achieve an operating margin on business activity of around 10%
by 2024 and generate free cash flow of between 5% and 7% of
revenue.
Presentation meeting
The results for the first half of 2023 will be presented to
financial analysts and investors in a French/English webcast on
Thursday, 27 July 2023 at 9:00 a.m. CET.
- Register for the French-language webcast
here
- Register for the English-language webcast
here
Or by phone:
- French-language phone number: +33 (0)1 70
37 71 66
- English-language phone number: +44 (0)33
0551 0200
Practical information about the presentation and webcast can be
found in the ‘Investors’ section of the Group’s website:
https://www.soprasteria.com/investors
Upcoming financial releases
Friday, 27 October 2023 before market open: Publication of Q3
2023 revenue
Glossary
- 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.
- EBITDA: This measure, as
defined in the Universal Registration Document, is equal to
consolidated operating profit on business activity after adding
back depreciation, amortisation and provisions included in
operating profit on business activity.
- Operating profit on business
activity: This measure, as defined in the Universal
Registration Document, is equal to profit from recurring operations
adjusted to exclude the share-based payment expense for stock
options and free shares and charges to amortisation of allocated
intangible assets.
- Profit from recurring
operations: This measure is equal to operating profit
before other operating income and expenses, which includes any
particularly significant items of operating income and expense that
are unusual, abnormal, infrequent or not foreseeable, presented
separately in order to give a clearer picture of performance based
on ordinary activities.
- Basic recurring earnings per
share: This measure is equal to Basic earnings per share
before other operating income and expenses net of tax.
- Free cash flow: Free cash
flow is defined as the net cash from operating activities; less
investments (net of disposals) in property, plant and equipment,
and intangible assets; less lease payments; less net interest paid;
and less additional contributions to address any deficits in
defined-benefit pension plans.
- Downtime: Number of days
between two contracts (excluding training, sick leave, other leave
and pre-sales) divided by the total number of business days.
Disclaimer
This document 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 the second half of the year, with
varying impacts on end-of-year performance. Actual outcomes and
results may differ from those described in this document due to
operational risks and uncertainties. More detailed information on
the potential risks that may affect the Group’s financial results
can be found in the 2022 Universal Registration Document filed with
the Autorité des Marchés Financiers (AMF) on 17 March 2023 (see
pages 40 to 45 in particular). Sopra Steria does not undertake any
obligation to update the forward-looking information contained in
this document beyond what is required by current laws and
regulations. The distribution of this document in certain countries
may be subject to the laws and regulations in force. Persons
physically present in countries where this document is released,
published or distributed should enquire as to any applicable
restrictions and should comply with those restrictions.
About Sopra Steria
Sopra Steria, a major tech player in Europe recognised for its
consulting, digital services and software development, helps its
clients drive their digital transformation and obtain tangible and
sustainable benefits. It provides end-to-end solutions to make
large companies and organisations more competitive by combining
in-depth knowledge of a wide range of business sectors and
innovative technologies with a fully collaborative approach. Sopra
Steria places people at the heart of everything it does and is
committed to putting digital to work for its clients in order to
build a positive future for all. With 50,000 employees in nearly 30
countries, the Group generated revenue of €5.1 billion in 2022.
The world is how we shape it.
Sopra Steria Group (SOP) is listed on Euronext Paris
(Compartment A) - ISIN: FR0000050809
For more information, visit us at www.soprasteria.com
Annexes
Sopra Steria: Impact on revenue of changes in scope and exchange
rates – H1 2023 €m H1 2023 H1 2022
Growth Revenue
2,840.1
2,543.8
+11.6% Changes in exchange rates
-45.2
Revenue at constant exchange rates
2,840.1
2,498.5
+13.7% Changes in scope
129.6
Revenue at constant scope and exchange rates
2,840.1
2,628.2
+8.1% Sopra Steria: Changes in exchange rates – H1
2023 For €1 / % Average rateH1 2023 Average
rateH1 2022 Change Pound sterling
0.8764
0.8424
-3.9
%
Norwegian krone
11.3195
9.9817
-11.8
%
Swedish krona
11.3329
10.4796
-7.5
%
Danish krone
7.4462
7.4402
-0.1
%
Swiss franc
0.9856
1.0319
+4.7%
Sopra Steria: Revenue by reporting unit (€m / %) – H1
2023 H1 2023 H1 2022Restated* H1 2022
Organicgrowth Totalgrowth France
1,198.9
1,121.3
1,023.7
+6.9% +17.1% United Kingdom
461.0
425.8
442.6
+8.3% +4.2% Other Europe
819.8
736.2
731.3
+11.4% +12.1% Sopra Banking Software
218.0
209.6
210.9
+4.0% +3.4% Other Solutions
142.4
135.3
135.2
+5.3% +5.3%
Sopra Steria Group
2,840.1
2,628.2
2,543.8
+8.1% +11.6% * Revenue at 2023 scope and exchange
rates
Sopra Steria: Revenue by reporting unit (€m / %) – Q2
2023 Q2 2023 Q2 2022Restated* Q2 2022
Organicgrowth Totalgrowth France
609.0
582.9
510.4
+4.5% +19.3% United Kingdom
244.3
218.1
223.6
+12.0% +9.2% Other Europe
409.4
373.2
366.4
+9.7% +11.7% Sopra Banking Software
110.3
107.2
107.7
+2.9% +2.4% Other Solutions
71.8
68.0
67.9
+5.6% +5.6%
Sopra Steria Group
1,444.7
1,349.4
1,276.1
+7.1% +13.2% * Revenue at 2023 scope and exchange
rates
Sopra Steria: Performance by reporting unit – H1 2023
H1 2023 H1 2022 €m % €m %
France Revenue
1,198.9
1,023.7
Operating profit on business activity
108.8
9.1%
99.6
9.7%
Profit from recurring operations
90.1
7.5%
89.6
8.8%
Operating profit
84.2
7.0%
88.7
8.7%
United Kingdom Revenue
461.0
442.6
Operating profit on business activity
52.4
11.4%
46.6
10.5%
Profit from recurring operations
45.5
9.9%
40.4
9.1%
Operating profit
38.2
8.3%
40.6
9.2%
Other Europe Revenue
819.8
731.3
Operating profit on business activity
72.8
8.9%
36.4
5.0%
Profit from recurring operations
66.0
8.1%
31.5
4.3%
Operating profit
56.2
6.9%
26.8
3.7%
Sopra Banking Software Revenue
218.0
210.9
Operating profit on business activity
2.8
1.3%
8.7
4.1%
Profit from recurring operations
-6.3
-2.9%
-0.1
-0.1%
Operating profit
-13.6
-6.2%
-4.5
-2.1%
Other Solutions Revenue
142.4
135.2
Operating profit on business activity
14.3
10.0%
11.9
8.8%
Profit from recurring operations
12.4
8.7%
10.6
7.9%
Operating profit
12.0
8.5%
10.4
7.7%
Sopra Steria: Consolidated income statement – H1 2023 H1
2023 H1 2022 €m % €m %
Revenue
2,840.1
2,543.8
Staff costs
-1,755.0
-1,589.8
Operating expenses
-768.8
-689.6
Depreciation, amortisation and provisions
-65.2
-61.2
Operating profit on business activity
251.1
8.8%
203.1
8.0%
Share-based payment expenses
-28.4
-14.5
Amortisation of allocated intangible assets
-14.9
-16.6
Profit from recurring operations
207.8
7.3%
172.0
6.8%
Other operating income and expenses
-30.7
-10.0
Operating profit
177.1
6.2%
162.1
6.4%
Cost of net financial debt
-6.4
-4.8
Other financial income and expenses
-6.1
0.9
Tax expense
-42.5
-43.2
Net profit from associates
-0.1
0.1
Net profit
122.0
4.3%
115.1
4.5%
Attributable to the Group
112.5
4.0%
112.3
4.4%
Non-controlling interests
9.5
2.8
Weighted average number of shares in issue excl. treasury shares
(m)
20.20
20.22
Basic earnings per share (€)
5.57
5.55
Sopra Steria: Change in net financial debt (€m) – H1 2023
H1 2023 H1 2022
Operating profit on business activity
251.1
203.1
Depreciation, amortisation and provisions (excl. allocated
intangible assets)
67.0
62.1
EBITDA
318.1
265.3
Non-cash items
1.6
-1.8
Tax paid
-46.8
-44.5
Change in operating working capital requirement
-14.0
-51.4
Reorganisation and restructuring costs
-29.9
0.1
Net cash flow from operating activities
229.0
167.7
Lease payments
-46.2
-45.8
Change relating to investing activities
-47.2
-45.0
Net interest
-5.8
-0.6
Additional contributions related to defined-benefit pension plans
-6.9
-10.2
Free cash flow
122.9
66.3
Impact of changes in scope
-428.6
-4.2
Financial investments
-6.7
-4.2
Dividends paid
-87.5
-71.6
Dividends received from equity-accounted companies
2.7
2.7
Purchase and sale of treasury shares
-3.1
-5.4
Impact of changes in foreign exchange rates
-6.6
-1.4
Change in net financial debt
-406.9
-17.8
Net financial debt at beginning of period
152.0
327.1
Net financial debt at end of period
558.9
344.9
Sopra Steria: Simplified balance sheet (€m) – 30/06/2023
6/30/2023 12/31/2022 Goodwill
2,316.0
1,943.9
Allocated intangible assets
93.9
108.3
Other fixed assets
274.1
261.3
Right-of-use assets
387.6
359.9
Equity-accounted investments
179.2
183.5
Fixed assets
3,250.8
2,857.0
Net deferred tax
71.0
58.5
Trade accounts receivable (net)
1,383.5
1,104.2
Other assets and liabilities
-1,612.6
-1,347.6
Working capital requirement (WCR)
-229.0
-243.4
Assets + WCR
3,092.8
2,672.1
Equity
1,844.8
1,893.4
Pensions – Post-employment benefits
164.5
137.7
Provisions for contingencies and losses
97.2
98.5
Lease liabilities
427.4
390.5
Net financial debt
558.9
152.0
Capital invested
3,092.8
2,672.1
Sopra Steria: Workforce breakdown – 30/06/2023
6/30/2023 6/30/2022 France
22,363
20,106
United Kingdom
7,693
7,208
Other Europe
13,943
11,944
Rest of the World
555
467
X-Shore
9,400
8,982
Total
53,954
48,707
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726298228/en/
Investor Relations Olivier Psaume
olivier.psaume@soprasteria.com +33 (0)1 40 67 68 16
Press Relations Caroline Simon (Image 7)
caroline.simon@image7.fr +33 (0)1 53 70 74 65
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