Sopra Steria Group Un/Adr

Following the presentation, you can ask your questions in writing using the questions tab on the webcast platform. This presentation is translated into English simultaneously and is being recorded. Now I hand the floor to Vincent Paris. Good morning, everybody. Welcome to this 2021 annual results presentation. For this presentation, I will be with Cyrille Mallardet and Etienne Duvigneault. So as you know, we'll have a change in general management. Cyrille will be taking over this role as of the 1st of March. So this means with the presentation we'll be giving the results, 2021 results presentation together. Obviously this year we've managed it together. And then I'll let Cyrille talk about the outlook and guidance for the future. So how is this going to work this morning? I will start with the highlights of 2021. Then Cyril will give the detail of the operating position by reporting unit. Then Etienne will give the financial results. And then Cyril will finish with strategy and outlook. And then at the end, we will be answering all of your questions. So if we summarize our highlights of 2021, I think what we can say is that it was a good year. We've exceeded all of our objectives, all the objectives that we set ourselves a year ago, and this is reflected in a turnover of 4.6828 billion with 9.8% growth and organic growth of 6.4. Operating profit on business activity is 379.2 million, so growth of 8.1% of our revenue. Net profit attributable to the group is 187.7 million, so 4% of revenue. Free cash flow, 264.4 million, compared with 203.5 in 2020. Net financial debt, 327.1 million, so a reduction of 23.1 when compared with the end of 2020. And the UK pension fund deficit of tax, It's $48.8 million compared with $119.9 million as of the 31st of December 2020. Just a couple of words now on other figures that we're actively steering. So this is extra financial criteria. Change in workforce is plus 3.2%. So excluding acquisitions at 2.4%. Attrition rate, which we're monitoring very closely, is 16%. So it's slightly more than in 2020, we're at 13.6, but this is quite exceptional, but it's clearly better than 2019 at 17.7. Feminization of the workforce, 17.6% compared with 12% a year ago. The survey which we conduct every year, Great Place to Work, shows satisfaction as we're up 10 points compared with last year, so 72%. And then with regards to the environment, we are proud, for the fifth year in a row, we're proud to be ranked as A-list by CDB Climate. And then the cumulative reduction in greenhouse gas emissions per employee is 50%, so fully aligned with our targets. So we wanted to make up 85% by 2040, and we're aligned with this objective. So as I was saying, we've generated good performance with regards to all of our key indicators. Growth was 6.4% organic growth, a turnover of 4.68, 2.8 billion, so clearly better than 2019. Clearly, we're on the road to achieve 5 billion euros with the growth that we're generating. Operating margin on business activity, 1.1% up, so 8.1 compared with 7% last year, and then free cash flow, obviously we're satisfied with this, even if we have a favorable contact, Etienne will come back to that, but we've got about 70 million euros that was paid up front, so structurally speaking, we've set the group up with a good level of free cash flow, exceeding 20 million structurally. So against this backdrop, we've had a lot of growth, one market share, some nice victories. I won't go over them all, but I'll just give you three because they seem quite significant given the context and obviously good for the future. So Airbus, number one customer. We suffered a great deal due to the COVID crisis. We were selected for a structural deal, so engineering for all Airbus' entities on a global scale. We are referenced as a preferred partner for engineering with Airbus. And it's important to note that Airbus has obviously suffered a lot in 2022. We have planned to achieve the same turnover as what we achieved in 2019. So good work from the team here and a good, close working relationship with the customer. A second important victory, very important, in the UK, so in the financial domain. We've got Crown Commercial Service, where we were selected as one of the key operators, one of the key stakeholders in charge of managing government debt recovery. So this obviously required certification from the FCA. And this is important because this is going to, we'll see this reflected in our private sector accounts in the quarter four of 2022. But it gives us the possibility of pushing this strategy and the vision that we've had in the UK, so this platform approach in the financial sector. So this first win is important and it gives us the opportunity to win others. A third contract is iPolice, so the police in the Benelux, or in Belgium more specifically, with full overhaul of their IT system, a great deal of innovation, It's a state-of-the-art system, and it's reinforcing our sovereignty, which is obviously a key factor in all European countries. And we're very proud of this victory. So 2021 was very promising with a lot of success, as you've seen. Just a couple of words now on the market. No surprises here. Very active market, very buoyant in all sectors, in all geographies, across all business lines. And this growth is fantastic. driven by powerful drivers, the same, go to cloud, digitalization, optimization of processes with more and more artificial intelligence and data at the heart of everything, both to improve our customers' internal process, their resilience. Obviously, we're at the heart of their transformation. And then the third essential driver is cybersecurity, increasingly so. Good news is, with regards to these three drivers, we're very well positioned. We're talking about areas of expertise, which we've been able to accelerate, which we've been able to reinforce. We're part of the innovation ecosystems, and obviously we are a sovereignty and digital trust stakeholder. A couple of words on HR now. Obviously, this is key. This is an absolute priority. Obviously, the companies that are going to win are the ones who attract and retain the best talent who onboard them onto their project. So our human resources policy is at the heart of companies like us. It's at the heart of our success. So obviously we've been rolling out big efforts and we will continue to do so. We've got structural policies. So obviously we've got HR policy and this includes recruitment policies, training policies, which are obviously at the heart of companies' competitiveness, and we'll carry on heading in this direction, but it is obviously at the heart of our priorities. In terms of figures, you can see a change in headcount of approximately 1,500 employees. 10,636 people were recruited, so we accelerated recruits as of Q2, and the figures demonstrate this. Obviously, the second half was a lot more active as planned, So 6,400 employees that joined the group. And then attrition is under control at 16%. So we've also relaunched growth of subcontracting, so with an additional 650 subcontractors when compared with the end of last year. Now our value ramp-up trajectory. We've been focusing on this topic for quite some time. Now, obviously, consulting, you know that we suffered due to the COVID crisis. Obviously, we've seen a recovery, so 14% growth in activity. Sales price up at 4%. Obviously, we have to carry on reinforcing this, accelerating consulting, which is a major part of our strategy. But 2021 was a good year for us. Offer renewal, obviously, this is ongoing. All the drivers that I've mentioned previously impact this. We have to be proactive to guide our customers and to support them through their transformation. And all of this is reflected in something that we're quite proud of. We're increasingly recognized as a leader on this market. You can see on the right hand side of the slide, you've got all the external recognition. So obviously this is good and we have to carry on heading in this direction. In terms of external growth, obviously it's targeted. Three acquisitions, very targeted. The first, EvaBSSI, so this is a part of cybersecurity in France where we're increasing our firepower. It was important to do so. And then the two others are reinforcing our consultancy activity in Norway. So we've got eggs and labs with business design and then user experience. And then just to finish, just a another important factor. This is not something that started yesterday, but our policy in terms of corporate social responsibility is one of our priorities. We're working in different areas, so social, societal, and environmental. Obviously, social, this includes diversity, equality, and then environment. We've got lots of different targets, and then societal as well. We've got, in each of our countries, we've got initiatives that we're rolling out from us, from our employees, which are becoming increasingly important. And this is reflected, we've got an improvement in our ESG scores with the non-financial rating agencies, as you can see on this slide. So that's what I can say about the highlights. Now I'd like to suggest we hand the floor to Sirin. to talk about the situation in our reporting units. Thank you, Vincent. Good morning, everybody. So operating performance in 2021 improved with turnover, which was at 4.68 billion, with organic growth of 6.4%. Operating profit on business activity at 8.1%. with an improvement of 110 base points. So now let's look at the detail of this, of each operating unit. We'll start with France. France recorded a clear recovery when compared with 2020. This is reflected in organic growth of 5.9%. We saw a recovery in turnover in the second quarter, which accelerated in the second half with double-digit organic growth. The most dynamic verticals were defense. aerospace, telecommunications, and energy. Against this backdrop, recruitment was kick-started again, and the same applies to subcontracting. We've recruited 2,800 people, and we've increased subcontractors by 300. We're in a situation where we can accelerate recruitment in order to respond to address our 2022 targets. In terms We've made a progress of 1.8% in terms of operating margin, which leaves us in a good position for 2022. In the UK, 2021 was a solid year. The turnover was up with organic growth of 13.9%. Our two joint ventures, so NHS, SBS, and SSCL, grew by over 24 percent. Defense and security and government was up 9.4 percent, despite the Q4, which was less favorable as planned, so less volume here with regards to the visa renewal activity. The private sector generated negative growth of approximately 10 percent, but the operational situation clearly improved and we plan a return to growth in the second half of 2022. And this is obviously thanks to the new platform that Vincent has mentioned, so the service platform. So this is clearly an example of the platform business, which we want to develop. So especially for financial services, we want to develop a sustainable positioning here with added value. In terms of the operating unit turnover, And this came with a clear improvement in profitability, which was at 9.1 percent, so up 110 basis points. For other Europe, organic growth was 6 percent. Growth was obviously significant, especially in the Benelux in Scandinavia and in Germany. In these three regions, the growth rate was above 10 percent. with a quarter four which was especially buoyant. Operational performance was 6.8 percent. The countries in this region improved their performance with a margin of 9.1 percent, and SST is still dilutive, but this was planned. Then there's also reinforcement of our consulting activity in Scandinavia, as Vincent has said. thanks to acquisition of eggs and labs. So for a total of 200 consultants specialized in business design and user experience. Now for software banking software, we are clearly aligned with the objectives that we've established. Two priorities, a return to profitability and at the same time, significant investment in digital offers, which will obviously generate future growth. Progressive recovery of results, so operating profit on business activity, this was confirmed. It's at 17.5% compared with 10.5 in 20 and 5 million euros in 2019. So the transformation plan is underway for R&D. This is a plan where in its first year we saw a reduction in costs of 4 million euros And the target of this five-year plan is to reduce our costs by $30 million in 2025 when compared with 2020. 2021 turnover was down 3.3%, and this is due to a highly unfavorable basis for comparison due to the licenses in the second semester. The growth, just as a reminder, was at 43%. Services revenue was up in the second half of 2021. Now the digital launch of the digital office and SaaS, so open banking and customer engaging, is very promising. This generated €6 million of recurring revenue in 2021, and this should double in 2022. Now other solutions saw organic growth of 8.7%. Human resources solutions were up 10%. They saw good momentum in the domain of outsourced payslips. So today we manage over a million payslips every month. Now, property management solutions were up 6.2%, and over the year we've won 12 new customers. we continue our investment in renovating and digitalizing our offers. Operational performance is now above 10%, so this is a first step with regards to the trajectory coming back to traditional margin levels. And now I will hand the floor to Etienne, who will talk about the financial results.

Thank you very much, Cyrille. Good morning, everybody. And to start with, we will look at the consolidated income statement to the group. First, consolidated revenue reaching €4,682.8 million, therefore up 6.4% organically. Then the operating profit on business activity per sector reached €379 million. That is a margin rate of 8.1%, therefore an improvement versus 2020, but also an improvement versus 2019, more than 10 basis points. 2019 was the benchmark year for us before COVID started. Then between this and profit from recurring operations, we have shared base payment expenses. At the end of H1 2021, we had a new incentive plan. The impact on the P&L is only half a year in 2021. The expenses on this line will increase in 2022 due to the full year effect of this plan. And then the new share ownership plan called We Share 2022 that will announce today. I'll come back to this in a minute. Then we have mortgages slightly down 33 million euros and profit from recurring operations is 339 million euros, therefore 7.2% of our total revenues. Other operating income and expenses are going down at 35.9 million euros for the year 2020 had important exceptional expenses connected to the COVID crisis and therefore operating profit was 303 million euros therefore 6.5 percent of our revenues that is up 50 percent versus the previous financial year. Between this operating profit and net profit there are financial expenses that are under control with a bit more than €1 million. That's a total drop in the total cost of net debt. I'll come back to the debt structure of the group in a minute, and our financing conditions. And then €6 million is the decrease for other income and expenses. These are financial expenses that include the interest rates, the pensions in the UK, and also foreign exchange gains, non-cash items. In a minute, we'll look at the tax level, which is going up 33 million euros for the year, in line with the profit that's increased after taking into account the share of net profits from equity-accounted companies. And after deducting minority equities and interest, we have a net profit of which attributable to the group, 187 million, that is up 4%. Then other operating income and expenses in 2020, we have 15.6 million euros of one-off costs coming from the COVID crisis. This is something we can't find in 2021, of course. This being said, restructuring costs reached 35.5 million euros, therefore more or less 0.7, 0.8% on our revenues, therefore an absolute value. The figure has been decreasing and is a proportion of revenues compared to 2020. Then tax. I'd like to say something about the tax level. The effective tax rate is at 38.8% for the year. That is 2021. It includes a one-off effect that we had recorded during H1 2021 due to the fact that we've reassessed deferred tax assets in the UK in spring 2021. The UK government said that the tax rate would go from 19% to 25%. by 2024. If we set aside these one-off effects, we will have a normative rate in 2022, which will reach more or less 27%. On the following page, you have the details of movement in free cash flow between 2020 and 2021. FCF at €264.4 million. We're very happy about this performance, with EBITDA up almost €65 million. The change in working capital was not as good as in 2020, but that's a variance of a variance or change in a change, but it's favorable. And as Vincent said, and as we saw at the end of 2020, the group benefited from very good conditions at the end of the year. The number of net expected payments is estimated at 70 million euros. We had 50 million at the end of 2020, and therefore a slight improvement as far as that is concerned. I know it's always difficult to anticipate in this case, but it shows that there's enough liquidity on the markets, and the cash situation is comfortable for the main clients of ours. Now, this good cash generation is such that we can end fiscal year with a debt that's going to be a lot smaller by 100 million euros, at 327 million euros at the end of the financial year, with, as you can see, a bit more than 100 million euros invested in M&A. and, of course, the recovery of the ordinary dividend after being suspended in 2020. The balance sheet is also very solid, and it's even more solid than before with two ratios, the net financial debt to equity at 19% at the end of the year, and the net financial debt to EBITDA, which is the main ratio that we use if we look at the banking and bond covenants, which is at 0.7 times at the end of 2021. Now, the financing structure of the group is as follows. I'm not going to go through all the lines, but it's quite diversified with no major maturities in the short run, with a lot of ungrown amounts, more than €1 billion, and cash available at more than €200 million at the end of the financial year. That's for the snapshot for 2021. Now, I'd like to say something about three topics in 2022, and I will start with the financing of the group. The group signed two days ago with its banking partners, and we'd like to thank them, by the way, a new mid-term financing contract, which is a revolving credit facility at €1.1 billion. with an initial maturity of five years, that we can extend twice one year, that is a maximum of seven years, just one covenant, which is the leveraged covenant. And there's a novelty for Sopresteria, which is this credit facility has also a system, thanks to which we can either increase or decrease the price of credit on the basis of the GHG reduction objectives. That, of course, will be geared to projects that have impacts on the environment. It will not go to the bankers nor to the group. The second item is that the group is launching a new We Share 2022 employee share ownership program, which is based on a simple principle, which is that it's one free share for each share that's purchased by the employees. for a maximum volume of shares with company contribution, which is 100,000 shares. Therefore, a total of 200,000 shares for this plan, which will be visible on the financial statements in the first half. And then finally, capitalization of some development costs for limited amount. The group is very conservative as far as this is concerned on very well-identified product lines for which we expect strong growth. Cyril mentioned the digital offering for Sopra banking software. The group intends to capitalize this for a modest amount in the light of R&D expenditure. That is, we'll have short investment cycles with a strong commercial dynamic. We've identified our ROI and begin to accelerate our investments in 2022. Thank you very much for your attention. Now I'll hand over to Cyrille again, who's going to be talking about our strategy and our outlook.

Thank you, Etienne. So before we come back to our outlook and the targets that we're setting ourselves, I'd like to reaffirm our business strategy and just inform you what we're implementing to make this project happen. So it's an independent project supported by a reference shareholder And via employee shareholding, as Etienne reminded, it's a project that onboards all of our employees in the company's performance. So this sets out various requirements, one of which is ongoing improvement in our performance. Our strategy is very simple. It means drawing on our differentiation levers, our culture, our digital sovereignty, our close relationship with our customers, and it means producing high-performance offers with high added value, so end-to-end consulting, software, technological expertise, and then obviously our vertical approach as well. We are driving an ambitious project seeking sustained growth with a targeted acquisition So it's an ambitious project, which is European and global for software. So obviously we're staying in the course, and we're activating the different levers that we've established. So we are concentrated on our positioning with our 100 key European accounts. We have a willingness to have an impact. End-to-end approach with our customers accelerating on technology. So I'm talking about cloud artificial intelligence cyber security and we are also Reinforcing our consulting activities. So with higher this value here consultancy to support our major customers transformation project also draws on a production an extra production model, which is highly robust and then as for software I This is a key lever obviously to assume this high added value sustainable positioning with our major customers. Our mid-term ambitions haven't changed. With regards to the group's performance, we're targeting organic growth and turnover between 4 and 6 percent annually, free cash flow between 5 and 7 percent of revenue every year. With regards to profitability, we're targeting operating margin on business activity of approximately 10% in 2024. Finally, we want to play an active and sustained role in sector consolidation so as to reinforce our skills and grow our market share. Furthermore, we want to be ambitious with regards to corporate responsibility. This is at the heart of our business strategy, and we've got three priorities. The environment, boosting female representation with regards to our management and management bodies, and then digital sustainability with regards to our value proposition. With regards to the environment, we've set ourselves the target of net zero emissions in 2028. At the end of 2021, with a cumulative reduction of minus 50%, excluding COVID impacts, we're aligned with this objective. Now, with regards to female representation, we want to hit 30% of the XCOM in 2025. But in addition to this target, we've launched a program to identify, promote high potential women at all levels of management so that we can actually kickstart this approach in the long term. We're also looking at offers sustainability and especially with our consulting offers as well so that we can support our customers with ethical trust challenges and then also responsibility with regards to how we use digital. In 2022, we are fully committed to our transformation and to increasing our performance. We have set ourselves three priorities for the year. So firstly, human resources. Big challenge here is attractiveness, so attracting and retaining talent. In 2022, we want to accelerate recruitment, and we are targeting over 11,000 new hires. We are also working on retaining our employees, so using the tool Great Place to Work, and obviously all the initiatives that result from this. All of management at all levels of the company are clearly committed to this absolute priority, which is human resources. Furthermore, Etienne has mentioned it this year. We are launching the employee shareholding program, obviously to closely involve our employees in the company's growth and performance. The second priority is development of business synergies, so developing differentiating offers. with a special focus this year on the financial services and defense verticals. And then the last priority for this year is developing, strengthening consulting and software. Obviously, these are two key pillars for the group's strategy. Finally, our financial targets for 2022, we are aiming for organic growth in revenue between 5% and 6%. operating margin on business activity between 8.5 and 9% and then free cash flow of approximately 250 million euros. So that is all for the 2021 presentation. I'd like to thank you for listening and now we can move on to any questions.