Sopra Steria Group Un/Adr

Good morning, ladies and gentlemen, and welcome to this conference call on Sopra Steria's Q3 2026 earnings. Throughout the first part of the presentation, participants will be on listening-only mode, and during the Q&A session, participants can ask a question by dialing the hash key and then 5 on their telephone keypad. I'll now hand the floor to Rajesh Krishnamurthy, CEO. Over to you. Good morning, ladies and gentlemen. and welcome to this conference call on Sopra Steria's Q3 2026 earnings. I'm here with Etienne du Vignaux, Group CFO, with whom I'll be leading this session. I'll start with a few general comments on the performance over the quarter, then we will detail the figures for our four major reporting units. We'll finish with a Q&A session. Q3 2026 revenue came to 1,420.1 million representing growth of 7.9% when compared with Q3 in the previous year. At constant scope and exchange rates growth in revenue was 4.3% compared with 3% in the first half of 2026. It should be noted that this quarter had an additional working day when compared with Q3 2025. As planned, the conclusion of the SFT program had a non-recurring negative impact of 2.1 points on the growth over the quarter. Excluding this impact, underlying organic growth in the group's activities stood at 6.4% compared with 4.9% in the first half. Q3 2026 thus confirms ongoing solid growth momentum in our activities in all our reporting units. Vertical markets like defense, security, and space, which grew 13%, aeronautics, which also grew 13%, and also cybersecurity, which was up 18%, and consulting, which was up 7%, broadly drove the growth over the quarter. This growth highlights the relevance of our positioning and confirms the importance of our customers' digital transformation needs in the areas of agentic AI, digital sovereignty, cybersecurity, and operational efficiency. Given the growth posted in the third quarter and our outlook for the fourth quarter, we are raising our full-year organic revenue growth target We are now targeting organic growth in revenue between 2.5% and 3% compared with 2% and plus 2.5% previously. Targets for operating margin on business activity and free cash flow are confirmed. I'd like to suggest that we now move on to the detailed analysis of our performance by reporting unit and I'll hand the floor to Etienne du Vignaux. Good morning, ladies and gentlemen. Let's start with France. Revenue stood at €638.4 million. Organic growth was sustained at plus 6.1%. With the exception of energy and telcos, all the reporting units' vertical markets posted growth. The most buoyant markets were the public sector, defense, security, and space, transport, financial services, and aeronautics. I would stress that the public sector, which represents 15% of the France reporting unit, experience strong growth. It's got a strong exposition to state sectors, and it is also driven by strong transformation needs. The UK now, revenues stood at 232.3 million euros, organic growth was 8.2%. All the activities in the reporting unit, NHS, Aeronautics, Defense, Security, NextGen, BPS, New Technologies, they all grew. There was a favorable basis for comparison. The growth in Q3 2025 was negative, strongly negative at 9.5%. So this comparison basis will be reversed during the last quarter of the year, and we're expecting the last quarter to be down. But the second half of the year should be relatively stable when compared with the second half of 2025. Now Europe. Excluding SFT, revenues stood at €455.4 million. The reporting unit posted organic growth of plus 5.7%. Scandinavia, Italy, Switzerland, Spain remained buoyant. Belgium contracted slightly. The Netherlands stabilized, and Germany returned to growth. As forecasted, SFT posted revenue of €6.6 million, and as a reminder it was 32.7 million euros in the third quarter of 2025. In total, including SFT, Europe generated stable revenues of 462.1 million euros. Now for solutions. The reporting unit posted revenues of 87.3 million euros representing organic growth of 7.5%. The Human Resources Solutions business which represents 65% of the reporting unit's activity was up 6.6% and the real estate business continued to post sustained growth. So our economic and geopolitical environment remains challenging and it is marked by a great deal of uncertainty. Nonetheless, we have solid assets. A commercial strategy based on 100 strategic customers, strong credibility when it comes to digital sovereignty challenges, significant exposure to strategic and critical markets like defense, space, aeronautics, public sector, and financial services, an entrepreneurial model which fosters agility, and a primarily outcome-based commitment model. Q3 2026 was buoyant and our growth was solid. While the growth benefited from a positive calendar effect and a favorable basis for comparison, growth was above all driven by our positioning and our mix in terms of verticals. We are confident for the full year and we are raising our organic revenue target to between 2.5% and 3% At the same time, we're confirming our margin target, so above 9.5%, and our free cash flow target for around 5% of revenue. I'd like to suggest that we open the Q&A session now. Thank you. If you'd like to ask a question, please dial the hash key 5 on your telephone keypad. Please limit yourself to two or three questions max. The next question comes from Thomas Poutrieux from BNP Paribas. Over to you. Good morning. Thanks for taking my question. I've got a few. So let's start with Aero, where growth was aligned in Q3 with Q2 despite the basis for comparison. I think it was a bit tougher with Airbus. How do you explain this? Is the vertical growing quicker than what was planned or are you winning new positions? Second question, could you just drill down on the UK? Where do you stand when it comes to winning new contracts versus your initial expectations? And what's your level of confidence when it comes to an acceleration in this business unit next year? And then the third question, could we Talk about cash. Any changes in DSO this year? Have you seen an impact in the public sector? And then obviously an impact of French debt potentially. Thank you for your questions. So Aeroline is experiencing strong demand. So we're aligned with what we've experienced in previous quarters. Our customers are developing. We've won new projects. So we feel that there's good momentum linked to transformation projects with our customers. For the UK, we continue. Obviously, you've understood that Q3 was very strong, but there's a favorable basis for comparison with regards to last year. We'll see this reversed in Q4, but this business is stable despite the couple of contrasts The contracts that we've lost, but we are winning other contracts. But for next year, we're not ready to talk about what we're expecting just yet. On cash, so at the end of September, obviously we measure the indicator DSO. We're talking about the same measure as last year. Yes, the increase in interest rates, That does mean that certain customers are a bit more cautious when it comes to their balance sheet, but at the end of September, we're fully aligned with the trajectory that we set for ourselves, and we expect it to hit the 5% free cash flow, 5% of revenues.

Thank you. The next question comes from Laurendor at Kepler Chevreux.

Over to you. Good morning, everyone. I've got three questions. The first one, performance in cyber. Could we just focus on your positioning? Think about the headcount that you've hit and then the outlook for the next 12 months. Second question on rest of Europe. We've seen that all the geographical regions are in operating order. Where do we stand with regards to Belgium? We've seen that it's going better. These are the regions that have been struggling compared to others. And then for Q4, basically the feeling is that you've got a swing over 15 points in the UK. and the other regions remain similar to Q3. That's how you're going to hit the guidance for the year. Is that your logic? So for cyber, 200 million euros. So obviously it's got an extremely good outlook but perhaps Rajesh could talk about this. Yes, we see that our customers, they need to Thank you very much. Now for Belgium. For Belgium, what we can say is that over nine months, Belgium was basically flat, slightly contracting in Q3, but if we take a step back, we can see that we're flat over nine months. We're expecting a return to growth. Headcount has been stabilized, so we don't have the levels of attrition that we've experienced in previous quarters, and now we're ready to move forward. In the Netherlands, very slight growth, 0.X%, but we should expect a change in Q4. Now for the guidance for Q4, yeah, your calculations are right. In the UK, it's what you said. In terms of the swing, the basis for comparison has a significant impact in this region, so flat or slight growth in the UK. So this means that when we restate the UK and the SFT, we're expecting growth at about similar levels, restated for the UK and for SFT. As a reminder, if you'd like to ask a question, please dial hash 5 on your telephone keypad.