Sopra Steria: its accounts affected by a charge related to Axway Software

(AOF) – Sopra Steria will record in its 2022 accounts, at the level of its line net income from associated companies, a charge of between 24 and 27 million euros before tax effect. It is linked to the sale of a product by Axway Software, in which it holds 32% of the capital. As part of measures to improve its operational performance, Axway Software has indeed signed an agreement concerning the disposal of a product that is no longer part of the strategy pursued.

From an accounting point of view, the sale will generate in Axway’s financial statements for the 2022 financial year a non-recurring and non-cash charge estimated between 75 and 85 million euros before tax impact.

This event, which has no effect on Sopra Steria’s cash position, is not likely to affect the dividend proposal which will be approved by the Board of Directors for the 2022 financial year.

AOF – LEARN MORE

Key points

– One of the 5 European leaders in digital transformation born from the merger in 2014 of Sopra and Steria;

– Company organized into 4 businesses generating €4.3 billion in revenue: systems consulting and integration (61%), solution publishing (15%), business process services (15%) and infrastructure and cloud (19%);

– European presence, in France (48% of revenues), in the United Kingdom (13%), the other Europe division with strong positions in Germany (31%) and the rest of the world;

– Business model: to be, in Europe, the strategic partner of major administrations, financial and industrial noperators and strategic companies by helping them in their digital transformation and independence;

– Shareholders’ agreement between the founding families Odin and Pasquier and the managers, i.e. 22.3% of the capital and 33.6% of the voting rights, ahead of the employees (4.8% and 7.8%), Pierre Pasquier chairing the 15-member board of directors and Cyril Malargé being general manager;

– Healthy balance sheet with debt reduced to €327m, or 19% of shareholders’ equity and cash of €1.1bn.

Challenges

– Strategy based on a strong positioning in Europe, on the development of solutions (target of 20% of revenues in the publishing and integration of solutions), on consulting (target of 15% of revenues), the integration of medium-term and aiming for medium-term annual revenue growth of between 4% and 6%, an operating margin of 10% and free cash flow of between 5% and 7% of revenue;

– Innovation strategy:

– watch over the technologies and their uses ensured by the Digital Champions, innovation missions given to the project teams, hackathons open to customers and partners, demonstration spaces, codesign / targeted partnerships (startups, universities, research laboratories, large publishers such as Axway and GAFAM, Campus Cyber ​​France) / entry into the capital of start-ups, particularly in cybersecurity;

– Implementation of 2 development platforms, one for the cloud, the other for blockchain, artificial intelligence and machine learning;

– Environmental strategy with the objective of zero net GHG emissions in 2028:

– 3 stages: zero net emissions for direct activities at the end of 2022, for indirect activities (waste, journeys) at the end of 2025 and purchases of goods and services at the end of 2028 / support for customers in their low-carbon transition;

– Benefits of the partnership with OVHCloud on the platform offer in Europe;

– One of the best-positioned players in the promising segments of “cloud computing” (cloud computing) and big data (management of data volumes), as well as in co-transformation projects such as Ecomouv or Transactif and in the cybersecurity;

– Integration of acquisitions: EEGS Design and EVA Group after Sodifrance (making the group the French leader in digital services for insurance and social protection), Cxpartners, SAB and Fidor;

– High visibility with recurring turnover (more than 40%) thanks to partnerships with strategic customers such as public services.

Challenges

– Rumors of interest for Atos;

– Expectation for the second half of a resumption of growth in the British private sector;

– After a strong first quarter, confirmation of 2022 objectives: revenue growth between 5% and 6%, operating margin rate between 8.5% and 9% and net free cash flow of around €250 million;

– Dividend of €3.2.

The lucrative database market

This mature global market is expected to generate more than $40 billion in revenue this year, compared to $22 billion in 2017, according to IDC. Contrary to its initial ambitions, SAP did not succeed in dethroning Oracle. This is mainly due to major developments in this market with the emergence of Amazon Web Services or Google Cloud. Benefiting from a significant competitive advantage as companies’ data hosts, these players have gained significant market share in recent years. However, faced with a growing corporate appetite for high value-added data, traditional players have a card to play.

Maximum staff turnover

Companies in the IT services sector have seen the departure of more than 20% of their workforce in twelve months. This trend is not unusual in the sector, but it is reaching an unprecedented scale, in a context of strong growth and good recruitment dynamics. In addition, employees have new requirements and aspirations. The main criterion is the flexibility of work and the way it is implemented in the company. The American-Indian company Cognizant saw around 35% of its 330,000 engineers leave the company in one year. Capgemini, grouping 32,000 French employees, recently suffered its first strike since 2008, with a demand for a collective increase in remuneration.

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Sopra Steria: its accounts affected by a charge related to Axway Software


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