GROUPE STERIA : Interim results 2009: Revenue and operating margin rate hold up well

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Like-for-like revenue in H1 2009 was down 2.3% on the same period of 2008. The operating margin1 in H1 2009 was 6.9%, close to the previous year's level of 7.1%. Very good cash management brought a ¤100m reduction in the Group's financial debt compared with 30 June 2008. New orders were up 5.8% in Q2 2009 and the ratio of new orders to revenue stood at 1.12 at 30 June 2009.

On 27 August 2009, the supervisory board of Group Steria SCA examined the consolidated accounts submitted by General Management.

H1 2009 consolidated results:

H1   2008 2009 Organic growth
At constant exchange rates
Revenue ¤m 878.7 805.4 -2.3%
Operating margin1
as % of revenue
¤m % 62.2
7.1%
55.8
6.9%
Operating income2 ¤m 53.3 43.4
Attributable net income ¤m 27.0 15.9
Underlying attributable net income3 ¤m 33.0 28.8

Revenue

First-half consolidated revenue 2009

(¤ million) H1 2008 H1 2009 Growth
Revenue 878.7 805.4 -8.3%
Change in consolidation scope -
Change due to currency effect -54.5
Pro forma revenue 824.2 805.4 -2.3%


First-half 2009 revenue by geographic zone

(¤ million) H1 2008* H1 2009 Organic growth
UK 327.3 320.3 -2.1%
France 261.3 250.4 -4.2%
Germany 120.4 111.8 -7.1%
Other Europe 115.2 122.9 6.6%
Total 824.2 805.4 -2.3%


First-half 2009 revenue by business line

(¤ million) H1 2008* H1 2009 Organic growth
Managed Services and Business Process Outsourcing 318.7 291.2 -8.6%
Consulting and Systems Integration 505.5 514.3 1.7%

Second-quarter 2009 revenue by geographic zone

(¤ million) Q2 2008* Q2 2009 Organic growth
UK 165.6 164.7 -0.5%
France 131.4 122.4 -6.8%
Germany 61.9 56.8 -8.2%
Other Europe 61.1 64.9 6.2%
Total 420.0 408.9 -2.6%

* Like-for-like sales (base 2009)

Q2 2009 activity

Despite an uncertain environment, Group activity proved resilient in Q2 2009. Consolidated revenue was ¤408.9m, down by just 2.6% on a like-for-like basis compared with Q2 2008 despite a negative calendar effect, with two fewer days of production in France and three fewer in Germany and Scandinavia.

After a slight decline in Q1, new orders rose 5.8% at constant exchange rates over Q2 2009, resulting in a total increase of 1.0% year-on-year in H1 2009.

At 30 June 2009, the ratio of new orders to consolidated revenue reached 1.12, up from 1.08 a year earlier. The ratio was also above 1 for Consulting and Systems Integration and stood at 1.10.

The pipeline remains well-stocked, representing 2.1x projected annual revenue.

In the United Kingdom, excluding the currency effect Q2 revenue was more or less stable on 2008 (-0.5%). The sales drive continued, resulting in a steady inflow of new orders, up 14% over H1 2009. At 30 June 2009, the ratio of new orders to revenue was 1.20. At constant exchange rates, the Group is expecting revenue to start growing again in H2 2009. In France, organic growth was negative at -6.8% in Q2 2009. The new organisation introduced at the beginning of 2009 and numerous subsequent measures have produced highly encouraging initial results. These include a reduction in the intercontract rate - which is now back towards the level of a year ago - and, shortly after the end of H1, SFR's decision to award the company a global IT outsourcing contract worth around ¤100 million. This is the biggest deal ever signed by Steria France. At 30 June 2009, the ratio of new orders to consolidated revenue stood at 1.04. Business in Germany, which is focused on the more cyclical activities of Consulting and Systems Integration, proved much more robust than the profession as a whole with a quarterly decline limited to -8.2% at constant exchange rates. At 30 June 2009, the ratio of new orders to consolidated revenue stood at 1.20. In the Other Europe zone, organic growth of 6.2% in Q2 was driven by the strong performance in Scandinavia (+20.6%). In contrast, the situation remains difficult in Spain due to a particularly severe economic context.

First-half 2009 results

The operating margin1 held up particularly well over H1 2009. At 6.9%, it was very close to the figure of 7.1% recorded in H1 2008.

Underpinning this resilience were additional cost synergies from the integration of Xansa (+¤9.1m4 in H1 2009), extensive cost-cutting programmes in the geographic zones and the acceleration of various cross-company projects launched at Group level (industrialisation, centralised procurement, shared information systems, support services, etc.).

Net restructuring costs remained modest in H1 2009 at ¤4.2m, and should be limited to around 1% of annual revenue in 2009.

Financial result of -¤12.9m reflects a substantial reduction in net borrowing costs (-¤7.3m versus -¤11.9m).

The net income at 30 June 2009 factors in a decision, in light of the severity of the Spanish economic downturn, to write down an impairment charge of ¤4.9m, most of the Spanish subsidiary's goodwill, and to record a non-recurrent tax charge of ¤2.5m, corresponding to the derecognition of our deferred tax assets in Spain.

Financial position at the end of H1 2009

Cash flow generation in H1 2009 was particularly strong compared to H1 2008. Operating free cash flow5 improved strongly to reach ¤27.1m (compared to -¤28.7m in H1 2008), thanks to effective management of the working capital requirement and a strict control of capex.

At ¤239.9m, net financial debt was more or less stable on the level of 31 December 2008 and was down ¤100m from 30 June 2008.

The financing structure of the Group is healthy and sound:

Cash and cash equivalents of ¤146m Additional financing facilities available until July 2012 of ¤240m Net financial debt limited to 39% of shareholders' equity Bank covenants very comfortably respected

Outlook

In what is likely to remain a fragile environment in H2 2009, the Group is expecting a performance by its like-for-like revenue and operating margin rate similar to that of H1 2009.

Next publication: Q3 2009 revenue
Thursday 12 November 2009 after close of market.

Appendices: consolidated income statement, consolidated balance sheet, simplified cash flow statement and operating margin1 by geographic zone at 30 June 2009

Video interview with François Enaud, Chairman and CEO of Groupe Steria SCA, on www.steria.com and www.steria.fr

Steria is listed on Euronext Paris, Eurolist (Compartiment B)
ISIN code: FR0000072910, Bloomberg code: RIA FP, Reuters code: TERI.PA

CAC MID&SMALL 190, CAC MID 100, CAC Soft&CS, CAC Technology
SBF 120 general index, SBF 250, SBF 80, IT CAC, NEXT 150


For more information, please visit our website: http://www.steria.com

Press Relations:
Isabelle Grange
Tel: +33 1 34 88 64 44 / +33 6 15 15 27 92
Isabelle.grange@steria.com
Investor Relations:
Olivier Psaume
Tel: +33 1 34 88 55 60 / +33 6 17 64 29 39
olivier.psaume@steria.com

Consolidated Income Statement at 30 June 2009

¤ thousand 30/06/2009 30/06/2008
Revenue 805,417 878,692
Cost of goods sold and outsourcing (108,990) (141,281)
Payroll (475,821) (498,178)
External costs (149,839) (145,334)
Tax and duties (12,176) (19,108)
Inventory change 37 (86)
Other operating income/expenditure 12,382 5,671
Net depreciation and amortisation (18,861) (21,618)
Net provisions 1,779 797
Depreciation of current assets (424) (6)
Operating margin (*) 53,504 59,549
Operating profitability 6.6% 6.8%
Other operating income and expenses (10,051) (6,296)
Operating income 43,453 53,253
Net cost of financial debt (7,255) (11,859)
Other financial income and expenses (5,597) (1,244)
Financial income (12,852) (13,103)
Tax (14,445) (12,673)
Group share of profits from companies accounted for by the equity method (196) (1,228)
Net profit from continuing activities 15,960 26,249
Results from discontinued activities or those being divested   721
Total net profit 15,960 26,970
 
Attributable net profit 15,883 27,030
Minority interests 77 (60)
 
Fully diluted underlying4 earnings per share
(euros)
0.91 1.05

(*) After amortisation of client relationships recognised in the acquisition of Xansa representing ¤2,268 thousand euros at 30 June 2009 and ¤2,615K euros at 30 June 2008

Consolidated Balance Sheet at 30 June 2009

¤ thousand 30/06/2009 31/12/2008 30/06/2008
Goodwill 730,528 672,015 783,558
Intangible fixed assets 67,193 62,050 72,472
Tangible fixed assets 79,832 85,453 95,101
Shares in affiliated companies 5,387 5,222 8,386
Available-for-sale assets 1,825 2,203 1,971
Other financial assets 4,343 12,466 11,868
Pension commitments - Assets 19,073 3,440 0
Deferred tax assets 9,821 15,310 22,783
Other non-current assets 2,625 2,189 2,326
Non-current assets 920,627 860,348 998,465
Inventory 8,159 6,201 3,384
Net trade receivables 264,997 281,284 307,830
Client receivables 213,423 190,434 221,142
Other current assets 23,408 26,186 32,162
Non-current assets under one year 2,829 2,838 2,010
Current tax assets 19,884 15,837 20,540
Advance payments 40,715 27,885 37,123
Cash and cash equivalents 145,945 141,138 97,798
Current assets 719,360 691,803 721,990
Non-current assets held for sale      
Total assets 1,639,987 1,552,151 1,720,455

Group shareholders' equity 607,540 544,960 625,890
Minority interests 570 555 877
Total shareholders' equity 608,110 545,515 626,767
Loans and financial debt (> 1 year) 330,280 325,837 382,300
Pension commitments - Liability 32,858 39,898 57,982
Provisions for liabilities and charges (> 1 year) 15,045 13,688 17,646
Deferred tax liabilities 5,697 14,293 10,138
Other non-current liabilities 21,088 18,146 5,326
Non-current liabilities 403,968 411,862 473,392
Loans and financial debt (< 1 year) 55,569 50,583 55,427
Provisions for liabilities and charges (< 1 year) 18,075 19,216 17,704
Trade receivables and related accounts payable 151,927 134,493 144,972
Amounts owed to clients and advances received 112,720 113,702 110,116
Current tax liabilities 36,935 31,366 37,542
Other current liabilities 252,683 245,414 254,535
Current liabilities 627,809 594,774 620,296
Non-current liabilities held for sale      
Total liabilities 1,639,987 1,552,151 1,720,455

Simplified Cash Flow Statement at 30 June 2009

¤ million 30/06/09 30/06/08
Cash flow 60.5 67.1
Tax -9.9 -4.4
Change in WCR (cash element) -9.0 -69.6
Operating cash flow 41.6 -6.9
Net capex -9.9 -15.0
Restructuring -4.6 -6.8
Operating free cash flow 27.1 -28.7
Dividends6 -8.8 -1.0
Net financial investment 3.9 3.2
Capital increase 0.0 0.0
Change in consolidation scope 0.0 -0.4
Additional contribution to pension fund -22.8 -8.8
Other -4.0 2.7
Free cash flow -4.6 -33.0

Operating margin7 in H1 2009
by geographic zone

¤ million H1 2008* H1 2009
UK 9.7% 11.2%
France 7.3% 6.6%
Germany 8.5% 5.7%
Other Europe 4.5% 4.6%
Group costs -1.0% -1.1%
Group 7.1% 6.9%

1 Before amortisation of intangible assets linked to business combinations. The operating margin is the Group's key indicator. It is defined as the difference between revenue and operating expenses, the latter amounting to the total cost of services provided (expenses needed to carry out projects), marketing costs and general and administrative costs.
2 Operating income includes restructuring costs, capital gains on disposal and costs incurred on share-based payments made to employees.
3 Attributable net profit restated - after tax - for other operating income and expenses, amortisation of intangible assets and unrecognised deferred tax assets.
4 At the exchange rate of 26 July 2007 (¤/£ 0.67) when the acquisition of Xansa was announced. Non audited figure.
5 Cash flow minus change in working capital requirement, net capex, disposals and restructuring costs.
6 Of which coupon on the hybrid convertible bond: ¤8.8m at 30 June 2009 and ¤1m at 30 June 2008
7 Before amortisation of intangible assets linked to business combinations

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