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Wednesday 29 July 2020

Sopra Steria H120: JVs lift UK performance

Sopra Steria logoSopra Steria describes a “resilient” H120 to the end of June. It had guided in April to a decline of between 2% and 6%. The end result was an organic decline of 2.6% to €2.2b (with Q2, understandably faring far worse, with a decline of 8.4%). A widespread decline in new business and in additional business with existing clients is highlighted, with the aeronautics sector, representing 10% of global revenues, suffering more than most sectors. The operating margin held up well, standing at 6.1% compared to 6.8% in the comparable period in 2019. Notably, though staff costs increased from €1.3b to €1.4b, operating expenses decreased from €636m to €558m, presumably due to things like a drop in travel and office expenses. In addition, cost cutting programmes were launched in April.

In the UK, the two Joint Ventures – Shared Services Connect Limited (SSCL) and NHS Shared Business Services (NHS SBS) – continued to positively impact the results during the pandemic. The organic revenue decline of -4.7% (to €338.5m) would have been deeper had it not been for the 4.9% organic growth in revenue for SSCL and NHS SBS combined. The rest of the public sector, as well as defence and security, is described as having been “fairly resilient”. Dragging down performance was the private sector as well as the impact of UK Government suspending the visa service, provided by Sopra Steria for the Home Office, from the end of March to the end of May. Unsurprisingly, the UK H1 decline was entirely attributable to Q2 performance; Q1 growth of 1.9% was followed by a Q2 organic decline of 11.3%.

Across the rest of the business, organic growth of +6.6% in ‘Other Europe’ really stands out. Sopra Steria points to strong growth in Scandinavia (up 9.4%), as well as the development of business related to Sopra Financial Technology’s operation of the Sparda banks’ information system in Germany – the Scandinavian performance, we assume, made possible due to Sweden’s decision not to impose a strict lockdown. Other geographies experienced similar declines to the UK. Sopra Steria Banking was the worst performer across the Group with an organic decline if 10.9%.

It won’t come as any surprise that the Group’s forecasts of an organic decline in revenues of 2-4% or the full year is caveated with the statement that the overall environment is highly uncertain. In the UK, we are comforted by the high proportion of revenues coming from the joint ventures and from the public sector more generally. In addition, the Group will now be far more prepared for a second wave in terms of adjusting its operations for a COVID-impacted environment.

Posted by: Georgina O'Toole

Tags: results   itservices  

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