- Revenue: EUR2,949.4 million, up 3.8% organically.
- Operating Margin on Business Activity: 9.7%, a 0.9 point improvement from H1 2023.
- Net Profit from Continuing Operations: EUR169.3 million, up 50.5%.
- Net Margin Rate: 5.7% of revenue, compared to 4% in H1 2023.
- Free Cash Flow: EUR44 million.
- France Revenue: EUR1,251.3 million, organic growth of -1.6%.
- UK Revenue: EUR487.3 million, organic growth of 3.1%.
- Europe Revenue: EUR1,050.5 million, organic growth of 1.5%.
- Solutions Revenue: EUR160.3 million, flat organic growth.
- Operating Profit: EUR229.7 million, 7.8% of revenue.
- Cost of Financial Debt: EUR8.8 million.
- Net Profit from Discontinued Operations: -EUR46 million.
- Tax Rate: 15.7%, expected to be around 23% for the full year.
- Net Debt: EUR1,057 million.
- Net Debt to EBITDA Ratio: 1.6 times.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 3.8% compared to H1 2023, indicating solid performance despite external challenges.
- Operating margin on business activity improved to 9.7%, up from 8.8% in H1 2023.
- Net profit from continuing operations attributable to the group rose by 50.5%, reaching EUR169.3 million.
- Successful integration of acquisitions like CS Group and Ordina, contributing positively to the group's performance.
- Strong pipeline in sectors like defense, transport, and public sector, with significant contracts won in cybersecurity and AI.
Negative Points
- Organic growth target for the full year had to be adjusted due to a 'wait-and-see' climate and external factors.
- Aerospace sector facing short-term difficulties, impacting the order book.
- Temporary delay in the ramp-up of a significant contract in the UK, affecting short-term performance.
- Free cash flow stood at EUR44 million, impacted by the postponement of the collection of research tax credits.
- Increased uncertainty in France, with investment decisions being pushed back, leading to lower discretionary spending.
Q & A Highlights
Q: Could you comment on your expectations by region for the second half of the year? Are there regions which should perform better than others?
A: In France, we expect to be flat. In the UK, we anticipate flat or slight negative growth. Europe, which accounts for 36% of our revenue, should see growth driven by Scandinavia, Spain, and Italy. Our solutions segment should see slight growth in the second half.
Q: You mentioned a 5% increase in prices. Are your prices still below your competitors? Are you planning further increases in the short term?
A: We are moving closer to our competitors' pricing. There is still room for maneuver, especially in consulting, systems integration, technological expertise, and cybersecurity. For example, in France, sales prices increased by 5%, while average salaries increased by 4%.
Q: Can you provide more detail on the business momentum by region, particularly in June and the UK election context?
A: June was a turning point, leading us to adjust our annual organic growth target. In France, we expect a recovery in aerospace in the second half, but it hasn't materialized. Defense and transport have good momentum, while public sector and financial services are resilient. Aerospace, energy, and retail are experiencing negative growth.
Q: Regarding Ordina's revenue reclassification, was this anticipated in your initial guidance?
A: The reclassification of Ordina's revenue, amounting to EUR40 million per semester, was anticipated. It has an accretive impact of 0.1 points, not 20 basis points. We accounted for Ordina's revenue last year when we acquired it in October.
Q: Can you provide more details on the impact of the UK elections on SSCL and the private sector pipeline?
A: Lower recruitment volumes were requested by the administration due to the elections, impacting May and June. We expect flat volumes in Q3 and opportunities to arise thereafter. The private sector pipeline is significant, especially in financial services, with good visibility for 2025.
Q: Could you elaborate on the consulting segment's performance and growth prospects outside of France?
A: Consulting saw a 4% decline in H1, with a 1.5% decline in France. Q1 was difficult, but Q2 improved. We expect flat growth for the full year. Beyond France, consulting is performing well in Scandinavia and Germany. We are reassessing our consulting strategy in the UK.
Q: Can you comment on the headcount reduction in banking and the demand environment?
A: The headcount reduction in banking reflects the demand environment. Year-on-year, the headcount change is minus 2%, and quarter-to-quarter, it's minus 6.9%. Organically, the year-to-year change is 0%, and quarter-to-quarter, it's minus 9.5%.
Q: What are the margin drivers and how should we think about margins given weaker top-line growth?
A: We aim for a 10% margin in 2024, which we believe is achievable and not a limit. Margin improvement is driven by project approach, integration of acquired companies, HR management, and cost optimization. Selling banking software will also contribute to margin improvement.
Q: Can you provide an update on the JV with NHS in the UK?
A: There are no significant changes with the NHS JV. Revenue is distributed across many customers, mainly hospital groups. We saw growth in H1 and expect annual growth. We have added new clients to our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
