Consolidated income statement at December 31, 2012
Main events during the 2012 financial year
2012 unfolded within a challenging and volatile environment both in terms of volumes and prices. In this context, the Group demonstrated commercial resilience with organic revenue growth at the top end of the range for the leading sector players in Europe and above that of the European IT services sector as a whole which declined in 2012.
The financial year saw some major commercial successes with a series of promising new client wins. For example, significant contract wins included the Ple Emploi, Canal+, JC Decaux, the UK Ministry of Defence, Whitbread, Cooperative Banking Group, Boots, the Norwegian Labor and Social Welfare Ministry, the Swedish Statistics Agency, EON, Volkswagen, etc.
During the 2012 financial year, the Group also revisited its strategy to hone its competitive positioning and target the Transformation market segment more precisely, aimed at affirming itself as the Trusted Transformation Partner for major European clients.
The offer portfolio was significantly reorganized with the launch of new offerings tailored to the expectations of customers in a rapidly-changing market: Workplace On Command (a cloud-hosted workplace solution), RightApps Management (an applications portfolio transformation and optimization solution), RightSecurity Services (outsourced solution for end-to-end IT security management), and SAP RightTesting (an industrial testing solution in an SAP environment).
The Group also reinforced the quality of its production processes by obtaining CMMI Level 5 certification for Steria India and by becoming the largest IT services provider to obtain level 3 TMMi certification for its RightTesting methodology.
To adapt to the difficult environment which existed in 2012, the Group launched an operational cost-savings plan (“3 P” plan) in the second half whose deployment was in line with the targeted €18 million to €20 million of operational cost savings.
In November 2012, within the framework of the execution of this plan, Steria divested its Spanish operations. For the establishment of the 2012 financial statements, the subsidiary was recognized as a discontinued operation pursuant to IFRS 5. The impact on the Group’s operating margin was positive to the tune of some 30 basis points for the 2012 financial year.
Operational performance for the 2012 financial year
The Group’s revenue growth was 4.6% and 2.4% like-for-like. The Utilities/Telco-Media/Transport (+11.4%), Insurance (+3.7%) and Public (+1.4%) sectors made a positive contribution to growth by posting a solid performance within the context of the 2012 financial year. For its part, the Banking sector saw a 3.9% decline despite a slight improvement during the second half. In terms of the business lines, Business Process Outsourcing grew by 9.9% and Infrastructure Management by 7.1% while application services (Consulting, Systems Integration, Applications Maintenance and Testing) recorded a decline of 1.5%.
Within an uncertain environment, the fourth quarter proved relatively resilient with organic growth of +0.7% (equivalent to that of the second quarter) and a solid level of new orders entry driven, in particular, by the cyclical applications services activities (+10.3%). At December 31, 2012, the book to bill ratio stood at an overall 1.03 (1.04 at end 2011) and at 1.08 for the application services activities.
Over the financial year as a whole, the Group’s operating margin2 amounted to €117.4 million corresponding to an operating margin rate of 6.4% , i.e. above the 6% minimum indicated at the time of the 2012 first-half results announcement. The decline in the operating margin rate relative to 2011 is mostly explained by a challenging pricing environment and an increase in the average intercontract level in a volatile market.
In the United Kingdom
, revenue increased by 1.0% like-for-like, supported by growth in the Public (+5.5%) and Utilities/Telco-Media/Transport (+2.9%) sectors. The Finance sector posted a negative performance over the period, partly due to the decline in activity on some existing contracts. At December 31, 2012, the book to bill ratio stood at 0.81 (0.97 at December 31, 2011).
, for the third year running, activity saw strong growth, markedly higher than that of the market. Organic growth for the year stood at 6.7% benefiting, in particular, from a good performance in the Finance (+11.5%) and Utilities/Telco-Media/Transport (+16.5%) sectors, the latter being helped by a significant level of activity on the EcoTaxe contract. New order entry increased by 14.4% over the year and the book to bill ratio amounted to 1.2 at December 31, 2012.
, the 2012 financial year closed with organic growth of 1.4%. There was a very significant improvement during the second half leading to a growth of 7.0% over this six-month period (-4.2% over the first half). The Banking sector recorded a solid trend over the year (+3.1%) thanks to a turnaround during the second half and the Utilities/Telco-Media/Transport posted robust growth (+5.6% over the year). Despite a return to growth during the fourth quarter, the Public sector was down over the financial year. At December 31, 2012, the book to bill ratio stood at 1.1.
In the Other Europe region
, the 1.4% like-for-like revenue decline was explained by the 3.5% downturn in Scandinavia while Belgium/Luxembourg and Switzerland saw growth of 3.6% and 2.6% respectively. New orders entry progressed by 10.3% for the region thanks to a very good fourth quarter in Scandinavia, leading to a book to bill ratio of 1.1 at December 31, 2012.
2012 net income
The operating margin stood at €117.4 million while other operating income and expenses amounted to a €38.3 million charge, down by €3 million despite a €30 million increase in restructuring charges linked to the execution of the “3 P” plan whose charge for the year amounted to €14 million.
Net financial expense stood at €7.9 million (versus an expense of €6.9 million in 2011) due to the full year impact of the renegotiation of the bank credit facilities in July 2011.
The net loss from discontinued operations of €14.9 million takes into account the net result over ten months (a €4.1 million net loss) of the Spanish subsidiary which was sold in November 2012 and the capital loss recognized on the disposal (€10.8 million non cash).
Attributable net income for the financial year stood at €35.6 million, €19.4 million lower than its 2011 level. Half of this change is explained by the decline in the result from continuing operations and the balance by the non-current loss from discontinued operations.
Financial situation at the end of the 2012 financial year
Despite the reduction in EBITDA linked to the decline in operating margin, compared to 2011, operating free cash flow improved by €7.2 million over the year to €29.5 million thanks, notably, to the reduction in consumption linked to the change in working capital requirement.
At December 31, 2012, the Group’s net financial debt stood at €143 million including a negative currency impact of €7 million and a negative perimeter effect of €6 million linked to the consolidation of the NHS SBS entity. Adjusted for these two effects, net financial debt was only slightly higher relative to December 31, 2011 despite the major restructuring efforts over the financial year.
At the end of the 2012 financial year, the General Management, the Groupe Steria SCA Supervisory Board and the Soderi Board of Directors propose a payout identical to that of the previous year (i.e. 20%) leading to a dividend of €0.20 per share (€0.35 in respect of 2011).
For the 2013 financial year, the Group is targeting like-for-like growth in revenue.
Furthermore, the progress on the “3 P” plan enables the Group to confirm its objective of a progression in the operating margin rate relative to that of the 2012 financial year.
Lastly, the Group expects net cash flow generation (after dividends) to be positive enabling a reduction in financial debt.
Next publication: first quarter 2013 revenue on Friday April 26, 2013 before the market opening
Steria is listed for trading on NYSE Euronext Paris, Eurolist (Section B)
ISIN Code: FR0000072910, Bloomberg Code: RIA FP, Reuters Code: TERI.PA
General Indices: SBF 120, NEXT 150
CAC MID&SMALL, CAC MID 60, CAC Soft&CS, CAC Technology, Euronext FAS IAS
For further information, visit our website: http://www.steria.com
About Steria: www.steria.com
Steria delivers IT enabled business services and is the Trusted Transformation Partner for private and public sector organisations across the globe. By combining in depth understanding of our clients' businesses with expertise in IT and business process outsourcing, we take on our clients' challenges and develop innovative solutions to address them efficiently and profitably. Through our highly collaborative consulting style, we work with our clients to transform their business, enabling them to focus on what they do best. Our 20,000 people, working across 16 countries, support the systems, services and processes that make today's world turn, touching the lives of millions around the globe each day. Founded in 1969, Steria has offices in Europe, India, North Africa and SE Asia and 2012 revenue of €1.83 billion. 21%(*) of Steria's capital is owned by its employees. Headquartered in Paris, Steria is listed on the Euronext Paris market.
(*): including the Employees Shares Trust in the UK
1Items shown have been fully audited. Specific audit verifications underway.
2Before amortization of intangible assets arising from business combinations. The operating margin is the Group’s key indicator. It is defined as the difference between revenue and operating expenses, the latter being equal to the total cost of services rendered (costs necessary for the implementation of projects), sales costs and general and administrative expenses.
3After taking into account IFRS 5 – Non-current assets classified as held for sale and discontinued operations in respect of the disposal of the Spanish operations.
4Operating income includes restructuring and reorganization costs, capital gains or losses on disposals, the estimated fair value of share-based compensation, the impact of goodwill impairment tests and actuarial gains and losses recognized during the accounting (corridor method) of post-employment benefits.
5Attributable net income, after tax, restated for other operating income and expenses and the amortization of intangible assets.
6Relative to 7.4% reported in 2011 and 7.8% after the application of IFRS 5 relating to discontinued operations.
7Subject to shareholder approval at the General Shareholders’ Meeting on Thursday May 30, 2013. The dividend will be detached on Friday June 7, 2013 and paid on Thursday July 4, 2013. Between June 7 and June 21, 2013, shareholders will be able to opt for payment in either cash or shares.
To view the press release with tables, please click on the link below:
Sachdev Ramakrishna, Director Marketing, Steria India Limited, +91 9871715438