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1 2006/07 Interim numbers & Outlook SFAF Meeting - 15 November 2006 - Bernard HUVÉ CEO.

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Presentation on theme: "1 2006/07 Interim numbers & Outlook SFAF Meeting - 15 November 2006 - Bernard HUVÉ CEO."— Presentation transcript:

1 1 2006/07 Interim numbers & Outlook SFAF Meeting - 15 November Bernard HUVÉ CEO

2 2 SII at a glance  SII is present on the market of technology consulting - Outsourced R&D, engineering and systems integration & telecoms - Presence in France + subsidiary in Poland  A long-lasting company: 27 years of profitable growth (founded on 1 April 1979)  2005/06 sales: €105.7m (+21.6% of organic growth)  2005/06 operating margin: 10.1%  Financially sound (IFRS) 31/03/06: Net cash €14.4m; Shareholders’ capital €34.2m  employees at 31 October 2006 (+23%) -Of which 80% engineers BAC + 5 -A strong technical culture and client service  Value creation: 2005 ROCE (after tax) = 35.6% -A flexible organisation, decentralised, reactive -Stringent management on a day-to-day basis ID card

3 3 SII ’ s services Outsourced R&D R&D Consulting Studies and implementation Processing, industrialisation 66% Systems Integration, Networks & Telecoms Third party maintenance 33% Development consulting 87% Project management assistance 5% Other and non IT 8% SII at a glance

4 4 Strasbourg Sophia Vélizy Sannois Lille 9 agences 10 offices Toulouse Bordeaux Nantes Tours Le Mans Brest Rennes Caen Lyon Montpellier La Ciotat Aix 0-100Lille, Strasbourg, Warsaw > 100Aix, Rennes, Nantes Sannois, Sophia, Toulouse, Vélizy Geographical breakdown of sales Lannion Niort National geographical footprint – subsidiary in Poland SII at a glance 1 subsidiary

5 5 A loyal clientele with major accounts  Major accounts 95%, SME 2%, Other 3%  20 top clients = 67% of sales -SII’s strategy: quality of service -SII’s positioning: mixed teams – long and recurrent projects dual expertise: IT and functioning -C lient strategy: listings and discounts on sales, pricing pressure, requests for projects with earnings commitment SII at a glance AmadeusEADSGemaltoSagemThales DCNFrance TelecomIBMSiemensThomson TOP 10 CLIENTS

6 6 Banking, Insurance 5.9% Sales breakdown / client sector Industry 58.9% Telecom and Media 15.5% Transport, Tourism, Services 6.8% A few new clients 2006 AIR liquide CSEE TransportPROSODIE NEUF TelecomVALÉO SII at a glance Utilities 2.9% Other services 6.3 % Public services 3.3% Sales by sector of activityIndustry breakdown Electronics 30.3% Automobile 20.0% Aerospace 14.7% Defence 13.2% Digitial TV 9.5% Payment systems 6.7% Other 4.6% Commerce, Retail 0.4% Railways 1.0%

7 7  Gaining strength of fixed-rate services  Commitment to achieving earnings rather than supplying means  Outsourcing  Global contracts vs specific skills Sales by contract Changes in contracts SII at a glance Technical assistance 73.3% Other 7.9% Fixed rate 18.8%

8 8 Summary H1-2006/07 Sustained profitable growth – SII on the stock market 2006/07 Outlook and targets

9 9  Durable growth drivers - Product innovation, a factor of company competitiveness - Sustained growth in outsourcing (Flexibility / Technological complimentarity) - The taking off of built-in IT Technology consulting, a buoyant market Technology consulting €5bn Outsourced IT R&D, software & IT and technical services H1-2006/07 Source : Syntec Informatique 17 octobre 2006 Technology consulting outperforms the L&S sector H growth: 8% vs 6.5% L&S sector (Syntec Informatique structure) €21bn

10 10 * Source : Syntec Informatique 17 octobre 2006 Return to buoyancy GDPL&SInvestment  Growth founded on a recovery in IT investment - Projects reappear - Growth mainly driven by volumes and rarely by prices - Durable growth triggers (globalisation, competition, retirement boom)  But a tightening labour market - 65% of companies say they have difficulties in recruiting* - A greater turnover in the IT sector - Salary pressure H1-2006/07 Growth in %

11 11  1 company, 9 profit centres - Low indirect rates (10.1%), despite decentralisation - Entrepreneur managers - Reporting in (virtually) real time  A quality approach at the heart of the strategy - One of the first IT services companies to obtain the ISO9001 certificate in One of very few IT services companies to be certified for 100% of its activity - A very advanced CMMi approach  Attributes of an average-sized player - Decentralisation / Responsibility - Commercial buoyancy - Local services with clients - Huge reactivity SII outperforms technology consulting SII +21% in H1-2006/07 vs Technology consulting +8%* * Source : Syntec Informatique 17 octobre 2006 H1-2006/07

12 H1 2004H1 2005H SII: Sustained growth A buoyant first half Q1 sales €29.61m, % Q2 sales €29.13m, % +17.6% Sales in €m +21.3% H1-2006/07

13 13 Average headcount Recruitment trends  HR efforts in line with the strategy -Recent recruitments: 347 engineers (target: +700 engineers in 2006/07) -Huge capacity to recruit: school presence, dedicated in-house teams, enterprise culture, cooptation -Turnover: 23% -Salary pressure H1-2006/07

14 14 Inter-contract ratio (SII terminology) = (Billable-Billed) / Billable Controlled inter-contract rates In % H1-2006/07 H1 2005/06 average 4.3% H1 2006/07 average 5.2%

15 15 Billable daysQ2Q3Q4Q1Total 2004/ / / An unfavourable first half  A penalising 2006/07 timetable regarding sales - Fewer billable days (250!) - A first half (civil year Q2) with only 60 billable days - A base of comparison focused on SII’s first half  A huge temporary impact on profitability - Employees with 35 days of fixed holiday per year (25+10 fixed flexi days) - A direct impact on profitability (3 / 63 = 4.8% on Q2) - An impact spread over 2006/07 (5 / 255 = 2.2% over the year) H1-2006/07

16 16 + Commercial buoyancy (organic growth = +21%) – Slight increase in the inter-contract rate – Higher average salary > Increase in selling prices – Impact from n° of trading days on sales and above all on profitability 2006/07Q2Q3 Sales (€m)  2005/06 (in %) Op. margin (in % of sales)6.2%10.2% Att. net profit (in % of sales) 4.3%6.6% Average headcount in quarter In summary H1-2006/07

17 17 Sustained profitable growth H1-2006/07 numbers Financial structure SII shares

18 Sales €58.74m +21.3% In €m Consumed purchases Payroll Taxes Provisions Sustained profitable growth Other income and expenses 0.61 €4.83m -10.7% Op. profit Huge payroll = 80.4% of sales (vs 76.6%) - 4-day delay in billing - Average salary +2.5%

19 19 C L Ô T U R E A U 31 M A R S Profit and loss account Sustained profitable growth In €m H1-06/07 IFRS H1-05/06 IFRS  Sales Operating profit in % of sales Financial products Tax Att. net profit in % of sales Average headcount Headcount at end of period

20 20 Cash flow capacity Change in WCR Investment Financing (incl. dividends) Cash flow  Available cash H1-2005/06 Cash flow table Share transfers In €m  Net cash H1-2006/07 Sustained profitable growth

21 21 Financial structure In €m Sustained profitable growth IFRS 30/09/2005 Fixed assets 3.4 WCR 12.0 Cash 16.3 Shareholders’ capital 31.1 Fixed assets 0.6 IFRS 30/09/2006 Fixed assets 5.9 WCR 18.9 Cash 10.2 Shareholders’ capital 34.5 Fixed assets 0.5

22 22 Shareholders ’ structure Personnel and fund 4.54% Free float 30.61% Management 56.42% Treasury shares 8.43% shares SII shares Source : SII

23 23 Technology consulting (Akka, Assystem, Alten, Altran, Ausy) Eurolist (C) Code ISIN : FR EuroNext segment NextEconomy / SBF 250 – Small 90 Stock-market performance SII shares Source JCF Quant SII T T T T T T T T T T T T T4 2006

24 /07 Outlook SII strengths 2006/07 targets SII outlook Sector outlook

25 25 Sustained demand  Continued investment in companies - Catching up with underinvestment in the past - Technological innovation, distribution of in-built electronics - Renewal of IT systems - Multiplication of projects (smaller but more frequent)  Growing outsourcing - Retirement boom - Refocusing on the core business - Increasingly complex projects 2006/07 Outlook  Today’s challenge: recruitment - Conserve criteria of quality and profitability - SII: 700 engineers forecast in 2006/07 (half for turnover, half for growth)

26 26 Margins under pressure  Virtually stable reference prices - Pricing power on the demand side - Overcapacity of the offering, dumping of small players - Clients looking for savings - Indirect pressure from offshoring  Selling price – cost price scissor effect - Pressure on salaries - Shortfall of certain profiles  Problem of billable days - H2-2006/07 virtually stable in relation to 2005/06 (-1 day) days in 2007/ /07 Outlook Billable daysQ2Q3Q4Q1Total 2005/ / /

27 27 Constantly looking for improvement SII proactive regarding profitability  Continued rigourous management - Reduced functioning costs - Indirect rates under pressure  Nearshore intervention capacity (Poland)  Growth / profitability arbitrage - Intention to not enter into a deflationary trend… - … which could lead to a refusal of missions  The real challenge: improvement of production processes - The possibility of work packages - The CMMi 2006/07 Outlook

28 28 The advantages of the CMMi model  Necessity to improve the management of complex projects - Clients require an increasing number of services to commit to earnings - Additional risks… (exceeding budgets, changes) - …but opportunities to gain margins in certain conditions - Necessary discipline to control projects and optimise teams and expertise  Against this backdrop, quality insurance and CMMi valued processes are solutions adapted to the integration of IT systems. 2006/07 Outlook Advantages for SII - Traceability, capitalisation and reproductibility - Better management of employed resources - Proposals for hybrid contracts - Reduction and control of unknown Advantages for clients - Better defined interfaces (quality) - Repeated follow up and deliveries - Platform development (outsourced services for the supplier)

29 29 Early implementation of the CMMi model  This valuation backs SII’s level of quality - Process mastered and standardised throughout the company - Development planned and assessed - Corrective forecasts and actions - Collective capitalisation and valuation (expertise, methods, tools and metrics) 2006/07 Outlook Certified service sites (at CMMi level)SII Aix-en-Provence (3)Silogic Toulouse (2) AXLOG engineering (3)SII Sophia Antipolis (2)SQLI Toulouse (2) Cap Gemini-Paris Accelerated Delivery center (2)SII Toulouse (2)Steria Midi Pyrénées (2)  SII the most advanced players in this approach At 4/09/2006 – official list of the SEI relative to valued French IT services companies* i.e. for SII: 1/2 sites at level 3 and 2/6 sites at level 2 (at 4/09/2006) SII’s target: December 2006: Nantes (2)February 2007: Rennes (2) End-2008: all agencies committed to generating earnings will be at level 3 * Sources:

30 /07 Outlook 1. Limited risks Clients: large accounts, loyal Historical and technoligical background Persisting quality insurance 2. Basic functional model One company, multiple profit centres Decentralised structure and localised services Enterprise culture: Technical and Services SII’s strengths – Still the same! 3. Sound balance sheet Steady cash generation Satisfactory cash balance No financial debt

31 /07 Targets  Assumptions regarding the business climate  Sustained demand 6-8% of growth according to IT Syntec 3 times growth forecast for GDP  Margins under pressure 2006 prices = 2005 prices + ε  +0% (a little better in 2007?)  SII’s targets*  Sales growth of around 20% (€125m-130m)  Operating margin down (9-10%)  2,000 salaries at 31 March 2007 (net creation of 350/400 jobs) Confirmation of targets from May 2006 * * Réunion SFAF du 17 mai 2006

32 32 Upcoming meetings  Q3 earnings: 14 February 2007  Full-year earnings and SFAF meeting: 16 May 2007  2006/07 AGM: 20 September 2007


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