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Feb 28, 2007

2006 annual results Operating margin: 7.1%

• 2006 annual revenue: €1.262 billion, increased by 7.4%, on a like-for-like basis
• 2006 operating margin: €89.6 million, up 36.8% compared with 2005, representing a margin rate of 7.1% (vs. 5.6% in 2005)
• Attributable net profit: €54.3 million, an increase of 41.9%
• Diluted EPS : €2.87, up 39.3%
• Proposed dividend : €0.42 per share (vs. 0.30 in 2005), an increase of 40%
On the 28th February 2007, the Groupe Steria SCA supervisory board examined the consolidated accounts submitted by the General Management.
 
    2006 annual results
 
 
2005
2006
Variation 
Revenue
€ m
1174.9
1262.0
+7.4%
Operating margin[3]
As a % of revenue
€ m
%
65.5
5.6%
89.6
7.1%
+36.8%
+1.5 pt
Operating income[4]
€ m
45.5
81.1
+78.2%
Attributable net profit
€ m
38.3
54.3
+41.9%
Diluted earnings per share
€
2.06
2.87
+39.3%
Average weighted diluted number of shares
Mn.
18.62
18.96
+1.8%
 
Net financial debt
€ m
38.3
-0.8
-
 
 
In 2006, the Steria Group substantially improved its operating profitability. Its operating margin increased by 36.8% to €89.6 million. This took the operating margin rate to 7.1%, an increase of 1.5 points compared with one year ago.
 
 
In France, the operating margin rate improved by 0.6 points compared with 2005 reaching 9.3% before group costs. In the UK, the operating margin rate progressed by 0.8 points to 9.6% before group costs. In Germany, the operating margin rate before group costs rose sharply to 7.9%, up from 5.2% in 2005 on the back of a considerable improvement in profitability in the second half of 2006 (operating margin rate before group costs of 9.2% in the second half of 2006 compared with 4% in the second half of 2005). In the Other European countries zone, the operating margin rate was up 1.9 points to 4.2% before group costs.
 
In terms of business lines, the Steria Group has maintained a high operating margin in Outsourcing (with a margin rate of 9.5% before group costs vs. 9.6% in 2005) and has improved its operating margin by 2.3 points to 7.2% in Consulting and Systems Integration.
 
 
Key events in 2006
  • The Group enjoyed sustained activity in 2006. This dynamism was reflected in a like-for-like revenue growth rate of 10.2% in our three principal geographical regions, a 11.5% rise in consolidated orders at 31 December 2006 relative to 31 December 2005, and a steady pace of recruitment throughout the year, taking our total headcount at end-2006 to 10 484, an increase of 1,195 employees in the year.
  • Operating free cash flows[5] increased significantly in the course of 2006 (up 48.7% to €33.9 million), giving a positive net cash situation at the year-end.
  • Group operating margin increased to 7.1%, putting the Group in line with the most profitable players in the European sector and fulfilling the undertaking given in 2002 following the acquisition of Integris.
  • The industrialisation process has been stepped up via the creation of an Industrial Operations management team that brings together within a Global Delivery Unit all of our data centres, our third-party application maintenance centres, and our helpdesk and call centres, and the launch of Global Sourcing and Global Service Centre projects.
  • The Group put in place an innovative, new governance model designed to strengthen its appeal and the motivation of its employees in order to create a competitive advantage regarding the level of service provided to clients. On this occasion, the Extraordinary General Meeting of Shareholders nominated on the 1st February 2007, François Enaud General Manager of Group Steria SCA. Jacques Bentz was elected as Chairman of the Supervisory Board in replacement of Eric Hayat who was elected as Vice Chairman. Moreover, Jean Carteron was nominated honorary Chairman of Groupe Steria SCA.
 
Outlook
The Book to Bill[6] ratio of 1.1 as at 31 December 2006 gives grounds to anticipate a further year of revenue growth in 2007.
Given the initiatives it has introduced, the Group has a number of growth levers that should improve profitability in 2007.
 
 
Next publication: first-quarter 2007 revenue:
Wednesday 2 May 2007 after the market close.
 
 
Enclosures:
  
 
Consolidated income statement as at 31.12.06
 
EUR 000
31/12/2006
31/12/2005
Revenue
1 262 046
1 174 929
Consumed purchases and sub-contracting
(286 594)
(293 606)
Payroll charges
(669 959)
(606 065)
External expenses
(172 320)
(171 205)
Tax and duties
(20 925)
(17 344)
Inventory change
326
(1 886)
Sundry operating income/expenditure
4 806
4 116
Net depreciation and amortisation
(24 046)
(24 105)
Net allocations to provisions
(2 953)
1 942
Depreciation of current assets
(809)
(1 289)
Operating margin
89 572
65 488
Operating profitability
7.1%
5.6%
Other operating income and expenses
(8 485)
(19 997)
Operating profit
81 087
45 491
Net cost of financial debts
(4 177)
(3 570)
Other financial income and expenses
1 013
(4 988)
Financial result
(3 164)
(8 558)
Tax
(23 632)
662
Group share of profits from associated companies
603
914
Total net profit
54 894
38 509
 
 
 
Group share
54 332
38 286
Minority interests
562
224
Earnings per share (in EUR)
2.96
2.12
Fully diluted earnings per share (in EUR)
2.87
2.06

 

Consolidated balance sheet as at 31.12.06
 
 
31/12/2006
31/12/2005
Goodwill
241 241
240 625
Intangible fixed assets
14 260
11 924
Tangible fixed assets
68 403
65 540
Investments in associated undertakings
2 976
2 631
Assets available for sale
2 360
2 374
Other financial assets
969
8 240
Deferred tax assets
39 262
43 668
Non-current assets
369 471
375 002
Inventories
11 392
4 938
Trade debtors and similar
279 396
257 693
Client receivables
121 522
123 410
Other current assets
12 567
14 151
Non-current assets less than one year
1 538
2 212
Due tax assets
6 163
2 901
Advance payments
17 921
17 425
Cash and cash equivalents
58 308
65 693
Current assets
508 807
488 423
Total assets
878 278
863 425
 
Group shareholders’ equity
322 453
260 038
Minority interests
1 041
520
Total shareholders’ equity
323 494
260 558
Loans and financial debt (> 1 year)
48 948
63 752
Pension commitments
74 852
84 197
Provisions for liabilities and charges (> 1 year)
5 680
11 432
Deferred tax liabilities
2 068
1 484
Other non-current liabilities
19
19
Non-current liabilities
131 567
160 884
Loans and financial debt (< 1 year)
8 535
40 224
Provisions for liabilities and charges (< 1 year)
15 527
15 781
Trade creditors and related accounts payable
135 355
127 171
Amounts owed to clients and advances received
58 858
82 785
Due tax liabilities
15 865
3 116
Other current liabilities
189 076
172 906
Current liabilities
423 217
441 983
Total liabilities
878 278
863 425
 
 
 
Simplified cash flow statement
 
 
31/12/2006
31/12/2005
Cash flow
103.1
67.3
Change in WCR (cash elements)
-29.5
-9.2
Operating cash flow
73.6
58.1
Net industrial investment
-25.5
-17.6
Restructuring
-14.2
-17.7
Free operating cash flow
33.9
22.8
Dividends
-5.6
-4.6
Net financial investment
9.1
-75.7
Capital increase
11.6
3.0
Others (incl. pension commitments)
-9.9
-9.3
Free cash flow
39.1
-63.7
 
 

[1] Earnings per share
[2] Dividend which will be proposed by General Management to the General Meeting of Shareholders on 30 May 2007
[3] Operating margin is the Group's key indicator. It is defined as the difference between revenue and operating expenses, these being equal to the costs of services rendered (costs necessary for the implementation of projects), as well as Selling and General and Administrative costs.
[4] Operating profit includes additional expenses associated with stock options or bonus shares allocated to certain employees, restructuring expenses, capital gains on disposals, etc.
[5] Cash flow less change in WCR (Working Capital Requirement), less industrial investments net of disposals and less restructuring
[6] Orders taken in the year as a percentage of annual sales