EuroBusinessMedia (EBM): Steria, one of Europe’s leading IT services companies, reports annual results for 2010. François Enaud, welcome. You are the Chairman and CEO of Steria. What are your comments on the group’s performance in 2010?
François Enaud (FE): Satisfactory and promising. Satisfactory because we came back to growth earlier than the competition, with 1.5% revenue growth and an acceleration in H2 versus H1. In addition, our bookings in Q4 increasing by 32% versus 2009 are very promising for the growth in 2011. Financially speaking, we had a very robust operating margin at 7.1%, but more interestingly we did generate an excellent free cash flow at €86 million, driving the net debt to €100 million, which represents a gearing of 14%. And it is important to notice that these solid results have been reached despite a challenging situation in the public sector, as you know, and especially for the freezing of the discretionary spendings in the UK for the public spendings. All these results make us confident for the future, because together with the overall market improvement, we do strengthen the model of the group and we have still a lot of potential for improvement ahead of us. That’s why we have decided to increase significantly the dividend from 12 cents to 24 cents, doubling the dividend in 2011 based on the result of 2010.
EBM: What have been the main trends that you’ve seen by geographic zone in 2010?
FE: Starting with UK, the revenue in the UK has been quite good, slightly decreasing by 1.5%. Considering the challenging situation for the public sector, the situation has been really under control, and more interestingly we did maintain the best-in-class profitability in the UK with a 10.6% operating margin, which is definitely the highest performance in this market. And finally, the bookings on the fourth quarter have been very good and promising for 2011, with a book-to-bill of 1.12 for this period of the year. In France, we can be really satisfied with our rather strong return to growth; with 5% growth we have achieved one of the best performances on the French market. And interestingly, the bookings have been increased as well by 7%, which is as well excellent news for us, accelerating the growth again in 2011. For the other geographies, and first in Germany, in a quite soft IT services environment, we did maintain a slight organic growth, with notably good growth in banking by 4%. In Scandinavia, we did maintain the best growth of the group at 6.6%, after a very solid growth in 2009 we do maintain our momentum in Scandinavia. And in Spain, finally, we did rebound in the second half, leading the overall performance to a flat growth for 2010.
EBM: Steria recently announced significant contract wins. What were the key factors behind these successes?
FE: You are right to mention these very large successes in 2010. There’s been a very good year for winning significant contracts, such as the contract for Cleveland Police, exceeding €200 million value or for Chorus, the Ministry of Finance in France, exceeding €100 million, or for Airbus or for a large bank in France as well. All these contracts reveal the new capabilities of the group, for sure, but as well the way the group is perceived by the market and first by our clients. We are now definitely perceived as a dual partner, industrial and business partner together, with additional and increasing transformational capabilities. The reason for this success is based on, I would say, three factors. First is about our scope of services. We are now covering all the value chain for delivering large scope contracts, starting from consulting, but going to the business process outsourcing, not just maintaining our capability to deliver IT solutions, but now proposing value propositions, consisting in transforming the IT and operating processes on behalf of the client. These capabilities are still based on a very differentiating model which is a combination of our proximity to clients with our global capabilities - global, industrial capabilities -based on our new delivery model which is made by the different delivery centres; onshore, nearshore, offshore.
EBM: What is your vision regarding the evolution of public sector spending, notably in the UK?
FE: The pressure will likely continue all over Europe due to the fact that the public debt is driving a public spending reduction by 20 to 40%. It is not just about cutting costs or freezing discretionary spending. It is much more. It is about changing radically the way of managing processes, organising the operations in the different administrations. And this challenge is really an opportunity for a company like Steria. With our two flagship deals we do have in the UK, Cleveland Police on one hand where we do transform completely the IT and the business processes of this police force in order to achieve 20% savings in a short period of time. It is really emblematic of what such an administration can need to achieve their target. A second flagship deal is really what we do now for more than 7 years for the Ministry of Health in the UK, through a joint venture we have with them. We do as well operate all their business and horizontal processes in order to achieve together, jointly, significant savings in the same time while we do increase the quality of the health delivered to the citizens. With these two successful experiences, Steria has a very solid position to deal with the challenges of the administration over Europe. We do believe in our capability to export and to replicate these stories to other administrations in the different countries.
EBM: What would you say are your strategic priorities for the next three years?
FE: Definitely growth. Our strategic priority is to grow faster than the market will do and our growth will be based on three drivers: value, differentiation and our efficiency. Increasing value for us is about our capability to focus on selected offerings with strong business value for customers, but as well it’s about our capability to innovate, to transform new technology into new services for clients. And with cloud computing or mobility services we have two fantastic fields of innovation. The second driver will be differentiation. It will be important to maintain our features, to keep the attractiveness of Steria versus the other big competitors. This attractiveness for us is based on two things; first obviously our cultural features - the DNA of the company, this human touch well known within Steria and well appreciated by our clients - but it is as well about our service model. Our capability to combine the proximity with clients in order to ensure flexibility, agility, together with our global delivery model to provide and to ensure the overall productivity of our operations. And finally, the growth driver is as well about efficiency. It’s about increasing permanently our competitiveness by being more efficient altogether. It is about what we do to transform our internal processes and to make the overall organisation definitely much more efficient.
EBM: And lastly, what is your vision for 2011?
FE: An acceleration of the growth with the significant contracts won in 2010, with very good bookings at the end of the year in the fourth quarter, with the increased headcount by 5% versus the previous year, we are definitely in a very good momentum and that’s why we do target an organic growth of between 3 and 4% for 2011. Regarding profitability, our objective is to deliver at least the same profitability as in 2010, despite an increasing investment in our internal transformation. And the objective of this transformation is definitely to improve progressively the profitability model of our growth.
EBM: François Enaud, Chairman and CEO of Steria, thank you very much.
FE: Thank you
