Sopra Steria's UK profits cut in half in latest results

27 February 2019 Consultancy.uk

French origin consultancy Sopra Steria has seen its UK profits cut in half in its latest financial results. The news comes after two years of a costly restructuring exercise, which the IT services specialist believes will now start to see a modest return to growth in the coming period.

Sopra Steria is a European information technology consultancy which was established in September 2014 with the merger of Sopra Group SA and Groupe Steria SCA. The primary business areas of the company include consulting services, systems integration and solutions, integration of ERP solutions, and implementation of application solutions. Sopra Steria also delivers subcontracting solutions for user technical support, application maintenance, outsourcing services and operation of professional processes.

The firm’s global entity has enjoyed a year of solid growth, reporting a revenue rise of 6.9% to €4.09 billion for the latest financial year, while the Paris-based firm's homeland business grew its top line by 6.4% during the year to €1.7 billion, with operating profits up 7% to €131.8 million. However, the firm by no means saw a uniform boost to all its wings. Indeed, in the last few years the firm has undergone a challenging period in the UK in particular.

In 2017 Sopra Steria launched a recovery plan for its UK business, which involved expanding its operations in the private sector as well as growing its consulting business and sales teams. The move saw Sopra Steria sink over €39 million into the scheme, and as a result the firm's UK arm logged double-digit revenue declines that year, falling 13.6% to €801.7 million, while profits fell 38% to €36.9 million.

Following this, further restructuring costs related to resuscitating the UK business brought Sopra Steria to a year-on-year profit decline in 2018. The IT specialist firm spent almost €10 million more in restructuring costs, causing operating profits in the UK to fall by 52% to just €18.7 million for the year, while revenues contracted by 1% to €783.1 million.

While the figures seem bleak, however, the consultancy believes the figures show it is on track for its long-term recovery plan. Sopra Steria is now aiming for organic revenue growth of 4-6% for full-year 2019, and a slight improvement in operating margins on business activity, as the firm believes its restructuring programme is starting to have a positive effect, while taking solace in achieving organic revenue growth in the UK for the second half of the year.

Commenting in the release of its annual results, the firm stated, "Some initial signs of encouragement were recorded as a result of the far-reaching transformation programme launched in the UK. Adjustments were made to human resources, and trends in revenue and operating profitability picked up in the second half.”