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Welcome to Sopra Steria Group's presentation, which will be led by Vincent Paris, Group CEO, and there will be a Q&A session after the presentation. Over to you, Mr. Paris.
Good morning, everybody, and welcome to this call to talk about the Q3 results announcement 2020. We'd like to suggest that we proceed as follows. Firstly, I'll share the overall situation with you, then I will talk about the figures published for the third quarter 2020. Then I will talk about the cyberattack. And at the end, I will ask -- answer your questions with Étienne du Vignaux, the group's CFO. So with regards to the general situation in this third quarter, I think the first comment that I can make is that there has been a general improvement in the situation in the figures compared with the second quarter. We've had some good news. We've had plenty of deals in our portfolios, some good news with deals. And the underlying trends that we can see with regards to digitalization are confirmed, and this is obviously important to highlight. You've also seen that in terms of the figures, which we'll look at together, there has been a slowdown in the organic decrease in turnover. So in Q2, we're at minus 8.4%, whereas Q3, we're at minus 5.9%. And the drop in the aeronautics sector, which has been the most impacted in Q2, so this was at minus 30%, whereas it was at minus 20% in the second quarter. What's important, and this regards all our geographies, is that the employment rate for employees working on projects has improved. And in September, this is what we're hoping for, but we've come back to a bench rate which is close to a normal rate. That was the target that we set ourselves, and that's what we have achieved. And then the last highlight is that we've obviously carried on our cost-saving plans, the travel expenses, fees, subcontracting. And obviously, that will continue over the fourth quarter. That's the overall situation. Now I will go into details for each of our regions and our geographies. And I'll start with France, clearly, the most impacted geography, a geography that's been most impacted by the crisis. In terms of figures, Q3, EUR 365.5 million, with negative growth of minus 15.4%. So there are 4 items that explain this negative growth. First of all, we've got strong exposure to the aeronautics sector, which is declining by over 30%. And this transport sector is also contracting by over 20%. So these are the 2 verticals that have been the most impacted. And then another major factor is consulting activity is down by over 20%.And then another last factor, obviously, has impacted growth is vacations. Vacations have been taken over Q3 because, obviously, our employees have taken less holiday over Q2, obviously, linked to the crisis. So we have pushed for employees to take a couple of weeks more vacation over this period so that we can come back to a normal situation with regards to the vacation balance. So this has obviously impacted growth in the third quarter.So those are the 4 items that explain the negative growth. But what is important to bear in mind is that there's been changes in our fundamentals. So I spoke about employment rate for our employees. We've obviously made progress here. And the bench rate has come back to levels which are close to a normal situation. And this regards all our business lines. So consulting, obviously, there's been significant negative growth, and we've come back to almost normal situation. And this applies to all our business lines.We've also carried on managing subcontracting. This explains why we've boosted our employment rate. And we've reduced our subcontractors by about half, and we've been reviewing this since the start of the year. And then, obviously, I've mentioned the verticals that are experiencing negative growth, but there are 2 which are experiencing growth, and that is defense and the public sector. So with regards to everything I've just said, obviously, the consequences of all this, we're expecting ongoing improvement in the fourth quarter. Now if we move to the U.K., the Q3 turnover was EUR 174.7 million with organic growth of plus 6.2%, so a good quarter. And this is explained by 2 reasons, the first of which is the 2 joint ventures, SSCL and NHS, who have, on average, posted a growth of over 20%. These 2 subsidiaries haven't been heavily impacted by this crisis because, obviously, they provide services. And the ministry of -- the defense activity, as part of this joint venture, has generated good growth.And the second reason for growth in this region is that we have restarted the visa-issuing service for the government, which was completely shut down in the second quarter, and it's restarted in the third quarter; obviously, conversely, aligned with results. In the second quarter, we've seen that the private sector is under pressure. Now for the rest of Europe, turnover of EUR 292 million with organic growth of plus 0.4%. Two highlights, obviously, there are 2 countries that have had good growth. This was the case since the beginning of the year. We've seen growth in Scandinavia in Q3 and then Belgium as well. Other countries had been declining but moderately.And the other comment that I could make for this region is that the -- we've seen the effect of the subsidiary that we have with Sparda-Bank in Germany. Obviously, this operation has been launched. We started it in August in 2019. So we've seen an effect here which has boosted our growth because we generated 14.2% growth with this operation over the quarter. So those are the general comments that we can say for Other Europe. Now if we look at our solutions, Sopra Banking Software, EUR 99.6 million over Q3 2020, negative organic growth of 4.1%. No surprise here. There's little visibility, and decisions are taking longer. This is something we expected. It's been confirmed. But for several quarters now, the major focus is, obviously, our product development plans and our operational plans that we set for 2020, which we are following both for Sopra banking platform and Sopra financing platform.And this has also been reflected by some important go-lives across different product lines. So I can mention Cassiopae. So we had Nissan in China and Yamaha in France. And then for SAB, we've also had a go-live at BMCI, a subsidiary of BNP in Morocco, so live there. We are following our operational plan that we have set out for Sopra Banking Software.And then the Other Solutions, Sopra HR Software and Sopra real estate software, Q3 with a turnover of EUR 55.9 million with negative organic growth of 5.6%, obviously doing better than in Q2 because we're at minus 10%. We can see that things have got going again, but the recovery is slow. Obviously, there are some projects that are slipping in terms of decisions. So we're doing better than Q3, but we're not back at the pace that we've previously experienced. So that's what I can say about all of our different regions and the figures for each subdivision in Sopra Steria in Q3. Now I'm going to focus on the cyberattack, which has been impacting us now for several days. I'd like to remind you that we detected a cyberattack on the 20th of October. I can't go into the details, but it's a new version of the Ryuk ransomware. So this version was, up until now, unknown to antivirus software providers and security agents. So we've immediately implemented suitable security measures, and this has enabled us to contain the spread of the virus to a limited part of the group's installations and to protect our customers.So as it stands, we are not aware of any data leak. And as it stands, we're not aware of any damage caused to our customers' IT systems. We have started to reboot our systems since Monday. That's what we said, but it will take time just like every operation like this does. Obviously, more than ever, we're staying very close to our customers. And the last comment that I could make is that we're not the only ones.So that's a summary of the situation with regards to the cyberattack. Now if we think about the potential impact, obviously, after our insurance coverage, it's too soon to say what the impact will be. And we'll make an announcement on that once the situation gets back to normal. Before we take the questions now, we'll look at our outlook and our objectives. So with regards to the climate, obviously, this is nothing new. We've been making announcements since 2 quarters saying that, obviously, we've got a reduced visibility. I can't change that, but that still applies.In July, we made announcements for 2020 guidance. We were talking about a variance in -- organic change in turnover between minus 2% and minus 4%; operational margin on our activity between 6% and 7%; and then net cash flow available between EUR 80 million and EUR 120 million.So I can say that the performance over the first 9 months of the year and the initial trends for the start of Q4 are aligned with these objectives. But obviously, the potential impact of the cyberattack has not yet been calculated. We will communicate on these very shortly as soon as we will have the information as soon as the situation has got back to normal. So those are the comments that I can make on our Q3 and our situation. So with Étienne, I'd like to suggest that we answer your questions.
[Operator Instructions] We have a question from Gregory Ramirez.
I'd like to understand if you think you'll be able to come back to organic growth in Q2 2021 as employment rates get back to normal, obviously, with the work that you're doing with Airbus, obviously, taking into account the pressure and Airbus' situation. So do you think you'll be back to organic growth in Q2 2021?
So we're not going to talk about 2021. We're giving you the situation at the end of Q3 with the outlook for Q4, with all the information that we have, but we can't make any comments about 2021 for all the reasons that I've just explained, visibility, the possibility of another lockdown. Obviously, it's too soon to give you detailed information. We're working on everything that we can to optimize the situation.
We have a question from Emmanuel Parot.
I have 3 questions. So just to come back to Gregory's question on 2021, I can understand that you can't give any figures. But obviously, we're going through the budget reviews at the moment. Do you have any major accounts that are reassuring you with regards to the IT spending for 2021? That's my first question.Second question was on Sopra Banking Software. Could we have licenses for Q3? And how do you see -- what do you see the -- how do you see the situation?And then for the third question, it was the cyberattack. Okay, so no figures. But can we assume that, obviously, insurances are going to cover, broadly speaking, the probable impact of the attack?
So there are 3 questions. The first, with regards to customers and context, I will make the same comment. So the market is more dynamic than what we saw in Q2. There are new more deals. Digital is pushing, and we've seen a confirmation of this. All of our customers have put different topics that they want to address. [ That tended ] as new business. I can't say necessarily that they're reassuring us, obviously taking into account the economic and health context, I won't go that far. But up until now, we can see that the market was more active than what it was a couple of months ago. But there is low visibility and, obviously, the situation -- the overall situation means that we can be called into question any time. There are no customers who have had -- are experiencing any major disasters, but this could happen. With regards to the second question, now for licenses at Sopra Banking Software, last year, we did about EUR 60 million. And our target is to be around the same figure this year. And then the third question, I can't give you a detailed answer, but we should understand that, obviously, we haven't finished managing the situation. We're not fully back to normal. So at this stage, I can't give you detailed information because, obviously, if we go too quickly, if we move through the steps too quickly, I won't go into the technical details, but if we go through the stages too quickly, then you risk compromising all the work that we've done up until now.Obviously, now we're at war. The attack is not over even if we are making progress little by little. We are making progress every day, but we have to be cautious because each operation has to be completed very carefully. We can't have part of our system reinfecting the rest of our system. So we have to be very careful with regards to the operations that we're rolling out. We have to go through each step. So caution is really -- we have to adopt a cautious approach. And this is why we're waiting to have a full vision of the situation before we make any announcements. Étienne?
Now with regards to the insurances, obviously, we have specific insurance which covers up to EUR 30 million at group level. Obviously, we haven't observed any damages with our customers and our third parties and -- but there would be additional insurances which would cover this.
Now we have a question from Derric Marcon at Societe Generale.
Étienne and Vincent, so I'm going to ask my question now. I want to talk about recruitment. Have you relaunched a recruitment as of September? And then the situation in the aeronautics sector, do you think things will improve in the fourth quarter with regards to what we've seen in Q3?And my third question is partial furlough measures. Obviously, you've been using these resources. And then another question, on vacation, could we have the impact in a percentage? And then for the cyberattack, can you let us know which activity has been most impacted and which countries? Are there other countries impacted equally? Or are there other areas that have been more impacted? Is it more focused on France, for example?
For the first question, recruitment, yes, we have restarted recruitment, not as heavily as in previous years, but we have decided to recruit a little bit, so starting from halfway through this year. So the answer is yes, obviously, the pace is slower than what we've had in previous years. Now with regards to aerospace, with the vision that we have now, obviously, once again, no one can say that there's not going to be a second wave with Airbus. Nobody knows what's going to happen here. Obviously, the vision that we have is that it's stable, as we had announced, with the, obviously, employment rate which is improving. We're managing our subcontractors. We're playing on synergies with other sectors. But in the aerospace sector, we're not expecting an improvement which is going to consolidate the position that we have, which remains stable. Now with regards to partial employment measures, we haven't been using these measures since the month of June. The impact of holidays is obviously difficult to impact. This has an impact of 5% to 6% of growth, obviously, the number of vacation days that have been taken over the period in addition. And then for cyber, obviously, this is an attack that is impacting the group, but I won't go into the detail of the geographies of how it's impacting our different geographies.
And the type of activity that's been impacted, is it technical assistance? Is - have all the business lines been impacted in the same way as the service centers, for example? Or is there a difference?
No, I'm not going to make comments on this. I'd like to stay quite neutral here. Obviously, employees who are working on customer infrastructures or customer -- on the customers' premises, they're less impacted. We've maintained managed services. We've got business continuity here. But I can't give you -- too soon to give you any more details.
We have now a question from Nicolas David, ODDO BHF.
[Foreign Language]
We had the first question, but the second question, we did not hear.
The second question was on Cassiopae. Could you give us an update on the situation [indiscernible] and confirm that in 2021 [indiscernible]? Are you expecting an improvement in costs on the project side? And the last question is regarding public sector.
Sorry, the sound was cut off. So we didn't hear all of your questions. Obviously, you'll correct me if it was something else. So yes, we're seeing improvement. The main major area where we're seeing improvements is the employment rate for our employees' usage rate, which -- so we're seeing improvement in the month of May. Month-on-month, obviously, this leads to a general improvement in our situation across all of our entities. This is the major factor which is leading to overall improvement. And then for Cassiopae, version 4.7 has been delivered as planned. We're carrying on with this version with our traditional customers who are customers who have accepted to wait for this version. So this is underway. Things are going ahead as normal. Version 4.8 is under development, and it will arrive on the market Q2 2021. So we confirm the plan that we planned, which is going ahead of plan. We're following the plan. We're seeing significant improvements month-on-month.Now with regard to the public sector, I'd like to confirm that with the vision we have, I'd be surprised if there was a change in trend. The public sector is obviously a refuge. Investments are at least maintained or accentuated in order to support the economy. So it will only be later that we might potentially see an impact, but we expect this to be an active sector for several quarters to come. So those are the questions that I've heard, but perhaps there were some other questions since I was cut off.
The first question was in regards to [indiscernible]. Could we have a very much more details with regards to the geographies for Q4?
No, I can't give you more details for the different geographies. I've explained the trends. The trends should carry on. We should see a slight improvement. That's what you should take away in terms of trends for all the different regions that I've described, but I won't be going into any more details on this.
We don't have any more questions for the time being. [Operator Instructions] I have a question from [ Sandeep Raman ].
I have a question on airline in particular. Obviously, you've been saying, at company level, the bench rate is returning to normal. And you've also spoken about subcontracting. Could you give us perhaps the bench rate for this activity? And perhaps the percentage across -- you've spoken about some verticals that are slightly more dynamic. Could you speak about perhaps the HR approach that you're rolling out to absorb these changes?
So this is obviously something we're managing on a daily basis, staying close to our customers in the airline sector. Obviously, given the contact, we're very close to our customers. There are some deals coming out. We have won some nice deals. So that's obviously one factor which enables us to optimize results.Generally speaking, we're at about 6% for bench rate, but I'm not going to give you more details by verticals. Obviously, it's slightly more accentuated in the aerospace vertical. But obviously, with all the efforts that we're making, things are coming back to normal levels. And obviously, we're managing this very carefully. And then subcontracting is a way of amortizing this impact.And then there's another factor, which is obviously the synergies between the different entities rather than recruiting or subcontracting activity. We're thinking about how we can get entities working together on various different projects. Obviously, this has had a big impact in aerospace. This is how we've been managing subcontracting over the past couple of months, and this is what has enabled us to come back to quite an acceptable situation. So there is a -- obviously, it's a sum of small decisions which will add up.
So I started the conference quite late. But I heard, with France, there were 4 factors that explained the negative growth with regards to the other regions. So vacations, aerospace, and then could you just talk about the other regions?
So the second vertical where we've suffered, to a lesser extent, but still a bit, is obviously the transport sector where we're down by over 20% in this sector. So that obviously has a significant impact on our figures. And then I did highlight consulting as well. Even if we've come back to a more normal situation at the end of the quarter, this has had an impact on our accounts because we're down by about 20% in consulting. So those were the 4 factors. The 2 verticals: consulting and then the vacations.
One more question from Derric Marcon.
Sorry, just to come back to you, but I wanted some more details. When we were talking about vacation, was that France in Q3? Or was that for the full group?And then I had a question on the Sparda-Bank contract. So you're slightly under EUR 50 million in Q3. Is this a contract that's going to carry on generating turnover quarter-on-quarter? Or are things going to stabilize? How do you see things?
So with regards to the vacations, obviously, this is something that impacts France. The way we manage holidays from one country to another varies greatly. But obviously, the major impact here was in France. So that was a comment which applied to France and our French subsidiaries. Now the second question was for SFT. We should be at the same level of turnover for the coming quarters, around EUR 50 million.
We don't have any more questions for the time being. I'll hand the floor back to you, Vincent Paris.
Okay. So thank you very much. If there are no more questions, and thank you for connecting, I'd like to wish you a good day, and speak to you soon. Thank you very much, and goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]