Sopra Group: Excellent Performance in the First Half of 2006

Sopra Group (Paris:SOP):

-- Revenue: +22.9% (organic growth +7.6%)

-- Operating profit: +52%

-- Net profit: +55%

                                                 30/06  30/06  Change
                                                  2006   2005    (%)
                                                 ---------------------
Key income statement items
----------------------------------------------------------------------
Revenue(1)                                 M EUR 443.0  360.5   +22.9%
EBITDA                                     M EUR  29.8   19.6   +52.0%
    as % of revenue                          %     6.7%   5.4%
Operating profit                           M EUR  29.8   19.6   +52.0%
     as % of revenue                         %     6.7%   5.4%
Net profit - Group share                   M EUR  17.2   11.1   +55.0%
     as % of revenue                         %     3.9%   3.1%
------------------------------------------ ----- ------ ------ -------
Earning per share
----------------------------------------------------------------------
Net profit per share(2)                     EUR   1.50   1.03   +45.6%
------------------------------------------ ----- ------ ------ -------
Key balance sheet and cash flow items
----------------------------------------------------------------------
Free cash flow(3)                          M EUR  33.3    9.7
Net debt                                   M EUR 135.1   66.5
Equity (Group share)                       M EUR 190.5  133.0
Net debt / Equity                            %      71%    50%

The operating margin of 6.7% for the first half of 2006 was in line with the improvement forecast for the full year. Operating profit and the net profit attributable to the Group increased by 52% and 55%, respectively, compared with the first half of 2005.

These results confirm the relevance of Sopra Group's strategy - at the European level in systems and solutions integration, and worldwide with regard to Axway - as well as the successful integration of recent acquisitions.

Information by division for the first half of 2006

-- Consulting (4.9% of revenue): The operating margin remained strong at 11.7% despite a slight fall-off in revenue. The improved growth expected for the second half of the year should allow this division to improve its operating margin for the year as a whole.

                                     30/06       30/06       31/12
                                      2006        2005        2005
                                   ----------- ----------- -----------
                                    EUR         EUR         EUR
                                     M     %     M     %     M     %
---------------------------------------- ----- ----- ----- ----- -----
Revenue                            21.4   100% 22.5   100% 41.3   100%
---------------------------------------- ----- ----- ----- ----- -----
Operating profit                    2.5  11.7%  2.7  12.3%  5.0  12.1%

-- SSI(4) France (60.2% of revenue): The operating margin improvement in France in the first half of the year (+0.9 percentage points to 7.6%) is in line with expectations. The quality of the group's offerings and its strong positioning with major clients have allowed it to resist pricing pressure, which continues to weigh on this division's performance. The group expects a strong uptrend in growth as well as an improvement in the operating margin for this division in the second half of the year.

                                     30/06       30/06       31/12
                                      2006        2005        2005
                                   ----------- ----------- -----------
                                   EUR M   %   EUR M   %   EUR M   %
----------------------------------------- ---- ------ ---- ------ ----
Revenue                            266.9  100% 255.3  100% 504.7  100%
----------------------------------------- ---- ------ ---- ------ ----
Operating profit                    20.3  7.6%  17.0  6.7%  37.5  7.4%

-- SSI Europe (22.9% of revenue): Strong organic growth (+15.7%) in Europe and a pronounced improvement in the operating margin confirm the effectiveness of the acquisition-led growth strategy pursued by the group in 2005. This division's operating profit of EUR 5.8 million (with an operating margin of 5.7%) was achieved primarily thanks to the group's operations in the United Kingdom and Spain. The operating results of entities in other countries met expectations.

                                     30/06       30/06       31/12
                                      2006        2005        2005
                                   ----------- ----------- -----------
                                   EUR M   %   EUR M   %   EUR M   %
----------------------------------------- ---- ----- ----- ------ ----
Revenue                            101.5  100% 43.8   100% 125.5  100%
----------------------------------------- ---- ----- ----- ------ ----
Operating profit                     5.8  5.7% -0.3  -0.7%   4.8  3.8%

-- Axway (12.0% of revenue): Despite the traditionally high seasonality of its business and the acquisition of Cyclone Commerce, this subsidiary has just recorded one of its best ever operating margins for a first half period, up almost 2 percentage points. This achievement, which was due notably to the strong positioning of its offering in the B2B market and Collaborative Business Solutions, means that Axway can look forward to an excellent performance for the year as a whole. The integration of Cyclone Commerce's products with those of Axway is making good progress.

                                       30/06      30/06      31/12
                                        2006       2005       2005
                                     ---------- ---------- -----------
                                     EUR M  %   EUR M  %   EUR M   %
------------------------------------------ ---- ----- ---- ----- -----
Revenue                              53.2  100% 38.9  100% 85.5   100%
------------------------------------------ ---- ----- ---- ----- -----
Operating profit                      1.2  2.3%  0.2  0.5%  8.8  10.3%

Financial position

The Group generated net free cash flow of EUR 33.3 million, in particular due to better management of working capital requirements and the use of an exceptional tax credit of EUR 11.1 million related to the acquisition of Valoris.

After the disbursements relating notably to the acquisition of Cyclone

Commerce and the dividend payment, net debt came to EUR 135 million. At 30 June 2006, the group's financial position remains healthy: the net debt to EBITDA ratio(5) and the net debt to equity ratio are 1.73 and 71%, respectively.

Workforce

At 30 June 2006, Sopra Group had a total workforce of 9,610 employees, including 2,860 outside France. Excluding the impact of the Cyclone Commerce acquisition (100 employees) in January 2006, the number of employees grew by 410 in the first half of the year. Half of this growth related to foreign subsidiaries.

Outlook

Sopra Group has confirmed its revenue and operating margin growth forecasts for the full-year 2006. Growth is expected to be in line with or better than that of the market average, with revenue in the region of EUR 900 million euros and an operating margin of 8%.

Changes in the scope of consolidation

-- Newell & Budge (UK) has been consolidated since 1 July 2005,

-- PROFit Informatica (Spain) has been consolidated since 1 November 2005,

-- Cyclone Commerce (USA) has been consolidated since 1 January 2006.

Upcoming events

Sopra Group will publish its revenue for the third quarter of 2006 on Monday, 6 November 2006 after the market close.

About Sopra Group (www.sopragroup.com)

A leader in the European consulting and IT services market, with a total workforce of 9,600, Sopra Group provides the full spectrum of services enabling companies to transform their organisations and their information systems. Sopra Group is a total solution provider, from prior strategic reflection from an executive management perspective, through to the supervision and implementation of major systems integration and application outsourcing projects. Through its subsidiary Axway, the Group pursues the worldwide deployment of its activities in both application integration and Collaborative Business Solutions, with a complete range of solutions and services.

Appendices

Operating profit by division

                                30/06         30/06         31/12
                                 2006          2005          2005
                             ------------- ------------- -------------
M EUR                        Revenue EBIT  Revenue EBIT  Revenue EBIT
------------------------------------ ----- ------- ----- ------- -----
Group                         443.0  29.8   360.5  19.6   757.0  56.1
                     % margin         6.7%          5.4%          7.4%
------------------------------------ ----- ------- ----- ------- -----
  Consulting                   21.4   2.5    22.5   2.7    41.3   5.0
                     % margin        11.7%         12.3%         12.1%
------------------------------------ ----- ------- ----- ------- -----
  SSI France                  266.9  20.3   255.3  17.0   504.7  37.5
                     % margin         7.6%          6.7%          7.4%
------------------------------------ ----- ------- ----- ------- -----
  SSI Europe                  101.5   5.8    43.8  -0.3   125.5   4.8
                     % margin         5.7%         -0.7%          3.8%
------------------------------------ ----- ------- ----- ------- -----
  Axway                        53.2   1.2    38.9   0.2    85.5   8.8
                     % margin         2.3%          0.5%         10.3%

Consolidated balance sheet

M EUR                                             30/06  30/06  31/12
                                                   2006   2005   2005
================================================= ====== ====== ======
Goodwill                                          272.8  115.6  242.2
Other assets                                       35.5   33.4   35.3
Other assets and liabilities                       33.2   63.9   50.7

------------------------------------------------- ------ ------ ------
ASSETS                                            341.5  212.9  328.2
------------------------------------------------- ------ ------ ------

Shareholders' Equity (Group share)                190.5  133.0  185.3
Provisions                                         15.9   13.4   14.2
Net debt                                          135.1   66.5  128.7

------------------------------------------------- ------ ------ ------
CAPITAL INVESTED                                  341.5  212.9  328.2

Change in equity

                                                                M EUR
                                                               -------
Position at 31 December 2005                                    185.3
----------------------------------------------------------------------
  Dividends                                                    - 12.6
  Net profit - Group share                                       17.2
  Capital increase through exercise of share options              0.3
  Purchase or sale of own shares                                - 0.1
  Share-based payments                                            0.3
  Translation adjustments                                         0.1
----------------------------------------------------------------------
Position at 30 June 2006                                        190.5

Consolidated income statement

                                   30/06        30/06      Variation
                                    2006         2005          (%)
=============================== ============ ============ ============
                                 M EUR   %    M EUR   %
------------------------------- ------- ---- ------- ---- ------------
Revenue                          443.0  100%  360.5  100%   + 22.9%
------------------------------- ------- ---- ------- ---- ------------
Staff costs - Employees         -295.4       -249.2         + 18.5%
Staff costs - Contractors        -35.0        -24.2         + 44.6%
Staff costs - Total                                         + 20.8%
------------------------------- ------- ---- ------- ---- ------------
Operating expenses               -76.6        -62.1         + 23.3%
Depreciation and provisions       -6.2         -5.4         + 14.8%
------------------------------- ------- ---- ------- ---- ------------
Operating profit on ordinary
 activities                       29.8  6.7%   19.6  5.4%   + 52.0%
------------------------------- ------- ---- ------- ---- ------------
Other operating income and
 expenses                            -            -
------------------------------- ------- ---- ------- ---- ------------
Operating profit                  29.8  6.7%   19.6  5.4%   + 52.0%
------------------------------- ------- ---- ------- ---- ------------
Financial result                  -5.1         -1.4
Corporation tax                   -7.5         -7.1
------------------------------- ------- ---- ------- ---- ------------
Net profit                        17.2  3.9%   11.1  3.1%   + 55.0%
Group share                       17.2  0.0%   11.1
Minority interests                   -            -

=============================== ======= ==== ======= ==== ============
Gross operating profit            35.4  8.0%   23.8  6.6%   + 48.7%
=============================== ======= ==== ======= ==== ============

Change in net debt (6)

                                        EUR  m 30/06   30/06   31/12
                                                2006    2005    2005
                                               =======================
Net debt at opening (A)                         128.7   58.9     58.9
---------------------------------------------- ------- ------ --------
Gross cash flow from operations before net
 financial debt and tax                          36.1   25.0     66.6
Tax paid                                          3.6  - 5.4   - 14.2
Changes in working capital requirements           1.5  - 4.5    - 1.3
---------------------------------------------- ------- ------ --------
Net cash flow from operations                    41.2   15.1     51.1
Net financial interest paid                     - 4.8  - 3.9    - 8.5
Capital expenditures                            - 3.1  - 1.5    - 3.9
---------------------------------------------- ------- ------ --------
Free cash flow                                   33.3    9.7     38.7
Changes in scope                               - 24.7  - 7.8  - 103.2
Dividends paid                                 - 12.6  - 8.6    - 8.6
Capital increases in cash                         0.3    0.2      4.1
Employee participation                          - 2.0  - 0.2      0.7
Application IAS  32 & 39                            -  - 1.0    - 1.0
Other changes                                   - 0.3    0.0    - 0.7
---------------------------------------------- ------- ------ --------
Net cash flow (B)                               - 6.0  - 7.7   - 70.0
Changes in interest rates                       - 0.4    0.1      0.2
---------------------------------------------- ------- ------ --------
Net debt at closing(6) (A-B)                    135.1   66.5    128.7
---------------------------------------------- ------- ------ --------

References:

(1) Cf. press release dated 7 August 2006.

(2) Calculated based on the weighted average of ordinary shares in circulation.

(3) Net cash from operations before net interest expense and corporate income tax paid, change in working capital requirements and operating investments net of disposals.

(4) SSI: Systems and Solutions Integration.

(5) On a rolling 12-month basis.

(6) Net cash from operations less operating investments net of disposals.

Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here