meeting with financial analysts (sfaf)...meeting with financial analysts (sfaf) fiscal 2013-2014...

6/4/2014 www.groupe-sii.com

June 4, 2014 - Eric Matteucci, Chairman of the Management Board

Meeting with financial analysts (SFAF) Fiscal 2013-2014 financial statements

SII Group 65 Rue de Bercy - 75012 Paris Tel: 01 42 84 82 22 - Fax: 01 42 84 30 82

The SII Group

SII, engineering specialists

Embedded software and real time, scientific data processing applications, test benches, control and command software

EMBEDDED SYSTEMS

Analog and digital electronics, image and signal processing, mechanics, engine control, driver assistance systems

SCIENTIFIC ENGINEERING

IP convergence (IPTV), web (Portal), mobile systems (iPhone OS , Android, Linux projects) , infrastructures

I T C

Development of applications, decision support systems, financial software, information system security

INFORMATION SYSTEMS

Engineering technology 54% of consolidated revenue

Information technology 46% of consolidated revenue

The SII Group

SII: a complete range of services

Delivery solutions for a wide range of needs

o Development of Service Centers in response to industry demands

o All-inclusive offers for customers requiring long-term commitments

o Continued strong technical assistance services based on the maturity of the customer and

project

SERVICE MODE CHART

Consulting & Expertise

Technical Assistance

Service Centers

All-inclusive

Offshore

Revenue by type of contract (%) All-inclusive

& TPM

Technical Assistance

Service Centers

22%

37%

41%

The SII Group

SII: Major accounts

Major customers account for 97 percent of our business

o Financially strong clients

o Considerable exposure to global growth

o Growth potential from gains of market shares in the installed base

SII: A model which met its targets in 2013-2014

• Organic growth

• Improved results

• 30% of revenue from international operations

+3.3%

Net income of 25.1%

32%

Contents

6/5/2013

New international developments

Annual financial statements

Outlook

Highlights in France

Contents

6/4/2014

Outlook





A strong and balanced position

A decentralized model that relies on proximity

o Nine branch offices with considerable autonomy

o A better grasp of local conditions

o Responsible managers and teams

A leading player outside Paris

o Nationwide network for servicing large companies in all of their lines of business

o A better ratio of quality to cost of services

A stronger presence in the Paris region

o Following restructuring measures six years ago, business in the Paris region has increased from 43 million to 63 million euros

Total headcount in France on March 31: 2 632


2013: A difficult year for technology consulting

A general economic environment that did not favor investment

o Investing by non-financial companies continued to lag

o Manufacturing activity declined

o Some sectors were under pressure

• Pressure on prices in telecommunications

• Reduced defense spending

• End of the major upstream aerospace engineering programs

A net drop in the number of projects during the first part of the year

Slow improvement in 2014

Syntec Numérique-IDC survey, March 2014

Total number of bids tendered Changes in balances of opinion Year-to-year comparison (T = Q)

Order backlog Changes in balances of opinion Quarter-to-quarter comparison (T = Q)


In this environment, SII maintained its margins

Unchanged price-wage ratio, Impact of CICE tax credits

Strained situation in telecommunications, defense

and aerospace

Change in service mix toward more value added,

new delivery modes

Stagnating capital spending in France, shrinking TC market

Cautious hiring, stable bench-time ratio

Pressure on prices

Improved profit margin in France


Positions maintained in aerospace and defense

New prime supplier ranking for the Airbus Group (E2S )

Increased business with major clients

o Airbus Group, Thales, Dassault

o Gradual evolution of services toward production studies

Slight increase in volume of defense business

o In spite of reduced defense budgets

32% of revenue 32% of revenue

16% of revenue

Aerospace, Defense & Electronics

Telecommunications & Media

Finance & Services


Little impact in telecommunications

In a market adversely affected by mergers and consolidations…

o With restructurings in the sector resulting in fewer projects

…SII maintained its volumes, market shares and profit margins

o SII positioned itself on network engineering projects, which were less adversely

affected than system engineering

o Use of a large-scale delivery approach


16% of revenue



Finance & Services


Growth in the tertiary financial sector and decline in the service sector

New projects in banking

o Electronic cash systems

Breakthrough in insurance

o Significant business with a mutual insurance society

Marked differences in the service sector


16% of revenue



Finance & Services


Mixed results outside Paris

o Improved volumes at the Lille, Aix and Strasbourg offices

o More difficult conditions in Nantes and Rennes

o Good results elsewhere

Continued catching-up in the Paris region

o Organic growth of 1 percent, improved margins

o More potential for increased business

o A 4-point increase in the share of total business over the past three years

Regional differences, increased business in the Paris region

28%

72% Paris region

Rest of France

32%

68%

Breakdown between the Paris region and the rest of France

2010/2011 2013/2014

757

546

460

237

220

152

92

72

56

40

2 632

Headquarters


Small increase in bench-time during the year

An average bench-time ratio of 5.79%, up slightly from 2012-2013 (5.51%)

Billable hours, excl. paid leaves, down slightly from 88.76% to 88.42%

Monthly change in bench-time ratio (France) (Billable – Billed) / Billable

3,00

4,00

5,00

6,00

7,00

8,00

9,00

10,00


Caution in hiring

o 456 new employees in France

Small reduction in headcount (down 1.4%)

o Lower employee turnover, at 14 % (down from 18%)

Hiring in line with economic conditions

Hired consultants

in France

Number of consultants

In France

0

20

40

60

80

100

120

140

160

1600

1700

1800

1900

2000

2100

2200

2300

2400

2500

Contents

13/06/2014

Outlook




International

An expanding international business

After eight years of growth, international operations generated revenue of €94m

o Of this growth, 83% came from existing operations and 17% from acquisitions

o International operations now account for 32% of consolidated revenue

An international expansion driven by several factors

o Support for the expansion projects of major customers

o New ventures in fast-developing regions

A well-structured organization

o 11 countries, 22 operations, 2,000 consultants incl. 400 subcontractors

o Corporate international management with reporting procedures

o Alliances with local managers

964

454

115

95

56

38

26

22

12

11

103

1 896

Poland

Spain

Germany

Romania

Chile

Czech Rep.

Belgium

Switzerland

Morocco

Argentina

India

International

An international strategy for outperforming competitors…

Its strategy has caused SII to have the fastest-growing international operations among French firms…

… and has more than offset weak sales in France

-1.5%

0.1%

3.3%

French sales Organic growth bysample of French TC

firms

Organic growth by SII

21.8%

3.9%

SII internationalgrowth

Internationalgrowth by sampleof French TC firms

SII internationalgrowth

Internationalgrowth by sampleof French TC firms

*

International organic growth

* Sample: Altran, Alten, Akka, Assystem, Ausy

Consolidated organic growth

International

A significant improvement from fiscal 2012-2013

In € millions 2011-2012 2012-2013 2013-2014 Change Organic growth*

International sales 60.8 77.1 94.1 + 22.0 % + 23.1 %

Poland 22.6 33.2 43.2 + 29.9 % + 31.1 %

Spain 18.3 20.9 23.8 + 13.7 % + 13.7 %

Germany 6.0 8.1 10.3 + 26.3 % + 26.3 %

Belgium 4.6 4.7 5.9 + 26.7 % + 26.7 %

Switzerland 4.0 3.6 2.7 - 23.9 % - 22.7 %

Chile 2.5 3.5 3.2 - 8.1 % - 0.0 %

Czech Republic 2.6 2.4 2.6 + 9.8 % + 14.9 %

Romania 0.5 2.2 n.a. n.a.

Morocco 0.2 0.2 0.2 - 3.9 % - 3.2 %

Average international headcount

1,113 1,528 1,780

International operating margin 9.23% 8.86% 10.78%

*Excl. acquisitions and foreign-

exchange impact

… and for improving profit margins

International

Poland: Continued positive developments

Annual growth of 30%

Increased volume of business from existing clients

New customers

o Subsidiaries of large French and foreign corporations

€43.2m 2013-2014 revenue

964 Staff on 3/31/2014

CITIBANK GEMALTO

ROCHE VOLVO IT

Top clients

International

Spain: Sustained growth in a difficult environment

Revenue up 13.7%

o Slight improvement in the general economy

o Performance of the Catalan contract gradually catching up

Improved returns, although financial conditions remain tight

o No turnaround in pricing

o Excessively long payment delays

Offshore platform in Argentina

o Small increase in sales of application solutions

€23.8m

2013-2014 revenue

454 Staff on 3/31/2014

DELOITTE ISBAN

TELEFONICA VUELING

Top clients

International

Germany: A changed dimension

AIDA passes the 100-consultant mark (105)

o Growth of 26% for the year

Strong position in driver assistance systems

o New customers and increased market share with long-term clients

Broader line of services

€10.3m 2013-2014 revenue

115 Staff on 3/31/2014

AIRBUS Group BMW DIEHL

RECARDO Top clients

International

Germany: Acquisition of Rücker Aerospace

Strategic acquisition in the aerospace sector

o An aircraft engineering specialist with a staff of 180 in Germany and the Netherlands (revenue of €17m in 2013)

o Adds to the line of services

o Expands the customer portfolio

A regular supplier to the Airbus Group

o Development of transnational projects

Acquisition for cash, consolidated from April 1, 2014

Plan for bringing the profit margin up to SII standards

International

Business increased more than twofold in Romania o Success in securing orders from local companies

o Offshore project for a French client

Resumption of growth in the Czech Republic o 15% growth in spite of a stagnating economy

Declining sales in Switzerland

Very good results in Belgium o Higher margins helped by improvements in workload planning

Sound performance elsewhere in Europe

http://fr.wikipedia.org/wiki/Fichier:Flag_of_the_Czech_Republic.svg

http://fr.wikipedia.org/wiki/Fichier:Flag_of_Belgium.svg

http://fr.wikipedia.org/wiki/Fichier:Flag_of_Switzerland.svg

International

Slower business at the Chilean subsidiary (no growth, on a constant exchange basis)

o Business hampered by SII’s dependency on its first local customer

o Resumption of efforts aimed at diversifying the customer portfolio

Satisfactory year in Morocco

o Concentration on one major customer

o New services for the French client made it possible to optimize workload planning

Development of the Indian subsidiary

o Completion of the transfer of business from the Indian partner to the SII subsidiary

o Successful bid on a first local project

Continued expansion in emerging regions

http://upload.wikimedia.org/wikipedia/commons/2/2c/Flag_of_Morocco.svg

http://www.coupemonde.fr/wp-content/uploads/2010/08/drapeau-du-chili.jpg

Contents

13/06/2014

Outlook




Financial statements

Profit margin

In €m Temporary financial statements pending audit completion

2012-2013 2013-2014 Change

Revenue 284.8 294.2 + 3.3 %

Payroll (206.9) (208.3)

Purchases and outside expenses (50.0) (54.1)

Taxes (4.5) (4.6)

Depreciation, amortization and provisions (4.7) (3.9)

Other operating income and expenses + 0.1 + 0.4

Income from operating activities 18.8 23.7 + 26.3 %

Gross margin, as a % of revenue 6.60% 8.07% + 1.47 pt

Payments in shares (0.4) (0.9)

Non-recurring items (2.1)

Net operating income 18.4 20.7 + 12.0 %

Net operating margin, as a % of revenue 6.47% 7.02% + 0.55 pt

• International • Paris region • CICE tax credits/Prices wages • Overhead

• Billable hours


Net income

In €m Temporary financial statements pending audit completion

2012-2013 2013-2014 Change

Revenue 284.8 294.2 + 3.2 %

Net operating income 18.4 20.7

Net operating margin 6.47% 7.02%

Interest income (expense) (0.1) (0.5)

Taxes (including business value-added tax) (7.8) (7.0)

Net income 10.5 13.2 + 25.6 %

Net margin 3.68% 4.48% + 0.80 pt

Minority interests* 0.0 0.1

Net income after minority interests* 10.5 13.1 + 25.1 %

Average headcount 4,204 4,374 + 170

Headcount at the end of the period 4,251 4,528 + 277

(*) impact of put options on minority holdings


Change in cash-flow generation

In €m 2012-2013 2013-2014

Cash flow from operations 15.75 19.74

Change in working capital and taxes (8.36) (5.43)

Cash flow generated by the business 7.57 14.31

Cash flow from investment transactions (3.69) (13.17)

Cash flow from financing transactions (3.43) + 3.08

Change in available cash 0.45 4.21

Purchases of securities (0.30) + 0.10

Foreign-exchange gains (losses) (0.05) (0.05)

Change in net cash 0.10 4.26

Cash at year start 20.55 20.65

Cash at year end 20.65 24.91

Long-term debt 3.78 6.32

Short-term debt 8.15 10.41

Net cash 8.72 8.18


Balance sheet

In €m 3/31/2013 In €m 3/31/2014

Non-current assets 28.8

Current assets 107.9

Cash 24.5

Current liabilities 81.6

Shareholders’ equity 71.9

Minority interests: 0.2

Non-current liabilities 7.7

Non-current assets 26.9

Current assets 128.0

Cash 28.4

Current liabilities 92.2

Shareholders’ equity 81.6

Minority interests: 0.4

Total = €183.3m Total = €161.2m

Non-current liabilities 9.5

Contents

13/06/2014

Outlook




Outlook

Outlook for fiscal 2014-2015

Continued increase in revenue and income in

2014-2015 in spite of a difficult first half

35 percent of revenue from international operations

Outlook

Proposed dividend & financial announcements

Dividend of €0.08 per share Proposed to the Shareholders’ Meeting of September 17, 2014

Financial announcements timetable for 2014-2015

Fiscal 2014-2015 first quarter revenue: August 12, 2014 after the close of trading

Fiscal 2014-2015 first half revenue: November 12, 2014 after the close of trading

Fiscal 2014-2015 first half results: December 9, 2014 after the close of trading

Aug. 12

Nov. 12

Dec. 9

Outlook

Share ownership as of 6/3/2014

Capital divided into 20,000,000 shares

Float 30.93%

Other shareholders 15.57%

Fidelity 10.13%

Oddo AM 5.23%

Treasury shares 7.90%

Management & Employees 61.17%

meeting with financial analysts (sfaf)...meeting with financial analysts (sfaf) fiscal 2013-2014...

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