It must have been the software-laden acquisitions that did it (see Sopra UK goes shopping (again) to double size), as organic growth was a different story for Sopra UK, the local operation of the Paris-based mid-tier SI. The expected near-doubling in UK headline revenues in 2012 to €104m (c.£85m) belied a 3% organic decline, as had been apparent pretty much all year (see Another tough quarter for Sopra UK). But profitability transformed, from a distinctly undernourished operating margin of 2.4% in 2011 to a very respectable 7.3%.
Groupwide, Sopra’s revenues grew by 16% (2.4% organic) to €1.22bn (c.£1bn), but operating margins fell from 9.3% in 2011 to 7.5%. Management is targeting 2-5% organic growth in 2013 but has yet to take a view on margins.
I am sure management will putting a lot of focus on its acquisition-enhanced Banking Software division (see Sopra – the banking software company!) given that revenues declined in 2012 on a pro forma basis by just over 1% to €216m (c.£175m). Software assets have become a core part of Sopra’s growth and profitability strategy – at 14%, Banking Software division margins are almost double those of the group. Management has set an ‘ambitious’ target to generate 30% of its total revenues from software, though by when it doesn’t seem to say.
To further this aim, Sopra also announced the proposed acquisition of Madrid-headquartered, Europe-centric ‘Global Services HR solutions’ firm, HR Access from Fidelity Investments. Fidelity acquired the business from IBM in 2003 (for an undisclosed sum) after it took over the running of IBM’s health and welfare plans. Terms of this latest acquisition were also not disclosed.
But the real question is whether Sopra will be able to use all this IP to leverage its services - else it simply becomes a 'business of two halves' (and it has been there before with enterprise software unit Axway,divested and floated in 2011 (see here).
