The fact that management of Paris-based Sopra Group didn't venture to provide margin guidance for 2013 when it announced last year's results rather set the expectation that the news might not be good. And so it came to pass, with the company now expecting operating margins to come in some 30-70bps below those in 2012 (7.5%). However, management is sticking to its 2%-5% organic growth target and expects net margins to 'at least equal' the 4.6% achieved last year. Part of the reason for the expected slip in profitability is the acquisition of Madrid-headquartered, ‘Global Services HR solutions’ firm, HR Access (see here), for which "budgetary breakeven could be reached as early as 2014".
Management also took the rather unusual step of forecasting revenues and margins two years hence, setting a €1.5-2.0bn revenue and a 10% operating margin target for 2015. This is a pretty bold statement for a €1.2bn company to make, clearly signalling more acquisitions are on the agenda, which then rather calls into question the aspirational margin boost.
Sopra is around a tenth of the size of Paris-based archival Capgemini and not much more than that compared to Atos. Meanwhile Sopra's core UK IT services business appears to be drifting away (see Sopra UK slips again) as its compatriots – including Steria, not that much bigger than Sopra groupwide – gain share.
Management's quest for accelerated growth and profitability seems to be resulting in an unfocused IP acquisition strategy (banking software, HR software, what next?) which risks seeing the company hoisted on its own medium-term-target petard. One wonders whether an independent existence for Sopra really is the best way forward.