Steria's UK business continues to struggle in the first half with weak performance in banking and public sector. UK revenue was down 3.6% on a constant currency basis (ccy) to €356.9m – that was against a 2% decline in Q1 (see here). Compare that to larger rival Atos, which delivered 6% growth in the UK in H1 (see here), and we can see clear diversity of performance.
The UK is still generating the highest margins group-wide, albeit down at 7.8% from 8.4% last time. Steria’s home market France saw its margin more than halve to 2.2% (vs. 4.7%), Germany improved to 6.6% (vs. 3.7%), as did the rest of Europe at 7.1% (vs. 2.6%). Steria is now embarking on a cost reduction plan in France.
Group-wide revenues fell 2.3% to €873.8m, although the operating margin remained more or less flat at 5.2%. In terms of business lines, infrastructure management and BPO grew by 4.5% while applications services (consulting, systems integration, applications maintenance and testing) fell 7.4%.
In the UK, Steria continues to see momentum in the Energy-Utilities/Telco-Media/Transport sectors. However this was clearly not enough to offset the decline in banking and public sector. Nonetheless, the UK pipeline has apparently seen a marked increase since December 2012 benefiting, in particular, from new opportunities in the public sector. In March, Steria won an ITO deal with the UK Health & Safety Executive (HSE) from incumbent CGI (see here), and in April, it signed the Greater Manchester Police for a recording managed service (see here). These deals should help to push the UK back in the right direction in H2.
Another plus, albeit small in size, is the £950k Steria has now won through the UK Government's G-Cloud framework. This includes project management support for a records management and collaboration programme at Defra, agile delivery for the development of a freight targeting system at the UK Border Force; and the hosting of a high availability website for the Hillsborough Independent Panel investigation on behalf of the Home Office. All in all, more encouraging signs for Steria's UK public sector business.