Thierry Breton, Chairman and CEO said: “During the second quarter, all the actions we have initiated in North America accelerated and led as expected to an improvement of revenue evolution in Infrastructure & Data Management towards growth in H2.
The integration of Syntel runs as planned and synergies continue to materialize. More order entry synergies were generated, and cost synergies are materializing.
During the first half of the year, the Group performed a positive +0.8% revenue organic growth (+1.1% in Q2), with a book to bill ratio at 100% (113% in Q2). Our commercial dynamism confirms the relevance of our end-to-end strategy, relaying on our key technologies and services, reinforced by our strategic partnerships.
We hired more than 600 experts in Big Data and Cybersecurity in H1 2019 and continued to invest in innovative offerings to be a leading player in the consolidation of this market going forward. Our Division recorded a solid +12.4% revenue organic growth in H1.
We significantly invested in H1 in innovative technologies such as IoT, Machine Learning and Edge Computing as well as in the related skills for our employees. Finally, we pursue our willingness but also our duty to reduce our carbon footprint in a high-energy consumer market.
Further to the first half of the year, we confirm all our objectives for full year 2019 as well as the targets of the three-year plan.”
H1 2019 performance by Division
Revenue was € 5,744 million, up +0.8% organically, thanks to a strong performance recorded in Big Data & Cybersecurity, and growth in Business & Platform Solutions. The decrease of Infrastructure & Data Management reduced from Q1 at -3.0% to Q2 at -0.6% further to the improvement of the situation in North America.
Operating margin was € 529 million, representing 9.2% of revenue, an improvement by +20 bps mainly fueled by the good performance in Business & Platform Solutions (+80 bps), while Infrastructure & Data Management achieved stabilization. Operating profitability of Big Data & Cybersecurity reflected specific R&D and offering investments in both Cybersecurity and Big Data solutions.
| Revenue |
Operating margin |
Operating margin % |
|||||
| In € million |
H1 2019 |
H1 2018* |
Organic evolution |
H1 2019 |
H1 2018* |
H1 2019 |
H1 2018* |
| Infrastructure & Data Management |
3,137 |
3,193 |
-1.8% |
274 |
277 |
8.7% |
8.7% |
| Business & Platform Solutions |
2,135 |
2,087 |
+2.3% |
247 |
224 |
11.6% |
10.8% |
| Big Data & Cybersecurity |
473 |
421 |
+12.4% |
48 |
49 |
10.2% |
11.7% |
| Corporate costs |
- |
- |
- |
-40 |
-37 |
-0.7% |
-0.7% |
| Total |
5,744 |
5,701 |
+0.8% |
529 |
513 |
9.2% |
9.0% |
Infrastructure & Data Management revenue was € 3,137 million in H1 2019, down -1.8% at constant scope and exchange rates. After a first quarter at -3.0%, the Division achieved -0.6% organically during the second quarter of 2019 thanks notably to the improvement of the situation in North America. The Division pursued its business model transformation by increasing the share of revenue in Hybrid Cloud Orchestration and in projects in Technology Transformation Services as well as Unified Communications. It continued the digital transformation of its main clients through automation and robotization and managed to sign several new deals in these strategic areas.
Growth materialized in Financial Services, mainly fueled by the ramp-up of the significant contracts in the United States with CNA Financial Corporation overcompensating the Standard & Poor’s contract which was not renewed last year, and in the United Kingdom with Aviva, coupled with increased activities with NS&I and Aegon. Telcos, Media & Utilities benefited from additional sales achieved with BBC and the ramp-up of several contracts such as in the United Kingdom and Iberia. The situation in Public sector and in Manufacturing, Retail & Transportation was challenging, notably in the United Kingdom due to Transition & Transformation phases completed last year and lower volume, and in the United States due in particular to the termination of Marriott International contract end of H1 2018.
Operating margin was € 274 million in the first half of 2019, representing 8.7% of revenue, achieving stability compared to last year. Indeed, all geographies pursued strong cost saving actions including the RACE program to adjust their cost base to the revenue evolution.
Business & Platform Solutions revenue during the first half of 2019 reached € 2,135 million, +2.3% at constant scope and exchange rates. Revenue growth reached +1.1% organically in Q2 2019.
Growth was strong in Manufacturing, Retail & Transportation, which benefitted from good performance in almost all geographies and particularly in Germany, thanks to new application management services with Siemens, new SAP engagement in Austria, the contribution from Syntel activities in North America, and new business recently won in the Benelux & The Nordics. Telcos, Media & Utilities sector showed a growth largely fueled in utilities in continental Europe. The Division posted growth in Financial Services, strongly supported by Syntel activities in this market in North America and materialized synergies on existing accounts in the United Kingdom. In Public & Health, the situation was more challenging mainly due to volume reductions in legacy contracts in North America. Finally, at the occasion of the transfer of legacy contracts to Syntel, the Division managed to reduce the number of low margin contracts in Q1 2019, and further in Q2 2019.
Operating margin was € 247 million, representing 11.6% of revenue. The strong improvement of +80 basis points was mainly led by North America, Germany and the United Kingdom. This was primarily attributable to the cost synergies from Syntel integration combined with the reduction of some low margin contracts as already mentioned. The improvement also came from increasing revenue from digital offerings combined with continued cost saving effects in most geographies, notably through the industrialization of global delivery and a more efficient workforce management.
Revenue in Big Data & Cybersecurity was € 473 million, with a continued double-digit growth led by France and Benelux & The Nordics, while North America did not repeat in Q2 the high level of sales performed last year and therefore impacted growth.
In Big Data activity, the strong growth was largely sustained by new business in France, combined with a strong performance posted in Benelux & The Nordics with the CSC contract, as well as in Brazil with a petroleum company. Cybersecurity activities also posted a double-digit growth led by new business opportunities with CNA Financial Corporation in North America, combined with good performance in Benelux & the Nordics and Germany which largely offset revenue from licenses not repeated this year in the United Kingdom. Mission Critical Systems sales posted a solid growth largely coming from the ramp-up of the National Police contract in Central & Eastern Europe.
In Q2 2019, Big Data & Cybersecurity recorded a revenue organic growth at +13.2%.
Operating margin was € 48 million, representing 10.2% of revenue. Operating profitability in H1 2019 reflected an acceleration on specific R&D and offering investments in both Cybersecurity and Artificial Intelligence, and Big Data solutions.
H1 2019 performance by Business Unit
| Revenue |
Operating margin |
Operating margin % |
|||||
| In € million |
H1 2019 |
H1 2018* |
Organic evolution |
H1 2019 |
H1 2018* |
H1 2019 |
H1 2018* |
| North America |
1,345 |
1,420 |
-5.3% |
148 |
140 |
11.0% |
9.9% |
| Germany |
1,074 |
1,052 |
+2.2% |
68 |
62 |
6.3% |
5.9% |
| France |
887 |
847 |
+4.6% |
59 |
61 |
6.7% |
7.2% |
| United Kingdom & Ireland |
842 |
860 |
-2.1% |
87 |
93 |
10.3% |
10.8% |
| Benelux & The Nordics |
524 |
510 |
+2.6% |
39 |
37 |
7.4% |
7.3% |
| Other Business Units |
1,073 |
1,012 |
+6.1% |
168 |
160 |
15.6% |
15.8% |
| Global structures** |
- |
- |
- |
-38 |
-40 |
-0.7% |
-0.7% |
| Total |
5,744 |
5,701 |
+0.8% |
529 |
513 |
9.2% |
9.0% |
** Global structures include the IT Services Divisions global costs not allocated to the Business Units and Corporate costs
During the first half of 2019, revenue grew in most Business Units:
· In North America, Infrastructure & Data Management accelerated its recovery in Q2 thanks to the ramp-up of new contracts including CNA Financial Corporation, while it was impacted for the last time by the ramp-down of two contracts terminated in H1 last year. North America is now on track towards positive organic growth in H2;
· Germany up +2.2% thanks to a strong activity in Business & Platform Solutions led by both digital projects and the new application management contract with Siemens;
· France grew by +4.6% fueled in particular by the strong performance in Big Data & Cybersecurity and more particularly in Public & Health;
· In the United Kingdom, a strong activity in Business & Platform Solutions more particularly from Syntel did not compensate lower sales of licenses in Cybersecurity and lower volume on contracts renewed last year in Infrastructure & Data Management;
· Benelux & The Nordics recorded a growth at +2.6% driven by its good performance in Big Data & Cybersecurity while stabilizing Infrastructure & Data Management;
· “Other Business Units” performed a solid +6.1% organically thanks to a strong performance in the three Divisions and in all geographies more particularly in Central & Eastern Europe and in South America.
The increase of operating margin in the first half of the year was mainly led by North America and Other Business Units. Indeed, North America benefited from the first materialization of synergies with Syntel and the improved monitoring of costs to align with the level of its activity. Other Business Units operating margin improvement was performed in almost all geographies linked to revenue growth.
