Monday, 27 October 2008

Steria profit warning sees off France CEO

(By Anthony Miller) Steria abruptly parted company with its France country CEO on the back of a profit warning, advising that FY08 margins will fall 30 bps shy of the 7.8% analysts had chalked in. Steria’s stock plunged 19% on the news. Steria had “confidently” predicted “near-8%” group FY margins at its interim results in August, expecting France operating performance to improve “significantly” in H2. Obviously not, as the terse company release referred to “operational difficulties encountered in France” in H2, though apparently all other geographies are performing to plan.

Indeed, the integration of Xansa, acquired for a startling 70% premium a year ago, is reportedly complete, with cost synergies ahead of plan. Steria’s UK business is now the largest in the group, responsible for over 40% of total sales, vs 30% for France. The UK is also Steria’s most profitable unit, at a 9.7% margin vs 7.3% for France. It sounds like the Xansa bit is still motoring well as just a few days ago Steria announced that it had signed a 5-year F&A BPO deal with UK hospitality group Whitbread, to be delivered entirely offshore. Since acquiring Xansa, Steria has apparently been successful at moving some French clients’ IT services work to India. However, major BPO deals like Whitbread have a minimum 12 month gestation period, so we wouldn’t expect to see any non-UK BPO deals announced before the new year.

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