Sopra Steria Group SA (SOP) Earnings Call Transcript & Summary

Welcome to the H1 2021 Results Presentation for Sopra Steria Group, which will be led by Vincent Paris, Group CEO; and Étienne du Vignaux, CFO. [Operator Instructions] I now hand the floor to Vincent Paris. Over to you.

Good morning, everybody, and welcome to this H1 Sopra Steria Results Presentation. For this presentation, we will have quite a standard agenda. We'll start with an overall presentation and a snapshot of where we stand halfway through the year 2021. Then we will look at the situation in each reporting units at the end of the first semester. And then Étienne will talk about the financial results for the first half, and I will finish with our priorities and objectives for 2021. So overall situation. I think the comment that I can make is that we are working on a very active market, accelerating in the second quarter. All verticals, all customers are impacted. And we are seeing quite a simple trajectory. All of these customers are moving towards the platform enterprise model. This is the central positioning. We're at the heart of the ecosystem. This means there's resilience, performance, and to be aligned with this trajectory, we have to obviously have a quick time to market. We have to move fast. And this involves transformations at organizational level and also in terms of information systems. There are 3 drivers pushing all of this. There's the cloud migration of infrastructures and applications, digitalization and automation of processes and then, of course, cybersecurity. So more and more digital, more and more cloud, more and more openness. So more investment required in terms of cybersecurity. These 3 areas are obviously our areas of expertise. So this is why our business has been highly buoyant and is accelerating in the second quarter. In terms of sales performance, business activity has been sustained. I can't talk about everything. But in the public sector, obviously, in continuity with previous results, it has been sustained. Obviously, we've had renewals with SSCL and then we've had the U.K. visa service as well. That was important. And then I want to highlight 2 other references which are important. Firstly, we have Airbus Defence and Space. So we are still their partner for private cloud. And this positioning is a visioning we acquired, so managing infrastructure last year. This requires 2 things. So Airbus obviously requires us to be very present, and we have got an interesting outlook, obviously, with everything that we've experienced in the past year. And then it also shows that we're a major stakeholder in this cloud transformation for our big customers. The second reference that I want to highlight is Covéa. We saw with the acquisition of Sodifrance last year, we want to be a leader in this market for social protection. So we are their transformation partner, and we have just won a very important transformation operation. So optimizing all of their customer relationship. That's the Covéa. So those are 2 illustrations. Obviously, I could give you plenty of other examples in Europe. And we can see that the market is very buoyant with these transformations. In terms of turnover, organic growth of plus 9% in the second quarter. One important factor is that basically, we've come back to the same level of business that we had at the same point in time in 2019. If we exclude changes in scope and currency, we're seeing EUR 1.17 billion compared with EUR 1.16 billion in Q2 2019. Obviously, this growth is conditioned by the aerospace business. I'm going to focus on this a little bit because at this point last year, we were very much impacted by this context. On the left of the slide, you can see changes in commercial air traffic. What can we say about this? So in 2021, we're kind of halfway between what we had in 2019 and what we had starting in the second quarter at 2020. So minus 26% when compared with 2 years ago. For us, we're on the right here. The first quarter in 2020 was very buoyant, plus 11%. Then we had 4 difficult quarters. And now we've returned to growth, plus 29% in Q2 2021. So where are we, broadly speaking? Obviously, we've seen growth -- negative growth. But now we're kind of halfway between the activity that we had 2 years ago and the business we had last year. Obviously, I'm giving the example of Airbus, which is our #1 customer, a key player in the industry. The turnover that we had basically -- every quarter was basically EUR 80 million. In 2020, it was about EUR 60 million. Now we're about EUR 70 million. So doing a lot better than last year. This is good news, obviously, but we're not at the level where we were 2 years ago. So return to growth obviously includes a rebound in operating performance. Operating margin on business activity has improved. It was at 6.1% 1 year ago, H1 2020. Now we're 7.2%, so an improvement of 1.1%. So we're doing better than the first half of 2019 when we were at 6.8%. And there are several factors that explain this. There's downtime between contracts, which was 3.5%. So that's been reduced. And then travel expenses have also gone down by about 50%. And then there are also other factors like in the U.K., in the first half, we've seen a lot of volume in the public sector, but I will talk about that afterwards. Another important factor is cash generation as well, where we're seeing positive influence. Free cash flow has improved for the past 2 years now. In the first half of 2019, minus EUR 21.8 million, H1 2020 EUR 37.1 million and H1 this year EUR 61.9 million. So we've got about the same volume of the favorable impact related to nonrecurring items, but we can see a trend, which is an improvement in the free cash flow. So throughout this transformation period, obviously, we have reviewed our corporate plan. We haven't changed it. You can see on the slide, this is exactly the same plan that we presented and established a few semesters ago. It's an independent project. It's an expansion project with added value in terms of our offers. So European for services and worldwide in software, and it is a project that is based on differentiation. That's not changed. But our environment has changed our customers' expectations, our employees' expectations. Throughout this period after COVID, obviously, we're not working in the same way as we did before and we don't produce in the same way, and we don't sell in the same way as before. So this obviously has an impact on the way we work with regards to our internal processes within the company. And this is what we have been working on actively to guarantee our midterm project. And obviously, we've seen an improvement in performance in the midterm. We want to achieve double-digit performance here. Behind this project, we obviously have 3 key priorities. No surprises here. We're pushing digital. We're ramping up our digital center of expertise, both in qualitative and quantitative terms. We've carried on investing, obviously, as necessary in digital. We have the approach, which is build to reuse and reuse to build. We have the cloud-native platform for all of our products today. And then obviously, we've been very active in terms of the digital ecosystem. You've got the various initiatives on the slide here. These were important in this domain. The second factor, which we pushed is consulting. This is at the heart of our project. Obviously, you'll know that last year, we had a negative growth. So we've returned to growth. We are recruiting. We are establishing the Sopra Steria Next brand, which we're rolling out in the group in Germany and Spain in particular. This is a key factor as part of our project. And then the third area, which we've pushed, no surprises here, is financial services. This is a vertical where we've got the most assets and we needed to align all of these assets and all of these business lines to provide as much added value as possible for our customers. So we've reinforced governance to accelerate synergies. We continue development of Sopra Banking Software. I'll come back to that. And then we are launching development of service platforms, and we hope to gain market share in this domain, especially in the U.K. but in all the group's geographies. So we're focusing ourselves to make ourselves more powerful in this vertical. That's what we can say in terms of highlights in the situation halfway through the year 2021. Now as per usual, I will talk about the operating position by reporting unit. So first of all, key figures. EUR 2.3283 million (sic) [ billion ] with organic growth of plus 4%. EUR 168.6 million, so 7.2% of revenue. Net profit attributable to the group was EUR 85.1 million compared with EUR 43.7 million last year. Free cash flow, EUR 61.9 million compared with EUR 37.1 million in the first half of 2020. Net financial debt, EUR 422.7 million, so 1x EBITDA. And the group's workforce was 46,129 compared with 45,960 at the 31st of December 2020. Here, you've got operating performance by reporting unit. So we're seeing organic growth, plus 4%. And top-level margin 7.2% compared with 6.1% in the first half of 2019. Now if we go around our divisions. France returned to growth as announced. We've had stable semester, 0%, and we're expecting growth in the second -- we've had 7.5% growth in Q2. So good momentum in all markets. Systems integration had a growth, which was satisfactory. Consulting, obviously, well returned to growth as well. Infrastructure management was stable with significant growth in the Go-to Cloud and infrastructure transformation, which means we will have growth in this area in the second half of the year. So we resumed hiring plus 1,400 people, and this will accelerate. And we have increased use of subcontracting to come back to the cycles that we had before the COVID crisis. Basically, we should take away that margin has improved when compared with last year. So 8.3% compared with 8.2%. We will continue to improve, and there is no reason why we shouldn't have the level of margin that we had before COVID, and we're seeing positive trends in terms of growth. The second half of the year will display an acceleration. With regards to the EU now, with United Kingdom, sorry, we've had a good half of plus 20%, aligned with previous quarter. So obviously driven by the public sector. The 2 joint ventures have had growth. SSCL had a major contract halfway through last year for the Ministry of Defence. And then a second factor with SSCL is the volumes that we've had, especially for human resources management. So we've seen good values in this -- in H1. NHS as well had significant growth. Another important factor I've mentioned, so the visa service with significant volume here. And we've also seen in the private sector, activity was down, but a lot less than in previous semesters. In terms of our margins, you can see a significant improvement, which was driven by this context. We've gone from 4.6% to 8.7%. We should be careful, obviously. There are contractual factors here, obviously, with regards to volumes of SSCL and UKVI. So this means that we're not at the same level of improvement in the second half, but we're seeing that the context is very positive. In the private sector, we'll be investing, and we'll have a solid sustainable foundation, especially in the banking industry. Now for Other Europe. Organic growth of 2.8%. There are 2 major blocks within Europe. So we've got SFT. This is the Sopra Financial Technology, subsidiary with the 7 Sparda banks. This operation, obviously, as planned in the business plan -- this is the first phase, which is behind us. We were at about EUR 85.8 million previously and profitability was negative at around EUR 3 million. But following the plan, this was planned. And in the 2 coming years, while we roll out the platform, once we finish the transformation, this will be the context. Obviously, this has had an impact on Other Europe. Aside from this operation, we've seen good momentum, very good momentum in all of our countries. Average growth of 7.5%, driven by Belgium, Germany, Scandinavia and Italy, where we had good growth rates. And what we should note is the improvement in operating margin for all of our countries. We've gone from 7.1% to 7.8% in the first half of this year. So very positive context, which should continue in the coming semesters. Now for our software business, Sopra Banking Software. Negative organic growth of 3.1%. But the second quarter posted organic growth of 3.8%. I think we need to highlight a few major trends with regards to Sopra Banking Software, the first of which is the market. No surprises here. We're seeing a progressive shift to a subscription-based model. This is not new, but this is a transformation which is underway and which will be amplified in the future. Second trend is linked to our willingness and the way we manage. So we want to refocus Sopra Banking Software on software business and increase the share of licenses, maintenance and subscriptions out of overall turnover. We were at 59% previously. And this -- we've seen organic growth in this domain of 3.8% this year. However, the services activity has gone down by 9%. So that was a minus 6% in Q2. And broadly speaking, in the coming semesters, we're going to see this trend, and we're going to carry on managing it. Another important trend that we're pushing is obviously transformation of R&D. We have strong objectives. We want to bring this down by 10% with regards to the ratio of turnover. We've about 30% of turnover and 3 years -- in 3 years' time, we want to bring it down to under 20%. So this transformation is underway, and it will start to pay off progressively in coming years. At the same time, we're carrying on developing our products. Obviously, we have 3 priorities. The first of which regards core banking systems. We've got the Sparda operations, which I've already mentioned. We're making progress on this, and we're rolling out the first components in the second half of this year. And then obviously, we have the objective, where Sopra Banking Platform is due to roll out this operation elsewhere in Germany and in Europe in the future. Our second objective is to carry on pushing Sopra financial platform. So this is from APAK and Cassiopae office. We've got a more subscription-focused model. So the APAK model is obviously highly effective, and we'll be using this. And then the third priority is digital transformation. We've been investing in this for several years now. So we won't stop, we will carry on. This is very important. It's important to open up our core banking systems and ensure that we're a major player in digital transformation with these assets. So with all these transformations that are underway, our objective is to come back to double-digit profitability as quickly as possible. And then obviously, with growth, we'll carry on increasing the margin in the future. And then to finish the operating units, we've got Other Solutions. We're seeing an active market here, 8% organic growth, 13% in the second quarter. The overall context, same for Sopra Banking Software in terms of business here. We've carried on investing heavily in digital. We started last year and we will continue. This is important to sustain growth and develop -- to defend our positions and to carry on developing. So modernizing our product, opening up to digital. Margin improved slightly when compared with last year, 6.8% compared with 5%. So we won't be back to 15% due to the investments that I've spoken about. But in the second half, the margin should improve. So that's what I'd like to share with regards to our reporting units. And now I'd like to hand the floor to Étienne to talk about the financial information.

Thank you, Vincent, and good morning, ladies and gentlemen. Well, let's look at the income statement first with revenue at EUR 2.328 billion, that's 4% organic growth. And operating profit on business activity at EUR 168 million. That's 7.2% of revenue. Stability of share-based payment expenses, at the end of May 2021, the new incentive plan was initiated but has had little impact. So we're thinking of EUR 6 million to EUR 7 million impact. Amortization of allocated intangible assets, down by EUR 16.2 million. You might remember that in last year, those -- the PLM activity impact in the aerospace industry, that was not -- that did not recur this year. Group profit from recurring operations at EUR 150 million, that's 6.5% of revenue. Other operating income and expenses down significantly, minus EUR 9.2 million, which gives us an operating profit at EUR 141 million, that's 6.1% of revenue compared to 4% in the first half of 2020. So financial debt and financial expenses are under control. And if we compare the first half of 2021 to first half of 2020, it's stable. If we look at the net profit from associates and if we exclude noncontrolling interests, net profit is at EUR 88.8 million. You might remember that first half of 2020, EUR 10.5 million worth of our nonrecurring expenses linked to the COVID crisis had an impact. Well, a little less than EUR 6 million have been recognized. It was tax-related, but not corporate tax. So it has had a favorable impact. But excluding these effects, the restructuring and reorganization costs are down compared to 2020. So both in absolute terms and in percentage of revenue. If you look at tax now, so effective tax rate is up at 33.5%, but the tax expenses also include a onetime effect that has to do with the impact of the increased tax rate in the U.K. The corporate tax is going to go from 19% to 25%. That's been announced by the U.K. government, which is why for 2021, we're counting on an effective rate of 30%. Having said that, we think the normative tax raise will be around 28%. That's our estimation, bearing in mind the changes in rates that have been announced in France and in the U.K. in particular. Quick word on our net financial debt. It is stable. So EUR 3.5 million less than in 2020. So in previous years, dividends were paid early July, whereas this year, it has been paid first quarter. Almost EUR 62 million in free cash flow generation. If we look at the detail of movement in free cash flow, first, EBITDA went up at plus EUR 36 million, nonrecurring items up EUR 20.6 billion (sic) [ million ]. And in change in working capital requirement, minus EUR 44 million. But we have to be reminded that there had been a favorable effect of the EUR 57 million last year. So we haven't had that effect in the first half of 2021. But having said that, the group has gone on benefiting from anticipated net cash receipts from its large accounts, both private and public, in particular, in the U.K. in the public sector. So it has accounted for EUR 61.9 million as of 30th of June. It's something we've had already benefited and underlined before, and it has been a highlight of the first half of 2021. And lastly, our financial position remains very robust. The ratio, net financial debt to equity, is 26%, and the net financial debt-to-EBITDA ratio is 1x. And the available undrawn amount, fairly comfortable, EUR 1.1 billion. That's the figures I wanted to share. Thank you for your attention. I give the floor back to Vincent for the outlook.

Thank you, Étienne. So we'll start with challenges and priorities for the coming period. No surprises. Obviously, human resources are going to be central. They always are with our type of business, more than ever today. So obviously, given the mechanics, growth and transformation that we have, we're going to be focused on HR. We're focusing on recruitment. This is key in order to deliver growth. I said that we've restarted recruitment. We've recruited over 4,000 employees at group level in the first half. Acceleration in Q2, so 1,900 in the first quarter and then 2,400 in the second quarter. So we'll be accelerating this. We want to recruit at between 9,000 and 10,000 employees, of which 3,000 in France, by the end of the year. Our next priority is obviously, training. Corporate culture, fundamentals and basics are going to be key. So obviously, with a new way of working, more remote working, homeworking, we have to uphold these foundations. So we're investing in training. And then the third priority with regards to human resources is diversity. Well, obviously, you've seen we've committed to boosting female representation in management bodies with 25% in the Excom by -- with 30% in the Excom by 2025. We've carried on investing in our office of consulting, financial services and then transformation of our R&D. We have our product plans. And then obviously, external growth. We're seeing that the market is accelerating. There will be consolidation. So we want to be an active player in this domain. In terms of guidance and targets. The context I've just described means that we've increased our objectives. Organic revenue growth is still equal or above 6%. We had said between 3% and 5%. Operating margin on business activity between 7.7% and 8%, where previously it had been between 7.5% and 8%. And then free cash flow between EUR 150 million and EUR 200 million where previously, we set ourselves a target of EUR 150 million. So that's the key information we wanted to share with you on the first half of the year for Sopra Steria. So what I'd like to suggest we do now is answer your questions.

[Operator Instructions] We have the first question from Nicolas David from ODDO BHF.

Thank you for this very detailed presentation of the results. I've got several questions. Firstly, with Airbus. Thank you for the detail. EUR 70 million in revenue with this for the second quarter or -- what are you expecting for the second half of the year? Is this a plateau or are you seeing an acceleration here? My second question in regards to U.K. Organic growth is obviously very strong. But if we exclude from this [ business ], the visas, obviously, that were stopped in Q1. So the trend is not as strong in Q2. What's the momentum here? Obviously, we've got ramp-up with the Ministry of Defence, SSCL. Is there any more information that we should have in mind? And what can we expect for the second half? Have you signed a new contract with the Ministry of Defence? Is it significant? And then last question is banking software and more specifically, financing software. Are you going to be more active in sales terms, especially with Cassiopae with the new versions? How is the pipeline for this activity?

Yes. Good morning. Well, to answer your first question on Airbus. We're clearly, in Q2, we are at the level I've just referred to. So it's going to be pretty much stable over the next four quarters, the forthcoming period at any rate. That's the basis. If we're successful in terms of gaining new market share, it could be better if the clients [ covers ] some activities. It could be a little less. We're not foreseeing any acceleration in growth, but that's what I've shared with you, as well as we intend to build for the forthcoming period, bearing in mind what we currently have and compared to what we had for Q2 2020. Regarding the U.K. growth for over all of the first half. You have to bear in mind that these volumes are not linear from one quarter to another. So there can be 1 very buoyant month and 1 month that is not as booming. So even with the visas, it's difficult to give explanations for 1 month or for a quarter. So we've, of course, benefited from the gain of the Defence Ministry deal for SSCL, but that effect is a onetime thing. So maybe it's going to go on in terms of positive effects, but we can't really rely on that. If you look at the figures compared to versus 2020, of course, we had some quarters where everything was at a standstill. So that's not going to happen again. So that's why we are confident in that momentum. Regarding Sopra Financing Platform. So we have this element that derived from APAK and Cassiopae. So we are cautious. We want a cautious growth. We do not aim at a more intensive growth, but there is growth on license, maintenance and subscription. And we're experiencing growth on banking platform as well for the first half of this year. But we are still expecting cautious growth and not a very high growth, and that's deliberate on our part.

Okay. So obviously, with Airbus, we saw that the situation was a little bit anxious after the first quarter. But in terms of guidance, are you feeling a little bit more reassured with regards to Airbus' environment and the plans that they might have for the future?

We were not worried really, but we saw as a possibility a second wave of reduction and [ curbing ], and it's still possible. But if we look at air traffic, what Airbus is saying in the global market of the aerospace industry, when I'm talking of a basis, that's what it is. It's sort of a bedrock basis and everybody is pretty confident. So in terms of subcontracting, well, we want to maintain the level of activity, then we have to be good at competing with rivals. But for the aerospace industry, the matters for concern are no longer matters of concern.

Okay. Very clear. Now for SFT, I just want to understand the subscription model, which is obviously -- which is generating less significant growth than the licenses model. But what can we expect? Perhaps you might be more active in terms of sales. Will we see an acceleration in this growth progressively in the second half?

You're talking of banking software, Sopra Financing Platform. Sorry, we couldn't hear you very well, so to speak. Well, good news is that we've experienced growth in the first half with that license maintenance subscription model. That's what we're focusing on, the midterm plan. You know very well that when you move from a license maintenance model to a subscription model, it can be a bit erratic. There can be good quarters and not so good quarters. So the subscription model will be very robust. But it takes a bit more time. For Sopra Banking Software, we don't expect a significant improvement. It will depend on the way things go with subscription. But the underlying trend is about deep transformation of R&D and investment in our product plans, the way I've described them. So if we keep to this, we will deliver, but we need a bit more time. And about the figures for this year, of course, moving to subscription-based models and the uncertainty on licenses, I think we need to remain cautious.

Now we have another question from Emmanuel Parot from Gilbert Dupont.

I have 3 questions. The first on financial services. I wanted -- you mentioned a reinforcement. Could you talk about that? My second question, the Sopra Banking. So if I had -- you've got a drop in services of 6% with obviously the willingness to lower the weighting of services, if I've understood properly. Could you just talk about this change? And then could we consider in the midterm -- are you going to perhaps integrate -- will this be integrated? And then with recruitment in France. So if we take the figures that you quoted, net figures, how is this impacting subcontracting? How is subcontracting changing? And then what about offshore for France, what does this represent? And what are the changes now compared with the previous years?

Financial services first. We're strengthening in terms of governance, but our business already existed. It's the first vertical market. This is where we have most assets, and this is where we have more promises from our clients. But it is where it is also complicated to deliver. I'm thinking of consulting and software that are on an industrial mode. So to combine all these approaches and all these clients is not easy. So governance is essential to make sure that we make the right trade-offs, that we're aligned with our clients and we're pushing for the right priorities. So in terms of vertical priorities, we need to decide on the right priorities. And it's partially -- there are partial improvements that are possible. Nothing more than that, but it's essential. All of our clients should be able to benefit from our assets in all the geographies with the Sopra Banking Software at the core of it. Secondly -- second question, Sopra Banking Software. I forgot your question. Yes, it was about services, yes, right. So minus 9% at Q1, 3% in Q2. We want to refocus on added-value services close to products. We've had a negative growth that was a bit more significant, but which was as planned on the financial platform on Q1 and Q2. But that service activity we are going to go on strengthening. Can -- is it possible for new partners to integrate our products? Yes, that's something we are looking into, but not right now. Maybe not before 2 or 3 years from now. But there's absolutely no obstacle to overcome. This is what we base our building of the model on. And your third question about recruitment. So net headcount, it's about 130 people. If we look at departures and arrivals, we want to speed that up, as I said before. We want to speed up recruitment. We've recruited 1,400 people. We want to go over 3,000, which means that we could also do more. But we want the quality of a recruitment to be preserved. This is a tense market, same as for everybody. So we're strengthening the recruitment scheme, but we want to preserve quality. We've gone from 1,000 subcontractors to 1,500. Maybe we can push a bit more. Subcontracting is a good thing to have. We've seen it in a time of crisis, which actually helped us overcome the difficulties. And in terms of offshore, we wanted to increase our volume of offshore. I think it's 17% of our activity that is offshore. If we can push a bit more in the future, we'll do it. Another important element that we're working on is everything to do with industrialization, automation, AI, that fuels growth with that having a growing headcount. So we're working on all these subjects and the period is conducive to all these changes, even though recruitment is still tense. But the trend is, we expect an accelerated growth in the second half in France.

And if I could just add one more question on SSCL, the increase in HR volume. Could you just remind us what goes behind this? What's the business model, please?

Well, here, we're talking about outsourced platforms, so managed services platforms. So we have to deliver service. So when there's growth, there can be 2 reasons. It's because we deliver new services, and that's what we do at SSCL every 2 years, but it can also be explained by the fact that we have additional orders that are onetime orders, with everything to do with recruitment and strengthening our teams. We've been called upon a lot more than in the previous quarters on these platforms. This is why the volume has been quite high. A lot of the additional requests of that type and new services, so the growth has been significant in the first half.

We have another question from Laurent Daure from Kepler Cheuvreux.

Three questions, actually. So I just wanted to come back to performance in France, because in Q2, compared with 2019, it's a geography that's slightly under. So what activities haven't regained former levels or what are the limits in terms of recruitment when we look at demand? Because when we look at the workforce in France in the first half, it doesn't support strong growth in coming semesters. Now with the reduction in R&D for banking, in practical terms, when we talk about a drop to improve margin by 10%, so we're going from -- going down from EUR 120 million, how is this going to work? Will there be an offshore change? Will there be subcontracting? Can we have a little bit more detail on this lever? And then my last point, for Other Solutions, can we have some detail on the HR and real estate products? When you talk about investment and digitalizing product from a practical point of view, what's the investment that's being prepared? Could we have a little bit more detail in this domain?

Right. Well, as I said before, we're speeding things up in terms of recruitment. Up until now, it's not going to put the brakes on our development. But it's in line with our [Audio Gap] So we're going to go on pushing for more recruitment. We've leveraged subcontracting. And we've strengthened our schemes. We've sped up since January and February, and we never stopped. It's gone from strength to strength, and all our business lines are growing and all our vertical markets are also pushing the growth, and it's going to be even more significant in the second half compared to first half. So there's a constant improvement. In terms of performance, we made a decision. In spite of negative growth, we wanted to secure and ensure our capacity for upturn and recovery. We're prepared for a strong recovery, and we wanted to be able to support that recovery. So the margin rate gone down a bit. But from next year, there's no reason why we can't renew -- regain profitability. With regards to the transformation of R&D, of course, it's complex and it's going to unfold over several years. We're going to streamline our site. The objective is to divide more than twofold the number of sites. We're pushing India. We've started -- 3/4 of our R&D should be in India. That's the objective. We've made headway, but we still have our work cut out. And on industrialization, we're going to push forward as well. In our R&D activity, we have to do way more with the same teams or even with more restricted teams. So there are reserves for productivity here that we need to tap into. So that's the clear direction we want to take, and we have action plans to that regard. With regards to Other Solutions, it's a transformation in which we have back office tools that should deliver. So our clients want us to go on delivering, but the challenge is on front office and digital. We want to attract new customers, and this should all be organized with an architecture completely open up to digital, which entails transformations on our product and also an investment on digital that can make all of that possible. And the investment in digital has to be heavier than before because we invest in our products. And we're going to invest in the next few years to preserve that momentum. And if we don't, then we might be in danger 2 or 3 years from now. So this is to answer your question on investment on our 2 product lines on HR and property. But it's true, first and foremost, of HR.

So in short, for France, this means that you're comfortable. You think you'll come back to organic growth above 10%?

The answer is yes.

We have a last question from Derric Marcon from Societe Generale.

Sorry, I didn't hear the answer to the last question. So I have several questions. So services for Sopra Banking Software. Thank you for the details that you gave us for Q1, Q2, and the details on performance for H1. Could you come back to outlook? So minus [ 12% ] in Q1 and minus 6% Q2? What do you see happening for services in the second half? And I'm struggling to understand when you talk about refocusing expertise, but then obviously, you've got partners which come into play. I think this drop in services is something that you're sustaining rather than the natural willingness. Could you just come back to this point? And then the next question is licenses, maintenance and subscription, plus 3.8%. Can you just give us a bit more information between Q1 and Q2? And then cloud and infrastructure, you were talking about stability. We've seen the performance of this business over 3 years now. So EUR 30 million in turnover since 2019. Is this linked to refocusing this activity of this business? Obviously, this is driving growth in the future. So is it linked to a new focus on this business? I just want to better understand why, with regards to this business, we're seeing such a strong drop over the past 3 years when it was stable in Q1, whereas some of our competitors are generating growth. And then my last question regards anticipated payments. So the EUR 60 million mentioned for the first half, could we have more information or past information? Is this going to happen or will there be a negative impact on this line in the future?

So Laurent, those question was, are we -- am I confident that there could be organic growth over 10% or 2 digits? And I said yes. So maybe my answer was too short, which might be why you didn't hear it. So on Sopra Banking Software, in Q1 -- so the software part, not service, the software part. That's what's your question. So license maintenance subscription plus 3.8% for the whole of the quarter, minus 6% in Q1, plus 14% in Q2. And this is exactly what I was detailing in the previous question. It could be erratic. Due to what? Well, the growth is fairly stable. Over time, it might go down. But it's not from one quarter to another, you can see the difference. On subscriptions, there's growth, but we're starting from a lower starting point. And then in the subscriptions, there will be good quarters and not so good quarters. This is illustrated with Q1 and Q2. But the trend, as I've described, is pretty good because subscriptions are on the rise. That's for your first question. Services, is it -- has it been deliberate or is it something that we've suffered in spite of our will. Well, when I mentioned the vertical market, on the Sopra Financing Platform side in particular, but it's also true of core banking, there are projects that we might have considered 3 years ago and that we're not considering because we consider that it's too risky. So in this period, we've established 3 priorities on our product plans, and our leaders, our teams, our experts are going to be all invested in on this. So my objective 3 years from now is to have all those product plans that can be rolled out. That is important. So we're going to fight to sign as many licenses as possible and to have as little negative growth as possible, but there are activities where you need patience. That's what we've seen with the teams. But we're working on it and we're trying to cut our costs. Regarding the cloud infrastructure, it's a movement that we decided 5 or 6 years ago, which was to refocus on transformation, less on traditional infrastructure. But to engineer all that, you have to keep a traditional -- certain level of traditional activity. So the gains we've made in consulting is because we are present on services. So the growth is driven by that transformation, by all the added value, not by the rest. So when we don't see any added value, we tend to put the brakes on this. So we haven't had growth for a number of years, but this is the continuum. There's such demand and such power potential with Go-to-Cloud. Cycles are longer. It's more stable. So it takes more time to go up or to go down. So the cycles are longer, but we are staying the course. We want to remain a credible player on this, in particular on the end-to-end. Infrastructure per se is not what we're interested in. We're interested in end-to-end approach. And the cyber, of course, a part of this, is very important, where there's -- we're experiencing growth and we want to push, same as everybody else, on this.

Well, so on anticipated payments. So EUR 60 million as of the 30th of June. So we had observed pretty much the same phenomenon, a bit less, EUR 50 million last year. Historically, we haven't measured it for every quarter, but it was about EUR 15 million. So it was way lower. But since the beginning of the COVID crisis, and that's a good thing, behaviors in terms of DSO and payment terms have improved by private customers, but also for the public sector, which is important because we're greatly exposed to the public sector. It's true in France, but as well as the U.K. Is it going to prove long-standing? Is it sustainable? Well, in the short term with the current market context and a lot of liquidity and the state support, we are going to keep that trend over a number of months. But it will not come back to 0. If it decreases, it will be gradual, so we won't be losing EUR 50 million in one go. I mean, unless there's a very serious crisis. But the difference with this crisis compared to previous crises, in terms of payment terms, we had seen a lot of tension. It's been different this time. A lot of economic players, including us, we've tried to have a virtuous behavior so that cash could circulate at all levels. So this is the lesson we'll have learned from that crisis. We need cash to circulate.

We have another question from Gregory Ramirez from Bryan Garnier. And this is the last question.

I just wanted to come to growth factors, growth in the second half. We're seeing it locked at 8%, if we extrapolate this information. So organic growth in France above 10%, but then in the U.K., there will be the MoD contract and its impacts. So I'm just trying to put this information together. So seeing growth 8%, does this mean that despite everything, there will be an acceleration in growth in Other Europe despite the Sparda contract, as well as continued growth in Other Solutions and then a very good second half of the Sopra Banking Software?

Well, generally speaking, as you may have gathered from my comments, France, wants to clearly push and that the weight of France is important. U.K. not so much, but we still expect growth, not at the same level as first half. On Other Europe, we expect more growth. You're right in saying that. On Sopra Banking Software, it's not our priority, and this is not what we're relying on in terms of growth. It will depend on the license effect for the end of the year. But we will probably not see growth for the second half or maybe it will be a slight growth. We'll see. But for me, most of it is what I've said before. And we said in the guidance, we're confident in the fact that we can meet the targets that you've described.

For Other Solutions?

On Other Solutions, well, generally, we expect growth momentum in line with what we've had before and no disruption. It's still a very active market.

We have another question from Derric Marcon at Societe Generale.

Yes, sorry to come back, but I have 3 follow-up questions. Could you help us model Sopra Banking Software's dynamic? Obviously, given the weighting of services, it's important to understand for the second half. Will the second half be aligned with the trend from Q2? Could we have a little bit more detail on that? And then the second question. If we come back to France, you're expecting a second half which is better than Q2, if I've understood properly. But we have the impression that in the first half, growth was generated with subcontracting, obviously. Just to understand the acceleration in the second half that you're expecting, is this going to be with offshore and there won't be that much of a change with the workforce in France or is there a subcontracting potential and offshoring will help? So what are the changes with regards to the first half? What is going to support your growth objectives for the second half? And then my last question regards the improvement in margin. Obviously, you mentioned positive factors. Travel expenses, which are down 50%, usage rates, which are up. But this brings improvements to 1 percentage point. But if you're talking about 3.5% and then with a 50% improvement in travel expenses, is there some headwind here that we should take into account? What are the other factors?

Well, regarding banking software, as I've said before, it's hard, bearing in mind the context we find ourselves in to give a very specific guidance. Because the move to subscription-based model, to answer your question, it depends on how many licenses will be signed. And there's still uncertainty for the end of the year period. There will be a slight negative growth. It won't be a significant negative growth for the quarters to come, but there could be a slight growth, depending on the date these licenses are signed. So generally speaking, we'll be close to breaking even. But I gave you the figures for Q1, Q2. We should expect pretty much the same for Q3, Q4 for banking software. Regarding France, as I said, we're going to really leverage everything we can. There's no reason to worry. We will recruit more. We will push offshore. We will industrialize more. So I see it as an opportunity to regain growth, but with margins that should gradually go back up. This is how we build our outlook, bearing in mind the context. Recruitment is visible. Offers are made. We need to push for more subcontracting, if that's possible, and the offshore elements and industrialization elements. So leveraging these 3 elements, I'm not worried at all. And the last element, having to do with the improvement of our margin. Well, the [ intercontracts race], the traveling expenses that have gone down. Then there are onetime elements that are nonrecurring that happened in first half. In U.K., visa renewals had completely ground to a halt and that's the highest volume we've had in the first half. So the difference, the gap, of course, will not be as significant for the second half as it has been in the first half.

We don't have any more questions. So I will hand the floor to you, gentlemen, for conclusion.

Okay. So thank you, everybody. Thank you for taking part in this discussion. And for those who I won't see again, I wish you great holidays, and I will see you soon. Thank you very much. Have a good day.