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

Ladies and gentlemen, welcome to the Sopra Steria H1 2022 Results Presentation, which will be led by Cyril Malarge, CEO; and Étienne du Vignaux, CFO. [Operator Instructions] It will be simultaneously interpreted into English and is being recorded. Now I'll hand over to Cyril Malarge. Over to you.

Good morning, ladies and gentlemen. Welcome to this conference. I am delighted to present the H1 results with Étienne du Vignaux, Group CEO. So we will have the agenda as follows. We'll have the highlights of H1. Then I will review the operating situation by reporting units. Then Étienne du Vignaux will present the financial results for H1. I'll come back to priorities and objectives for 2022. Then we will review the proposed acquisition of CS Group. And then finally, we'll have time for a Q&A session. As a summary, I would say our performance was solid over the first half. It puts us on track to achieve the objectives that we set ourselves at the start of the year for 2022. The revenue was EUR 2,543.8 million, 7.3% organic growth. Operating profit on business activity was EUR 203.1 million, so 8% of revenue. Net profit attributable to the group was EUR 112.3 million, so 32% organic growth when compared to 30th of June 2021. Free cash flow generated was EUR 66.3 million compared with the EUR 61.9 million in H1 last year. Net financial debt contracted and was EUR 344.9 million, so 0.75x EBITDA. And our balance sheet was also reinforced, thanks to positive changes in pension funds, especially in the U.K., where we finished the first half with a surplus of EUR 50.1 million compared with a deficit of EUR 57 million on the 30th of June 2021. So the first half of the year was highly eventful which illustrates the group's transformation. Firstly, in terms of sales, I would like to mention that we've reinforced our relationship with Airbus, EUR 200 million in turnover in the first half. We were indexed to expand our scope of intervention to engineering and functional design. Another example is the NUWARD Consortium. This is a consortium which brings together EDF, TechnicAtome, Naval Group, Framatome, and other groups aiming to build and run a new nuclear reactor concept, which is more compact. So we were chosen to implement an information system blueprint and to run change management. In terms of financial services, I want to mention some good changes, SBS, so 12 new references here for new digital offers and for SaaS offers as well. In terms of market recognition, we've been indexed in various listings. So for financial services and digital services, so for artificial intelligence, cybersecurity, IoT and also we've expanded our certifications in the cloud domain. We are now a qualified managed services provider for Amazon, Google Cloud, Microsoft Azure and then for Oracle as well. In terms of cloud, we should also note expansion of our partnership with OVHcloud with new services today because we're offering our customers an open source offering for AI rollout at scale with an industrial and secured approach. In terms of sustainable development, I'd like to mention the gender equality standard, which was delivered by Bureau Veritas with regards to establishment of our equal opportunity policy. Then I'd like to remind you something that we're very proud of. As a founding member, we took part in the inauguration of the French cyber campus, which already has about 50 of our employees working there. So the market momentum, as I've mentioned, was very positive throughout the half of the year. Organic growth of 6.4% in 2021, 6.5% in Q1 2022. And we saw an acceleration in growth in the second quarter, so at 8.1%. At this stage, we haven't identified any signs of a slowdown in terms of customer demand, which remains sustained. Our growth fundamentals are solid. There are 3 factors that illustrate this. The first, over the last 2 decades, we've had average organic growth of 6%. The second factor is that the IT market is growing structurally with 3 key drivers: Go-to-Cloud, digitalization of processes and, obviously, cybersecurity challenges as well. The third factor is value enhancement. And behind this, we've got an increase in sales prices. I can see 2 factors that influence this: strong demand from our customers but also our value enhancement strategy, which is starting to pay off, especially for our consulting and digital activities. Obviously, in this dynamic market, we are prioritizing human resources. We're spending a lot of energy on attracting and retaining talent. In the first half, our workforce grew by 5.6%, thanks to regular growth in head count, over 600 every quarter. In the first half of the year, we recruited 6,843 people, which represents just over 60% of our full year recruitment targets. Now if we look at the attrition rate, it's 19%, so obviously, higher than rates observed in H1 2020 and 2021, but it is under control and at the same levels as H1 2018 and 2019. Now with regards to operational situation, group's performance improved in H1 2022 with an operating margin on business activity at 8%. So 0.8% increase when compared with 30th of June last year. And we've seen a clear increase when compared with the first half in 2018 and 2019. This comes with an increase in free cash flow. The free cash flow is resolutely positive now as of the first half of the year and it has been for 3 years. In H1 2022, it was EUR 66 million compared with EUR 62 million last year. I've already mentioned momentum in our sector, which is sustained, but we know that the macro global context is fragile, so we do remain attentive. And against this backdrop, I think it's important to give a reminder of the group's profile and its resilience, which draws on 4 different pillars: customer focus, recurring revenue, our sector mix and then flexibility. Our customer strategy, as you know, is a focus on 100 strategic customers. They represent 2/3 of the group's revenues. And for these strategic customers, we are developing a close working relationship over time, working closely together in the field. And this means that there's less volatility with regards to our business relationships. Now with regards to recurring revenue, recurring revenue for the group represents over 40% of the group's revenues if we take into account BPO, infrastructure management, application maintenance and then software maintenance as well. With regards to our sector mix, I want to highlight the share of the company's revenue in the public and para-public sector, which is over 35%. This is a sector which is obviously less sensitive to conjunctional factors. And then finally, we demonstrated this during COVID, we have genuine capacity to adjust our flexibility with regards to resources, so subcontracting, Which is obviously a flexibility lever, and this has come back to precrisis levels. Now if we review operating performance. On this slide, you've got revenue EUR 2,543.8 million, organic growth of 7.3% and a margin of 8% compared with 7.2% in the first half 2021. And we've got this information by reporting unit. I'd like to suggest that we review each of these reporting units. For France, first half was solid, strong growth, a return to pre-COVID margin levels. Organic growth was 9.8%. Slightly above this, 10% in the second quarter. Business was driven by our PLM activity, which grew by 40%; Cybersecurity, which generated 16% growth; and Consulting, which increased by over 14% as well. To a lesser extent, Systems Integration and IT Infrastructure Management contributed to growth. And then we saw that the most buoyant vertical markets were aeronautics, defense and transport. Operating margin on business activity was 9.7% compared with 8.3% last year, so an increase of 1.4% compared with 9.3% in the first half of 2019. So this obviously demonstrates the fact we've come back to pre-COVID performance levels. I'd like to suggest that we review the U.K. now. The U.K. had a good first half with operating profit at 10.5%, so 1.8% increase when compared with 2021. Organic growth was at 5%, mainly driven in the second quarter, so [ 10.8% ]. So a dynamic quarter, stronger than expected, and it was driven by our service platform business and growth in our joint ventures SSCL and NHS SBS, which posted growth of 9.7% in Q2. Private sector improved also and generated slight growth in the second quarter. So the outlook should be a return to growth in the second half of the year. That's all for the U.K. Now if we move to Other Europe. So the first half had a good organic growth, 8.2%, with Scandinavia and Benelux generating double-digit growth. Operating profit on business activity contracted, down to 5%, and it was impacted by a contract in Germany where negotiations are underway. We don't anticipate any significant impacts for this contract in the second half. Revenue for SFT was EUR 79 million with the same level of operating profit as H1 2021. Now if we look to the future. Obviously, if we look to the future, we can see that all countries are on track to hit operating profit on business activity of 10%. Now we can move to Sopra Banking Software. The first half is aligned with the plan. We had 2 priorities: developing digital offers, which will generate growth in future years; and then progressive improvement in profitability. Revenue contracted slightly by 0.7%. This is due to a license impact. We see a greater seasonal effect than in 2021. We haven't changed our licenses targets for the full year. Subscription, maintenance and services grew by 1.4%. And we've seen strong momentum on our new offers, our digital offers, so aligned with the plan. As a reminder, a year ago, we launched a 5-year plan, which aims to make a EUR 30 million R&D savings by 2025. This has delivered the first year. Last year, we had EUR 4 million savings. Today, we're on the right trajectory and working to deliver the 5-year plan. Consequently, the operating profit on business activity reached 4.1%, therefore, up 1.3 points compared with the first half of 2021. Now we're going to continue with Other Solutions. This has improved. If we look at operating profit on business activity, reaching 8.8%, therefore, up 2 points versus H1 2021; then organic growth reaching almost 5%. In particular, we've seen solutions for HR that are up 7.5% and then our dedicated property solutions that have remained relatively stable. That's for property management. And therefore, we are back to a profit level we had before COVID. Now I'll hand over to Étienne du Vignaux, who's going to talk you through the first half results.

Thank you, Cyril. Hello, ladies and gentlemen, we'll start with the consolidated income statement for the group. Cyril mentioned the main aggregates. Consolidated revenue reaching EUR 2.543 billion, therefore, organically up 7.3% versus last year; and operating profit on business activity reaching EUR 203 million. Therefore, the margin rate is 8%, up 80 basis points versus H1 2021. Then between operating profit and business activity, the expenses in shares have increased, and we have mainly a share impact for 2022 that we've announced and that we rolled out during the first half and more marginally as well, the other costs concerning the LTI plan 2021-'22. Amortization of allocated intangible assets are up a little. And then the operating profit is 6.8% of total revenue. Other income and expenses, EUR 10 million, therefore, 0.4% of the half year revenues. I'll come back to these. And therefore, operating profit is at EUR 162.1 million. Therefore, 6.4% of our revenues, up 15% versus H1 2021. Between this line and the net profit, the cost of net financial debt is stable, less than EUR 5 million. And other income and expenses, interest, for instance, burden due to the U.K. situation is less than EUR 1 million. After taking into account tax and the percentage of equity accounted affiliates and after deducting the minority interest, we reached EUR 112.3 million for net profit, therefore, up 32% compared to H1 2021. Then if we look at other operating income and expenses, the net expense is EUR 10 million for the first half in 2021, the figure included the first half provisions that were restated for risks that are not repeated in 2022, yet we've seen a decrease in restructuring costs totaling a bit more than EUR 10 million versus EUR 15 million for H1 '21. And the tax expense is EUR 43 million for the half year. Therefore, the effective tax rate is 27.3%. This includes company tax and also the expense incurred for the French value-added tax. And we're targeting 27% for the full year, that is 2022. Let's have a look at the change in net financial debt compared to the end of December 2021. As you can see, we've reached EUR 344.9 million at the end of June, therefore, a slight increase compared with the end of last year. On the left of the slide, as you can see, we have free cash flow, which is solid, totaling EUR 66 million. And that, I'm going to give you more details about in a minute. We had more or less the same number as cash generation for H1 '21. And therefore, we trust that we could meet the objective of free cash flow, which is an annual objective nearing EUR 250 million. The group has also strengthened its balance sheet. On one hand, we have a better control over our debt. The net financial debt-to-EBITDA ratio is 0.75x at the end of June, and we've decreased as well the pension commitments in the U.K. but also we've seen long-term interest rates have increased during the first half, and there was a favorable effect on the equity of the group. If we look at these 2 effects, we can say that the gearing ratio will be at 18% on the 30th of June 2022. And finally, the financing structure of the group. Here is a snapshot at the end of June. It's diversified. We have no major maturity in the short term. At the beginning of the year, we signed a new RCF contract, totaling EUR 1.1 billion with a maturity of 5 years and we can extend by 2 years. And available undrawn amount, which is good, more than EUR 1 billion at the end of June and EUR 185 million in cash and cash equivalents at the end of the first half. Now I'll hand over to Cyril, again who's going to talk you through the priorities and objectives for 2022.

So you've obviously all understood for the second half, our priority is to accelerate with 3 areas of focus, first of which being human resources, our tech momentum and then our consulting business. With regards to human resources, clearly, we are working on reviewing our HR policy to make the group more attractive and then to also provide even more compelling career paths for our employees. We're also working on our employee brand and respecting the promise made upon recruitment. And we're also working on training programs. In particular, we are focused on reinforcing manager training so that we can help them and support them so that we can drive this ambitious and transforming strategy. With regards to tech, behind this, we've got reinforcement of our expertise, certification, leveraging the value of our job families. And then we've got an acceleration in implementation of centers of expertise, so artificial intelligence, data and then cloud. Finally, with regards to consulting, we are reworking our organizational model. We're also reworking the impact of the Sopra Steria Next brand. And behind this, we have the challenge to ramp up our positioning in consulting, ramp up our sales price and then our capacity to attract the best talent. Now if we come back to objectives for 2022. We confirm our objectives with organic growth in revenue between 5% and 6%. In this area of focus, obviously, I've mentioned that demand is sustained, but we are observing the macroeconomic environment, which has deteriorated. So we do have to be cautious. But we should be in the higher range of this guidance, and we will reassess the situation after Q3. Other objectives now, operating margin on business activity between 8.5% and 9%. And we're also confirming our free cash flow of around EUR 250 million. So now I'd like to come back to the proposed acquisition of CS Group. CS, as you know, is a leader in mission-critical systems, positioned on design, development, rollout of critical systems. It's one of the rare companies that are part of this landscape and it's clearly positioned and recognized in this sovereign technology domain. The major customers, we've got some big references here: defense, security, aeronautics, space. So we've got the Minister of the Army, NATO, Homeland Secretary, Airbus for Aeronautics, EDF, CEA for nuclear, and then for space, we've got ESA and then CNES. I'd also like to highlight that CS has got a strong innovation capacity. This is the company's DNA. So R&D teams are working with universities, research centers and then they have top quality industrial partnerships as well. So revenue for 2021 was EUR 237 million, 13% organic growth momentum, so they're positioning themselves, forecasting EUR 258 million for 2022. They've got 2,241 employees and margin of 4.1% compared with the 2.9% of 2020. Sales momentum, which is clearly accelerating with orders of EUR 487 million. Well, of course, this transaction is strategic for Sopra Steria. We'll be stronger in sovereignty and digital trust. And given the geopolitical and energy context that we know, this transaction will strengthen the group on its strategic verticals, which will be growing fast, which will benefit from massive investments, defense, security, but also space and the nuclear business and energy. This means that we'll have a French leader in digital services, critical systems and, more particularly, the sensitive sectors I mentioned before. It's very important because we have a special momentum. There's convergence between the digital world and the world of industrial and critical systems. There is a moment when you have to seize this opportunity. Well, this leader will have strategic links with the main industrial groups and we'll gain skills and command and control, secured communications, cyber defense, high-tech technologies and drone technologies and tactics and also image processing. But it's more than this. With this transaction, we'll strengthen our positions in aeronautics, and this means with our first customer that is Airbus. And we bought EVA Group several months ago, and this means that Sopra Steria's positioning is going to be stronger. That is in the field of cybersecurity offerings. We'll be in the top leading group in France. We'll be one of the top leaders. As far as integration and performance is concerned, CS Group will reach the level of performance of Sopra Steria France in 3 years. And I trust that this transaction is going to be a success because on our side, we have verticals that are really good when we look at the Sopra Steria model. And then in terms of value creation, this transaction will be accretive on the earnings per share on the very first year. There we are. Now we're going to give you more information. These are the key elements. By the way, you have all the information in the press release that we sent to you this morning for this transaction today. This is an exclusive agreement. We will acquire a total of 65.3% shares from CS shares that you can see on the right-hand side from Duna and company, and the shares of Mr. Sabeg and Mr. Blanc-Garin and some of Novidy's shareholders that was acquired several years ago. All in all, SSG, Sopra Steria Group, already has 9.8% of the total capital. We would have 75% of total equity capital after buying the different blocks. The purchasing price for these blocks, just like for the public tender, of course, it will be evaluated by an independent expert, will be equivalent EUR 11.5 per share. This Shows a premium of 68.6%, if we look at the 60 last trading days. The main steps are as follows. We start today, 28th of July, and the 2 groups Sopra Steria and CS Group will start consulting with the bodies that represent staff. This is necessary before we can sign the acquisition contract that would take place in Q4 2022. In parallel, we'll file the case with the French authorities so that we can buy the blocks and then launch the tender on the first quarter of 2023. What are the impacts on Sopra Steria? Cyril mentioned the earnings per share. There's going to be an accretive effect in 2023 and 4% in 2024. In terms of financing, it will be financed totally in cash. Given the level of the debt of the group, there's no problem at all for us given the existing credit lines that we have. The leverage after this will be a leverage of net debt to EBITDA leverage. This transaction for us will create value. The impact on operating profit, on business activity after the integration is assessed at a minimum of EUR 13 billion (sic) [ EUR 13 million ] annually with the dates you can see there on the slide. progressively, we'll capture 100% of this amount by 2025, so 3 years after the acquisition. What's more is that CS today has EUR 364 million of tax deficit that we could use in the future after the integration.

Thank you, Cyril. Now there we are. That's the end of the H1 2022 results will continue now with the Q&A. Thank you.

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

Congratulations for these excellent results. I have 3 questions to ask as far as I'm concerned. First, about the mindset for recruitment in the second half. Will you actively pursue your hiring policy? Or will you be more conservative? Or will you use more subcontractors? Could you perhaps give us more information on this? Question number two, I'd like to talk about the U.K. Your Q2 performance is going to be strong. Your results were really good as well. We understand that the joint venture is doing well. Could you tell us more about these revenues in the U.K.? Do you think you can continue during H2? Is it this revenue that leads to this very high profitability that was historically high? And is this something that can continue during H2 as well, this level of profitability? And finally, a question about CS Group. Could you perhaps tell us more about the decision-making process and your strategy after the acquisition? For instance, when you take a stake, what are you going to do? Have you changed your rationale to some extent recently? And have you decided to act more recently given what we've seen in the field of defense and cybersecurity?

Well, your first question has to do with the hiring policy and subcontractors. If you look at how we work, this is something we reassess on a monthly basis. Each month, we look at our own impetus and how much we work with subcontractors and how many people we hire. We consider that we're going to continue, and we're going to buy a lot from subcontractors and also hire more people. There's strong demand. We see no weak signals. So we'll reassess this monthly basis. But as we speak, we've considered that in September, we'll stick to our recruitment policy. That means we're going to be more ambitious than what we had initially budgeted. Question number two, the U.K. Yes, the growth was good in the U.K., mainly on the joint ventures, but 2 platforms as well, that is renewal of visas but also passports, the delivery of passports. That's due to the fact that the Brits want to go on holidays. And we couldn't really very much cope with this situation. This is a one-off. It will not continue during the second half. During the second half, there's going to be a slight growth in the U.K. but not as much as the first half. Now the CS business, of course, this is very accretive on the margin, and that's good. These platforms are really good. And today, if you look at our performance level, it's a structural performance in the U.K. So it means that we will have a solid position during the second half. Now let me come to CS. When we took this stake, no, we didn't necessarily think about these objectives. Now what's happened then? Well, on our side, Sopra Steria, we've worked on our strategy. And as you know, we've decided to strengthen our positioning for sovereignty in Europe. And also, it's something we've seen for the past 2 years. This confirms that this is a proper strategy. And we want this strategy to come to fruition. And finally, we're deeply convinced that there's a good convergence momentum between digital business and physical business, between digital and industrial systems, for instance, on these sovereign markets. So we consider that the time was the right moment for us to do this transaction.

Crystal clear. Now something about CS Group, you are seeing alignment of operational performance. What about the cost synergies? And what about efficiency gains, please?

Etienne will answer that.

Yes, EUR 13 million, we said. We've not given you all the details, but most will be based on efficiency gains because we want the company to reach the level of performance we have in France, which is what Cyril said. And in 2024, it will be above the existing performance that we have in France, which is really good on the verticals such as defense, aeronautics, which are the important verticals that CS has today.

[Operator Instructions] Next question from Laurent Daure, Kepler Cheuvreux.

I have 3 questions to ask. Number one about CS, I have the impression that if you look at the margins, the margins were well below those that you have. So as a minority shareholder, I suppose that you were keeping an eye on this company's performance. Now my question is, how come the margins of this company have never reached a satisfactory level? Is it due to usage rates or pricing that's not good enough or maybe structural costs that were too high? And you said you will increase the margins. What are the main measures that you need to take? That's my first question. Second question, could you please tell us more about the German project? There's an overrun. Could you give me more comfort this will not happen or happen again during the second half? And then I was looking at your annual guidance, the U.K. will be growing modestly during the second half of the year. And what are the main regions where you think you're going to have some type of dynamism? I suppose it's France. France, thanks to which you will reach the 5% or 6% growth.

Well, thank you for these questions. For CS, you're right. You're right to say that if we look at their past performance, their past performance is not as good as ours. We don't have all the details, but we have a certain view. We know more or less where they stand, and we know what the reasons are. It's probably due to a bit of a heavy structure to start with. And the way they manage the staff or staffing, their fundamentals are different from ours. So we suppose that in this sense, we could do something and change that. And also margins on projects that could be improved. And we trust that we will be in a position to increase performance and their margins to reach the same level as ours if we do this. Now the German project, this is a major transformation program in Germany for one of our clients. It's a project, which is almost like a huge program. And roles and responsibilities to start with are clear and they're less clear with time. And if you look at the program now, it's almost unmanageable. This is what we saw during the first half. The clients and ourselves, we consider therefore that each of us were partly responsible. We agree on that. We agree with the client on that. And currently, we're working with the client to review the road map for this program. We want the program to be much more accessible, less ambitious probably, and we'll focus on different types of commitments. This is what we're currently finalizing with the customer. This is why we consider that during H2, the impact will be a lot smaller than the impact that we recorded for the first half. And for H2, there are different engines for H2, and it's France and also the reporting unit called Other Europe.

So my question about Germany is that you're going to go to a timely material type of approach rather than having a lump sum approach?

That's true. And we will decrease the scope as well so that we can smooth out things over a number of years, and our time line will be less ambitious.

[Operator Instructions] We have another question, Mr. Emmanuel Parot, Gilbert Dupont.

I have 3 questions. Could you tell us more about the price and salary ratio for H1? I think there's a slight improvement on your gross margin. And what do you expect for H2? Second question, as usual, can you give us a breakdown of Sopra banking activity, licenses, services, credit, et cetera? And third question, which is technical, the pension liabilities. I suppose that with the increase in rates, there's a surplus now and not a deficit. So when I look at your cash out for these pension liabilities, when I look at the table, could this perhaps disappear next time you renegotiate this? Could you tell us more about this, please?

Thank you. I'll answer the first 2 questions, and then Etienne will answer the final question. The selling price to salary trends, this is not something we track at group level. We have all sorts of activities. We have sometimes the ability to follow the ratio, but not always. Now if we look at France, and France is quite representative, we gave you positive signals, and we can confirm those for the second half. If you look at France, selling prices were up 3%, more or less, during H1 and average salaries increased by 2%. This is due to the fact that our hiring policy focuses on hiring young people. More than 70% young engineers fresh out, between 1 or 0 and 3 years of experience. Now if we look at the second half, that's the second part of your question, I'd say that for the year, we'll have selling prices, which will be more than 3% and the salaries up a bit less than 3%. That's to give you an order of things. Now the second question, the breakdown of Sopra banking activity for the first half. For the first half, we have produced EUR 19 million worth of licenses, EUR 31 million for subscription and SaaS, EUR 69 million for maintenance and EUR 88 million for services. And third question, Étienne, the pension funds in the U.K.

Now if you look at our books, at the IFRS, there's a deficit, an IFRS deficit. And if you look at net assets, if we count in terms of net assets, this is what we use when we negotiate, and this is regulated. This is what we call the technical deficit, which is much more prudential than net assets in the meaning of the IFRS standards. So to answer your question, these contributions will not be zeroed next year. They will decrease this year compared to what we saw last year. We are still negotiating as we speak. We're negotiating the next contribution. So we'll set up the necessary measures so that we can decrease the cash contribution as early as next year.

[Operator Instructions] Mr. Nicolas David, again, ODDO BHF.

I have another question I wanted to ask. Back to the German contract, in terms of accounting, does that mean that the decrease in the margin is due to direct operational losses? Or have you set aside provisions already so that you could possibly anticipate an impact? And second question, with the acquisition of CS Group, and given the fact that with Airbus, you're now referenced for PLM and engineering, I'd like to know how exposed you are to industry in a general way. Could you perhaps be more ambitious? Could this modify your sectorial focus?

Étienne will answer the first question. I'll answer the second one.

The accounting impact of the German contract. Most of the effect is the loss in the first half. We have provisions so that we can also cover the losses during the beginning of the second half, but there will be reduced losses.

To answer the second question about the CS Group, yes, that's true. As far as Airbus is concerned, we're going to strengthen our positions. We have complementary activities. That's interesting. Will this change our industrial sectors and our strategies in industrial sectors? No. We will keep our focus, that is, we will focus on the verticals that we consider are the group's priorities. I mentioned them before. We're not going to be focusing on the car-making industry or other things. This is not what the group intends to do. We have a lot to do if we focus already on the sectors where we are positioned. We're going to keep our focus and stick to our strategy.

We have another question, Gregory Ramirez, Bryan Garnier.

I have two questions about the integration of CS. Could you clarify something? You've said EUR 13 million is what you expect in synergies. Does that include a tax deficit that will be carried over? And could we use this tax deficit as early as 2023? You said EUR 13 million. Okay, what's the breakdown between commercial synergies and operational synergies and the tax synergies? And back to the previous CS margins, if we look at what they did in the past, it's lower than what we see usually in IT and other services. Isn't it due to the nature of their contracts? Given the decision-makers at the time they had more complicated contracts, there was quite a lot of lump sum contracts. And I don't know CS very much, but I had the impression that there were structural reasons why we could think that the integration would be a bit more tricky than we think or that you would need to radically change their modus operandi or radically revisit the former CS contracts.

Étienne will answer the first question.

Now in answer to your EUR 13 million question, these are not really commercial strategies. And as far as the tax credit deficit is concerned, it's not included in EUR 13 million. This is the synergies we can find between the 2 companies.

Now back to the past CS margins, you're right, the programs were different. These are industrial programs, and they have constraints and the security scope is different. These are contracts of a different kind, but we know them well. Almost 10 years ago, we had the inter-army systems architecture contract that we won. So the nature of contract is a bit different. That's true. But we think that anyway, we can increase their margins, we can have a better control of the scope of their contracts and what's more, we need to optimize the staffing of teams. These are the main things we're going to be working on so that we work with them.

We have no more questions on the phone. You have the floor then.

We've received a question in writing, Derric Marcon of Societe Generale, about CS Group. To calculate the accretive nature, what type of safety margins you've factored in compared with the latest data from the Capital Markets Day of CS? I'll answer this. Well, we looked at complementarities between both companies connected to this tie-up. And by the way, we trust that we are in a position to manage the company after the tie-up. And after looking at operational complementarities, as Cyril said, we're looking at 10% by 2025. Okay. Thank you. Thank you very much. Thank you for your attention. Thank you for being with us this morning for this conference call. The conference call is now over, and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]