UK disappoints for European IT services giant in 2017

'Transition phase' in public sector partnership and poor exchange rates stunted UK performance, claims Sopra Steria

Sopra Steria's UK arm has posted a year-on-year decline in revenues and profits, in what was otherwise a widely positive 2017 for the French IT services giant.

Revenues for the year reached €3.85bn (£3.41bn), a 2.8 per cent year-on-year increase, while operating profits grew by nine per cent to €261.7m (£231.8m), representing 6.8 per cent of total sales, up from 6.4 per cent in 2016.

The firm's domestic French sales grew by 4.5 per cent to €1.6bn, while profits grew by eight per cent to €111.2m. Its "other European" entities - which encompasses the Nordics, Switzerland, Germany, Benelux and Italy - enjoyed a 12 per cent increase in sales to €827.6m, with each country achieving at least 10 per cent growth.

It was its UK business, however, that robbed Sopra Steria of a perfect year in terms of revenue and profit growth. Revenues fell by 13.6 per cent year on year to €801.7m, while operating profit plummeted by 38 per cent to €36.9m.

Sopra Steria claims that its joint venture with the UK Cabinet Office - a contract drawn up in 2013 worth €1bn over 10 years - is going through a "transition phase" which is expected to continue into the first six months of 2018.

The IT services firm also claims that longer decision-making cycles and a "wait-and-see attitude" from UK customers during the second half of last year affected UK sales.

Sopra Steria launched a plan last year to turn around its UK performance which will see the firm expand its private sector customer base and invest in its consulting business and sales team.

The firm plans to implement a cost-cutting programme to shave around €20m from 2018 UK outgoings.

Exchange rate fluctuations in the UK market also significantly affected the firm to the tune of €59.7m.

Commenting on the services firm's plans for the UK, chief analyst Georgina O'Toole at TechMarketView said: "The biggest challenge is going to be cultural - the UK business is learning to operate in a very different way compared with its historic modus operandi, which was aimed at large multi-year outsourcing deals."

Sopra Steria has spent the last few months investing heavily across the continent. It bought a majority stake in French fintech firm Galitt in September, after acquiring Swedish IT services company Kentor earlier last year.

The firm also claims it has ambitions to grow its presence in Germany, having bought €33m-turnover player Bluecarat last month.