(News Bulletin 247) – The digital services company has delivered its medium-term outlook with objectives including, among other things, a proactive policy in terms of external growth. But these targets were perceived as prudent by the market, which explains the sharp drop in the stock on the Paris Stock Exchange.

Definitely, delivering objectives to the market by 2028 does not bring luck to the companies that take part in the exercise. Last week, Safran was sanctioned on the stock market, losing more than 7% on Thursday December 5. Investors had little taste for the engine manufacturer’s medium-term prospects since they understood objectives that were far removed from expectations.

A week later, it is the turn of Sopra Steria Group to find itself in the market sights. The digital services company also delivered its targets for 2028 ahead of its investor day. Here too, the reception given to this roadmap is frosty. Sopra Steria shows the biggest drop in the SBF 120, dropping 7.5% around 11:30 a.m., while its benchmark index limits its decline to 0.10% at the same time.

Strong ambitions for external growth

In its press release, Sopra Steria explains that it “wants to assert itself as a European leader in digital services and “position itself as a credible and trusted alternative in Europe to global players”. With this in mind, the company plans to expand and balance its European presence by relying on five major geographic areas generating a turnover close to or greater than one billion euros (France, United Kingdom, Benelux, Scandinavia, Germany).

“This implies a concentration of acquisitions in the last three geographical zones where the group achieves between 400 and 600 million euros in turnover,” explains Invest Securities in a market commentary.

Sopra Steria also explains that it wants to develop the consulting activity to reach a share of at least 12% of its turnover and accelerate on new generation technologies, without specifying which ones, so that they contribute to 60% of the turnover. group’s business in 2028.

Sopra Steria, which intends to achieve a turnover of around 5.80 billion euros in 2024, intends to increase its revenues above 7 billion euros in 2028. The progression of activity will be based on organic growth (excluding currency and scope effects) of between 2% and 5% per year from 2026 and an external growth policy generating around 1 billion euros in revenue acquired between 2024 and 2028. The consulting, services and digital solutions group is therefore targeting average total growth of around 6% per year.

Still by 2028, the operating margin rate is expected to improve to between 10 and 11%, compared to 9.7% forecast for this year. Net free cash flow is expected to be between 5% and 7% of sales over the period, while pre-tax return on capital employed is expected to reach around 20%.

A silence on 2025

At first glance, the roadmap presented by Sopra Steria appears “realistic but without major surprises”, underlines Invest Securities. But on closer inspection, the objectives presented by the digital services group are rather timid. This is what struck analysts this Thursday morning. Invest Securities notes that Sopra Steria “did not risk giving indications for 2025, which assumes a ‘soft’ year like 2024”.

“Although these guidelines are not, in themselves, lower than market expectations and knowing that it is entirely healthy for the group to want to take into account possible macroeconomic cycles, the announcement effect is quite “mixed if we take into account the fact that the group previously targeted organic growth of 4% to 6% for the current year”, estimates Oddo BHF in a note published this Thursday morning.

“It is therefore a little surprising/disappointing that the group is now further capping the upper range of these forecasts,” continues the research firm.

Regarding the operating margin and free cash flow, Oddo BHF also notes that the lower limit of the objectives is really prudent and could disappoint, but recalls that this prudence is deliberate to the extent that the “group generally aims to exceed its ambitions “.

These are all parameters which “put the disappointing elements in the group’s financial objectives into perspective”, notes the research office. “Nevertheless, it now seems clear that this CMD (investor day) will not be a catalyst for the re-rating (rise) of the share price. Only the ambitions of M&A (mergers and acquisitions, editor’s note) are really exciting to this stage, but the timing is obviously uncertain on this subject, as always”, concludes Oddo BHF which maintains its outperformance rating and its price target of 251 euros on the stock.