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H1-07/08 results & outlook SFAF meeting Palais de la Bourse - November 14th 2007 -

H1-07/08 results & outlook SFAF meeting Palais de la Bourse - November 14th 2007 -. Bernard Huvé Eric Matteucci. SII in brief. IT engineering and consulting. Financial strength and sustainability Launched in April 1979 Financial position: Net cash flow €12m Shareholders’ equity €40m.

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H1-07/08 results & outlook SFAF meeting Palais de la Bourse - November 14th 2007 -

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  1. H1-07/08 results& outlookSFAF meetingPalais de la Bourse- November 14th 2007- Bernard Huvé Eric Matteucci

  2. SII in brief IT engineering and consulting • Financial strength and sustainability • Launched in April 1979 • Financial position: • Net cash flow €12m • Shareholders’ equity €40m Sales growth Various activities Integrated systems Networks & Telecoms Third-party maintenance 40% R&D outsourcing R&D consulting Research and development Process, industrialisation 60% Sales of €127m in 2006/07 Operating margin: 9.2%of sales IT services Staff growth Contracting assistance Various and non-IT Development and consulting 3% 5% 92%

  3. SII in brief Breakdown of sales/clients by sector Sales by sector transportation Industry breakdown Utilities 3% Public services 3% Trade, retail 1% Railroad 2.3% Payment terminals 6.3% Other services 6% Industry 57% Electronics 20% Digital TV 7.8% Transportation & Tourism 6% Banking, Insurance 7% Other 11% Telecom and Media 17% Aerospace 25% Automobile 13,3% Defence 14,3% New clients in H1-07/08 include Coface, Rio Tinto, Auchan, Arcelor, Smiths and RATP

  4. SII in brief Breakdown of sales/type of customer • Breakdown of sales by type of client • 20 biggest customers = 70% of sales • Alcatel  IBM • DCN  Safran • EADS  Siemens • France Telecom  Thales • Gemalto  Thomson • Low dependency (except in terms of referencing) • Multi-company client base • Multi-site company 92% 4% 4% Big account SME Miscellaneous

  5. CMMi, means of industrialisation SII in brief • Quality insurance, a pioneering approach • SII is one of the oldest IT service companies with ISO9001 certification (1992) • Broad scope (activity, branches) • CMMi model, SII still leading the way in quality insuranceCMMi – a model for checking IT systems’ development potential • Use of CMMi methodology since 2004 • More than 50% of activity is CMMi assessed (2 or 3) • Investment of around €200k per year between 2004 and 2009 to increase brand awareness and profitability • CMMi, advantages for clients, employees and the company • Clients: managing quality, scheduling and requirements • Employees: working in an environment where processes are formalised • Company: controlling commitments, monitoring hazards, managing risk

  6. SII in brief Assets: responsiveness, flexibility and sustainability • Nine profit centres in France, developments abroad • Light structure • Fully autonomous managers • Local service • Local roots • Virtual real-time reporting • The benefits of a medium-sized player • Decentralization/Dispatching responsabilities • Commercial dynamics and steady customer relations • Flexibility & local reactivity SII is “outperforming” its sector Average annual growth of 23% in sales and operating income over 10 years

  7. Summary • H1-07/08 • H1-07/08 results • 2007/08 trends

  8. H1-07/08Confirmation of sector growth Technology consulting: structural growth • A booming market • driven by R&D outsourcing and embedded systems • Essentially provided by French companies • High employment • 3,500 net job starts forecast for 2007 in companies with more than 10 employees (source: OPIIEC) • Structural growth • Acceleration in the rate of innovation and time-to-market • R&D outsourcing strategy • Internal focus on “core, core business” • Search for specific expertise +8.0% +7.0% +6.0% ISTI* Embedded softwareservices R&Doutsourcing Technology consulting +7% *ISTI: Information, Science, Technology and Industry Source: press conference – Syntec Informatique October 2007.

  9. H1-07/08Confirmation of sector growth • Continued pressure on prices • Offshore – Near-shore • Fragmentation of sector* • €5.3bn of sales in France • 65,000 jobs • 4,600 companies, including 605 with more than 10 employees • Buyers’ market • Recruitment problems • Industrialisation still greater for “sounder, cheaper, faster” operators * Source: press conference – Syntec Informatique October 2007.

  10. 07/08 priorities Reminder of the four challenges facing SII • Recruitment • Keep technical and human criteria • Limit wage spirals • Selling prices • Arbitrate between growth and profitability • Select clients • Industrialisation • Continue CMMi deployment (2004/2009) • Reduce cost prices (work package) • International development • After Poland and the Czech Republic…

  11. H1-07/08Structural costs under control Change in structural costs SII definition: (Total costs – payrolls of billable employees – subcontractor costs) / total costs

  12. H1-07/08Inter-contract rate H1-07/08: back to normal % Employees Change in headcount (end of month) Inter-contract rate SII: (billable - billed) / billable

  13. H1-07/08 Work package development 84% 78% 73% 66% 91% 68% 13% 13% 14% Other 14% Time & material 19% 13% 16% 11% Fixed price 8% 6% 2% Work package 06/07 02/03 03/04 04/05 05/06 S1 07/08 • Increased weight of work package services • Commitment to results vs. resources • Outsourcing of tasks • Global contracts vs. one-off expertise

  14. International 2% Paris area 30% Rest of France 68% H1-07/08 Further growth in European network Headcount 9 branches 11 offices Warsaw Brussels Lannion Lille Caen Brest Sannois Strasbourg Rennes Le Mans Geographic breakdown of sales Vélizy Tours Prague Nantes Niort Lyon Bordeaux Toulouse Sophia Aix Montpellier Vitrolles La Ciotat

  15. H1-07/08International developments • Development on domestic markets • Poland (January 2006) • From zero to 65 employees • 11 local IT system clients (2/3 of sales) (Banking/Insurance – Telecom operators and equipment manufacturers)Pekao, Axa, Citibank, Société Générale, Allianz, Ericsson, FT • One R&D client (1/3 of sales): Gemalto • Czech Republic (May 2007) • 5 employees • Gemalto "client sponsor" for R&D outsourcing • Belgium (September 2007) • Start-up period

  16. Summary • H1-07/08 • H1-07/08 results • 2007/08 trends

  17. Key figures +14.7% • Results in line with company’s business plan • Structurally negative seasonal factor in H1 67.35 58.74 +1.4% -1.6% 4.90 4.83 3.20 3.15 H1-06/07 H1-07/08 H1-06/07 H1-07/08 H1-06/07 H1-07/08 Sales (€m) Operating income (€m) Operating margin of 7.3% Net income (€m)

  18. Breakdown of overheads 6.67 0.24 2.18 Other operating income 53.06 Outside purchases Taxes 0.78 Salaries and payroll costs Provisions Operating income Sales €67.35m +14.7% €4.90m +1.4%

  19. H1-07/08 results

  20. H1-07/08 results Cash flow table Change in WCR = ¼ of sales growth

  21. Balance sheet A healthy financial structure IFRS 30/09/2006 IFRS 30/09/2007 €m Shareholders’ equity 34.5 Shareholders’ equity 40.0 Non-recurrent 5.9 Non-recurrent 6.4 WCR 18.6 WCR 22.2 Cash flow 10.5 Cash flow 12.0 Non-recurrent 0.5 Non-recurrent0.6

  22. Autodétention 9,8% Management 62,4% Parvus AM 7,5% Float 20,3% SII on the stock market Shareholder structure at 30 September 2007 3,000,000 shares Source : SII

  23. SII on the stock market Comparative one-year share performance

  24. Summary • H1-07/08 • H1-07/08 results • 2007/08 trends

  25. 65 55 PIB SS Invest. SII 45 35 25 15 5 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -5 SII is structurally outperforming the S&S sector An increasing ratio Changes in GDP growth, investment, S&S and SII Source: press conference – Syntec Informatique October 2007.

  26. Outlook for 2007/08 Demand to remain firm • Further investment in companies • Catching up on previous underinvestment • Technological innovation, spreading of embedded electronics • Upgrade of information systems • Numerous projects • More outsourcing • Increasingly complex projects • Refocusing on core business • Retirement of baby boomers • Current issue: recruitment • Problems with hiring in some skills • Maintain quality and profitability criteria • SII: 700 new engineers expected for 2007/08 • Slight drop in turnover (22% to 17.5%) since the beginning of the FY

  27. Outlook for 07/08 A restrictive “daily rate–skill–wage” comparison • Almost stable pricing tariffs • Demand-side pricing power • Heavy competitive pressure • Indirect pressure from offshore • Scissors effect: selling prices – cost prices • Wage pressure • Shortage in some areas

  28. Outlook for 07/08 SII: constant quest to improve profitability • Continued rigorous management • Possibility of near-shore operations • Growth/profitability arbitration • Need to avoid a deflationist approach… • …that could lead to rejection of assignments • The real issue: improving production processes • Service contract or work package: “coming up trumps” • CMMi

  29. Outlook for 07/08 Ongoing strengths 1. Limited risks • Clients: major, loyal customers • Technological history and background • Quality control: long-term and distinct 2. Simple, insurance operating model • One company, several profit centres • Decentralised structure, local services • Corporate culture: technical and service 3. A sound financial base • Steady cash flow generation • Satisfactory cash flow • No financial debt

  30. Extraordinary Shareholders Meeting 20 December 2007 Resolutions Establish board of directors and supervisory committee • Board of Directors • Eric Matteucci for general operations; chairman of the board • Patrice Demay for development in France; member of the board • Jean-Paul Chevée for international development, member of the board • Supervisory Committee • Bernard Huvé, chairman of the supervisory committee Increase share liquidity • Increase shareholders’ equity through incorporation of reserves • Freely allocate six shares for every one currently held • Increase number of shares sevenfold Thus structured, SII will be able to overcome new challenges The new team aims to continue the “SII adventure”

  31. Targets for 07/08 Confirmation of previously announced targets • Economic assumptions • Sustained demand Growth of 6% to 8% according to Syntec Informatique • Pressurised margins 2008 prices = 2007 prices + ε • SII targets • Sales  €145/150m (organic growth of 15%) • Operating margin  10% (gain of 0.8 point) • Recruitment of 700 people (386 at end-September)

  32. Upcoming dates • Shareholders meeting (extraordinary): 20 December 2007 • Q3 sales: 14 February 2008 • Annual results and SFAF meeting: 15 May 2008 • Shareholders meeting: 18 September 2008

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