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Capgemini Group sees 2013 profit recovery, but consulting struggles

Paul Hermelin

Paris: Europe's biggest IT services consultancy Capgemini has reported encouraging 2013 profits growth, despite flat revenues and continued trading difficulties in many of its core European markets.

In the year ended December 31, 2013, Capgemini saw operating profit up 19% to €720 million on revenues up 0.9% to €10.1 billion.

The firm says that, "After an activity slowdown towards the end of 2012, in 2013 the Group enjoyed, as expected, an improvement in organic growth each quarter to reach 3.9% in Q4. Overall, the Group reports 2013 revenues of €10,092 million, up 0.9% on a like-for-like basis (i.e. at constant Group structure and exchange rates).

"Revenues fell 1.7% compared to 2012 published figures (i.e. at current Group structure and exchange rates), due to unfavorable movements in certain currencies, in particular the US dollar, the British pound and the Brazilian real."

Bookings during the year totaled €9,651 million, slightly down on 2012. The book-to-bill ratio stands at 1.05 for the year and 1.13 for the fourth quarter for Technology Services, Local Professional Services (Sogeti) and Consulting Services together, confirming, Cap Gemini says, the "dynamism of these businesses at the end of the year".

Outlook for 2014

In a context of gradually improving demand, the Group forecasts for 2014 an organic revenue growth of 2% to 4% and an operating margin rate between 8.8% and 9.0%.

Paul Hermelin, Chairman and Chief Executive Officer of the Capgemini Group, commented, "In 2013, Capgemini confirmed its ability to improve profitability in a sluggish economic environment and gain market share.

"The Group also further strengthened its status as a global leader: Capgemini is positioned on growing market segments such as cloud computing and digital, with the recently launched global service line "Digital Customer Experience"; its offshore platforms allow it to combine quality and competitiveness; finally, the Group now generates 30% of its revenues outside Europe and saw its activities accelerate in Latin America."

Operations by major region (at constant Group structure and exchange rates):

  • France — which remains the largest region in the Group — recorded an increase in revenues of 0.4% year-on-year, a net improvement compared to the decline in 2012. Growth reached 3.1% in the second half, confirming the Group's ability to gain market share. The operating margin in the region is 9.3%, up 0.5 points compared to 2012.
  • North America — the Group's second region — grew by 2.5% in 2013, driven by Technology Services in the financial services sector and by the infrastructure services business. Revenue surged in the fourth quarter with a growth of 7.9%. North America remains the most profitable region in the Group with an operating margin rate of 12.3% (up 0.5 points compared to 2012).
  • The United Kingdom & Ireland region contracted 0.3% in 2013, but expanded 1.8% in the second half. Excluding the scheduled decrease in revenues on a major Group contract, all businesses are growing. The profitability of the region reached 8.7 %, up 0.1 percentage points compared to 2012.
  • Benelux still shows a 3.3% decline for the full year, but returned as expected to growth in the fourth quarter ( 1.2%); the measures taken in the second half of 2012 led to a gradual improvement in activity throughout 2013. Its operating margin was 9.8 % of revenues, a 1.9 points improvement compared to 2012.
  • The "Rest of Europe" region contracted 1.4% as a whole but this is the result of contrasting situations: activity was stable in Central Europe and the Nordic countries; it progressed in Italy and Portugal but significantly declined in Spain. The operating margin of the region reached 7.7% (up 0.5 points compared to 2012).
  • The Asia-Pacific and Latin America region continued to enjoy a strong growth ( 12.0%), marked by a sustained activity in Brazil, the dynamism of the local Indian market and the development of financial services in Asia-Pacific. The operating margin of the region is 4.9%.

Operations by business (at constant Group structure and exchange rates):

  • Technology services (40.6% of Group revenues) reports growth of 1.6%, driven by the good performance of the financial services sector. The operating margin rate reaches 8.7%, up 0.5 points on 2012.
  • Outsourcing Services (40.1% of Group revenues) reports revenue growth of 2.0% and an operating margin rate of 9.2%, up significantly year-on-year (8.0% in 2012).
  • Sogeti (14.8% of Group revenues) reports a slight decline in revenues (-1.3%) in 2013, but with a growth of 1.3% in the second half. Its operating margin rate is 10.6%, virtually unchanged from 2012.
  • Consulting Services (4.5% of Group revenues) suffered a 7.5% drop in activity, reflecting the difficulties encountered by this business globally and particularly in Continental Europe. Profitability is reduced: 7.8%, down from 11.2% in 2012.

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