Capgemini Outsourcing Growth Offsets Consulting Decline in First Half

The Tip Desk · June 30, 2008 · 3 min read

The IT services provider saw outsourcing orders rise 34.6% as clients prioritized cost control.

Capgemini, the IT services provider, reported first-half revenue of 4,376 million euros. This figure represents a slight increase over the 4,374 million euros recorded in the first half of 2008, though the company said revenue fell 2.2% at constant exchange rates and perimeter,.

Outsourcing emerged as the primary driver of stability. Orders in this segment rose 34.6% to 1,376 million euros. The company said outsourcing is often the fastest and most effective way for clients to achieve cost control, which has become a major priority. This trend was particularly evident in the United Kingdom and Ireland, where outsourcing represents more than three-quarters of activity.

Conversely, the consulting business faced a downturn due to its discretionary nature. Revenue for this segment fell 13.4% at constant exchange rates and perimeter, reducing its share of total revenue to 6.8%. Average selling prices in consulting fell nearly 4% as demand for high-value strategy offers decreased. Despite this, consulting remained the most profitable segment with an operating margin of 10.5%.

Other segments also felt the economic environment. Sogeti revenue fell 5.4% and accounted for 17.0% of total revenue. The company said the utilization rate for Sogeti dropped by more than two points, although average selling prices remained stable.

Overall group profitability declined. The operating margin was 287 million euros, or 6.6% of revenue, compared to 7.6% in the first half of 2008,. The company attributed this decrease primarily to a degradation of the gross margin. Operating results reached 167 million euros, or 3.8% of revenue. Net income for the period was 78 million euros, compared to 231 million euros in the first half of 2008. Basic earnings were 0.54 euro a share.

Restructuring costs rose to 102 million euros, primarily in France, Spain, and the Netherlands. The company also reported a net financial charge of 39 million euros, which was 24 million euros higher than the first half of 2008.

Net cash stood at 576 million euros as of June 30, 2009, down from 774 million euros on December 31, 2008. This decrease was driven by a 143 million euro dividend payment to shareholders and a negative net cash flow from activities of 83 million euros. To strengthen its financial position, the company issued a new OCEANE, which provided 564 million euros in net proceeds,.

Total headcount rose to 89,453 compared to 86,487 on June 30, 2008. Offshore staff reached 25,027 people, representing 28% of the total workforce. The company said the annualized attrition rate fell to 9.6% from 18.3% in 2008.

For the second half of 2009, the company expects revenue to decrease between 4% and 6% at constant exchange rates and perimeter. It expects to achieve a full-year operating margin rate of approximately 7% through rigorous cost management.