Capgemini Raises Annual Growth Target Amid North American Strength

The Tip Desk · June 30, 2011 · 2 min read

The IT services provider now expects annual organic growth to exceed 1% for the full year.

Capgemini, the IT services provider, has raised its annual organic growth target to more than 1% at constant exchange rates and scope, surpassing its initial goal of near-zero growth. The company also confirmed its objective to increase its operating margin for the full year in line with consensus.

Growth was led by North America, where revenue rose 19.7%. At constant exchange rates and scope, the region grew 9.7%, with consulting and systems integration activities increasing by nearly 15%. The company said it is gaining market share in the North American market. Other high-growth areas included Asia Pacific, which saw revenue rise 31.0%, and the Nordic countries, which grew 14.0%.

These gains offset a decline in the Benelux region, where revenue fell 10.3%. The company attributed this to a depressed IT services market in that zone. Capgemini has implemented rationalization actions since late 2011 to restore profitability in Benelux, where the operating margin fell to 4.5% from 6.2% in the first half of 2011. Restructuring charges for the first half totaled 75 million euros, driven largely by actions in the Netherlands.

Group operating margin for the first half was 6.4%, or 328 million euros, which is 0.3 point higher than the first half of 2011. Excluding the impact of the Benelux market, the group improvement was 0.55 point. Systems integration remained the largest business line, representing 40.3% of revenue with a 4.8% increase at constant rates and scope. The operating margin for systems integration rose 0.9 point to 6.7%.

Net income for the half-year was 132 million euros, compared to 119 million euros in the first half of 2011. The net income attributable to the group was 143 million euros, up from 127 million euros in the prior-year period. Total headcount rose to 121,026 people as of June 30, 2012.

Cash flow was impacted by a dividend payment of 1 euro a share, totaling 154 million euros. Net cash stood at 27 million euros at the end of the period, down from 169 million euros on June 30, 2011. The company said the decrease was primarily due to the dividend and a negative cash flow from activities of 187 million euros.

To address dilution from the international share ownership plan, the company intends to buy back at least 100 million euros of its own shares over the next 12 months.