Capgemini reports solid Q3 2016 performance and confirms its full year guidance
Paris, October 26, 2016 – Capgemini Group reports consolidated revenues of €3,019 million for the third quarter of 2016, up 2.2% at constant exchange rates compared to the same quarter of 2015. Revenues grew 10.2% at constant exchange rates over the first nine months.
For Paul Hermelin, Chairman and Chief Executive Officer of the Capgemini Group: “The third quarter was a continuation of the first half. Growth was particularly strong in the Manufacturing (+12.6%) and Financial Services (+6.5%) sectors where our comprehensive Digital Transformation offering meets customer demand. The strong growth in bookings (+14% at constant exchange rates year-on-year) is a sign of a solid market demand and reflects our ability to gain market share.
Continental Europe posted another strong quarterly growth notably in Germany, Sweden and France, while in the UK we didn’t notice any material impact from Brexit. North America is still strongly impacted by the contraction of the energy sector, activity in that sector is expected to stabilize at Q3 level.
We continue to expand in market segments driven by innovation, with our Digital and Cloud activities growing 25% over the quarter.
Finally, we want to make bolt-on acquisitions to accelerate the transition of our business portfolio, particularly in North America. These acquisitions could represent 2 additional points of annual growth over the next two to three years.”
TRENDS BY BUSINESS
Digital and Cloud revenues grew 25% year-on-year at constant exchange rates in Q3. Growth is driven by a cross-business approach and leverages the management consulting business. Digital and Cloud generated 29% of Group revenues in the first 9 months of the year.
Consulting Services (4% of Group revenues) revenues grew by 3.1% at constant exchange rates. This number does not take into account the rapid development of Digital consulting missions initiated and invoiced by the other businesses. Technology & Engineering Services (15% of Group revenues) reported revenue growth of 1.3% at constant exchange rates, mainly supported by the North America and Rest of Europe regions. Application Services revenues (61% of Group revenues) grew 4.4% at constant exchange rates and continue to drive Group growth. In France, Central Europe and Scandinavia, demand for innovative offerings boosted Application Services revenues to over 10%. Other Managed Services revenues (20% of Group revenues) declined by 3.3%: the robust momentum of Business Services only partially offsets the contraction of infrastructure activities in the United Kingdom - anticipated since the beginning of the year – and in Latin America.
TRENDS BY MAJOR REGION
North America reported an increase in revenues of +0.4% year-on-year at constant exchange rates in Q3. The Energy & Utilities sector weighed again on performance as all the other sectors combined reported a 3.7% year-on-year growth. The Brexit did not materially affect the activity in the United Kingdom & Ireland in Q3. Revenues in the region declined by 1.5% at constant exchange rates as a result of the public sector contraction, anticipated since the beginning of the year, notably with the evolution of a large contract. On the private sector side revenue is growing by about 10% at constant exchange rates. Driven by its key sectors, France continued to grow at a steady pace this quarter with a 4.6% year-on-year growth at constant exchange rates. In line with the first half of the year, Rest of Europe revenues (which includes Benelux since January 1, 2016) increased by 5.4% at constant exchange rates. Scandinavia, Central Europe and Italy keep driving the performance in this region. The good momentum in Europe therefore continued in Q3 with an acceleration in the Manufacturing & Automotive sector. Finally, the Asia-Pacific and Latin America region grew 1.2% at constant exchange rates, with contrasted trends: a marked drop in Latin America (related to equipment resale), while Asia-Pacific continues to be very dynamic with a double digit growth.
At September 30, 2016, the total Group headcount stood at 187,616. Offshore leverage, with over 103,000 employees in the Global Production Center network, stands at 55% of the total workforce.
New orders recorded in Q3 2016 amounted to €2,792 million. This represents a 14% increase at constant exchange rates compared to Q3 2015.
OUTLOOK FOR 2016
The Group confirms its guidance for 2016, as upgraded on July 27, 2016: it forecasts revenue growth at constant exchange rates of 7.5% to 9.5%, an operating margin of 11.3% to 11.5% and organic free cash flow generation in excess of €850 million.
The Group now estimates the negative impact of currency fluctuations on full year revenues slightly below 3 points, primarily due to the appreciation of the euro against the pound sterling.
Announcement on October 5 of the decision to proceed with the early redemption of the ORNANE bonds (Zero coupon net share settled bonds convertible into new shares and/or exchangeable for existing shares of Cap Gemini due January 1, 2019) and in the event of exercises of conversion right to allocate a cash amount equal to the nominal value of the ORNANE bonds (i.e. a maximum total amount of €400 million) and shares for the balance (i.e. the difference between the Conversion Value, as defined in the ORNANE securities note, and the nominal value).
- Purchase on the market since June 30 of 1,165,643 shares (liquidity contract excluded) for a total amount of €100 million (average purchase price of €85.79). Since the beginning of the year the Group spent €265 million on the share buyback program.
- Signature of a major contract in Application Services with a major US medical technology firm.
- Signing of a 7-year contract with a US insurance company running on the Capgemini IBAS platform (Integrated Business Administration Services).
- Award of large Digital Transformation contract by a European Telco operator.
- Launch of Mov'InBlueTM with Valeo, a smart digital mobility solution for corporate fleets and vehicle rental companies.
Paul Hermelin, Chairman and Chief Executive Officer and Aiman Ezzat, Chief Financial Officer, will comment on this press release during a conference call, in English, at 8.30 a.m. Paris time (CET) today. You can access this conference call by webcast, either live or on replay for up to one year, from Capgemini’s investor website or directly by clicking on this link.
All publication materials will be posted on Capgemini investor website and will be directly accessible from https://investors.capgemini.com/results.
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A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of 200,000 team members in over 40 countries. The Group reported 2017 global revenues of EUR 12.8 billion.
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