Capgemini faces slow down despite Cloud and digital focus

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Technology outsourcing company Capgemini posted €12.792 billion (+2 percent) in 2017 – driven by digital and cloud business.

Digital and Cloud revenue of Capgemini rose 24 percent to reach €4.9 billion, representing 38 percent of 2017 revenues against 40 percent in Q4 2017.

Operating margin of Capgemini was €1.493 billion, or 11.7 percent of revenues, registering a growth of 4 percent or 20 basis points.

Operating profit was €1,183 million, or 9.2 percent of revenues, compared with €1,148 million in 2016.

Capgemini enhanced profitability, reflecting the Group’s ability to pursue industrialization such as rightshore model, standardization of operations, increased automation while rapidly expanding its innovation businesses.

Capgemini increased its total headcount by 3.4 percent to 199,700 at December 31, 2017.

Capgemini generated 31 percent of revenues in North America, 13 percent from United Kingdom and Ireland, 21 percent in France, 27 percent in the Rest of Europe, 8 percent in Asia-Pacific and Latin American region.

Capgemini aims to grow its 2018 revenue at 6-7 percent at constant exchange rates, to up profit with an operating margin of 12-12.2 percent and to generate an organic free cash flow in excess of €1 billion.

Capgemini achieved 14 percent growth in Consulting Services that brings 5 percent of Group revenues. Activity is fuelled by the Digital Transformation needs of the Group’s clients, notably in the Manufacturing, Financial Services and Retail & Consumer Goods sectors.

Capgemini achieved 4.7 percent growth in Technology & Engineering Services that contributes 15 percent of Group revenues. The Energy & Utilities sector also stood out with double digit growth.

Application Services, which contributes 62 percent of Group revenues, increased 6.6 percent. Strong Digital and Cloud demand drove business activity. Manufacturing and Retail & Consumer Goods sectors reported the highest growth.

Other Managed Services (18 percent of Group revenues) contracted 6.4 percent due to dip in the UK public sector and in infrastructure services.

Business Services remained generally stable, buy operating margin fell 80 basis points to 9.2 percent.

TBR analyst Elitsa Bakalova said Capgemini sustained revenue growth and achieved a stable operating margin during 2017. Digital and cloud, which collectively accounted for 38 percent of revenue in 2017, up from 30 percent in 2016, will remain the future areas of expansion for Capgemini.

Capgemini is pursuing acquisitions in North America to increase its resources, portfolio and client base, especially around digital services areas such as the ones of LiquidHub, Lyons Consulting Group and Idean.

During 2018 Capgemini will experience competitive and pricing pressures from established IT vendors in the region that are pursuing digital and cloud opportunities. Continental Europe, which accounted for 48.3 percent of Capgemini’s revenue in 2017, will remain a core contributor to the company’s digital and cloud and offshoring activities in 2018.

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