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Research Tree provides access to ongoing research coverage, media content and regulatory news on Capgemini. We currently have 24 research reports from 2 professional analysts.
Organic revenue growth was solid in Q3 19 (+5% vs +4.9% in H1 19). The picture was positive in all geographic areas, including North America where revenue growth improved following a poor Q2 19. The disappointment came from the announcement of a slowdown by the end of the year and the downgrade of revenue growth to the low range of guidance (+5.5% at constant currency, c.+4.5% organically). Conversely, the target of an operating margin of 12.3-12.6% of revenue is unchanged.
At constant currency, revenue growth was solid in H1 19 (+4.9%, o/w +4.7% in Q2 19 and +5% in Q1 19). Capgemini benefited from a strong development in Europe, driven by the UK and France which offset the slowdown in North America. The operating margin rate improved by 0.5pt to 11.4% of revenue. 2019 guidance is confirmed. Recently, the activist investor Elliott Management has built up a position in Altran Technologies. Capgemini said it does not intend to increase the offer price.
The proposed acquisition of Altran Technologies is a very positive operation for Capgemini. It brings highly-skilled consultants in R&D and high-tech engineering services in various sectors. The cash offer is not at an exorbitant price considering the market growth potential (+9%/year on average in 2017-22) and Altran Technologies’ operating margin is similar to that of Capgemini’s. The acquisition should be funded by cash and new debt (very probably at low cost). There are significant synergies expected in three years.
Organic revenue increased by +5% in Q1 19 (vs +6.1% in Q1 18 and +5.7% in Q4 18). In the US, organic revenue growth was softer than expected and the group is anticipating an acceleration in H2 19 thanks to some positive developments assumed in the insurance, retail and manufacturing sectors. All in all, Capgemini maintained its 2019 guidance.
Capgemini met expectations in FY2018. Organic revenue grew by 6.2% thanks to the development of digital and cloud services (>+20% at constant currency, c.45% of total revenue) and the operating margin improved by 0.2pt to 12.1% of revenue thanks to France, the Rest of Europe and Asia Pacific/Latin America. Capgemini is confident for FY2019. Guidance includes strong revenue growth (+5.5-8% at constant currency including acquisitions for 1-2pts) and an improvement in the operating margin to 12.3-12.6% of revenue.
Capgemini’s achievements were very satisfactory in Q3 18. At constant currency, revenue growth was substantial, +6.3%, in line with the trend seen in H1 18. Digital & cloud services (>+20%, 45% of group revenue) continued to be a strong growth driver as expected. Capgemini is confident for Q4 18 and revised upwards its 2018 revenue growth guidance at constant currency (>+7.5% vs >+7% including acquisitions).
Organic revenue growth accelerated in Q2 18 (+6.7% vs +6.1% in Q1 18) still driven by the cloud and digital revenue. The North American activities were the most dynamic and benefited from the integration of LiquidHub and Advance Lab. The operating margin improved in H1 18 thanks to Continental Europe. 2018 guidance was revised upwards at the top-line and unchanged at the operating margin level.
Q1 18 was a very strong quarter with organic revenue growth of 6.1% pushed by the comeback of North America (+14.8% at constant currency) and the solidity of the activities in continental Europe (+7% at constant currency). The Digital and Cloud offerings continued to be the growth driver and the related revenues exceeded 40% of total revenue.
Organic revenue growth was strong in Q4 17 (+5.6%). There was an impressive rebound in North America with double-digit growth and buoyant activities in Europe except for the UK/Ireland. The operating margin rate improved in line with expectations. Net financial debt decreased and represented 17% of shareholders’ equity.
In Q3 17, organic revenue growth (+3.1%) was slightly better than in Q2 17 (+2.9%). North America was back to strong growth (+6.9% at constant currency) and Europe (excluding the UK & Ireland) was buoyant (+4.7% in France and +6.8% in the Rest of Europe at constant currency). Q3 2017 figures Revenue reached €3,046m (+0.9%, +3.4% at constant currency). There was a negative currency effect (-2.4pts) and a change of scope (+0.3pt). Organic revenue growth (+3.1%) was slightly better than in Q2 17 (+2.9%). As usual, it was driven by the digital & cloud business (+23% at constant currency). At constant currency, Consulting services surged by 16% thanks to the investments made in North America and buoyant demand in digital transformation in the Rest of Europe. Application services (63% of group revenue) increased by 5.7% thanks to higher demand for the digital offerings in France, Germany, Scandinavia, Italy and Asia. Technology and Engineering services was up +3.8%, driven by France and North America. Conversely, Other Managed services dropped by 6.3% due to the on-going re-insourcing at HMRC in the UK and the contraction of managed services in Brazil. Bookings declined by 1% to €2,700m. This is not representative of an annual trend considering that new orders are not linear quarter after quarter. The group is expecting a higher order intake in Q4 17.
H1 17 was in line with consensus. Organic revenue growth was 2.7% (o/w +2.6% in Q1 17) and the operating margin rate was up to 10.5% of revenue (+0.3pt). The 2017 guidance is unchanged. H1 17 figures Revenue was €6,412m (+2.5%, +3% at constant currency). Organic growth was 2.7% (o/w +2.6% in Q1 17). The digital and cloud services continued to be solid growth drivers (+23% at constant currency) and represented 35% of total revenue. The most dynamic geographic areas were France (+4.7%), Rest of Europe (+7.9% driven by Germany, Italy, the Nordic countries) and Asia-Pacific/Latin America (+13.9%). The good news was North America was back to slight growth in Q2 17 (+1% vs -0.2% in Q1 17) leading to +0.4% in H1 17. In the UK/Ireland (-5.9%), the negative trend was related to the re-insourcing at HRMC as expected. By business, Capgemini had strong growth in Consulting services (+10.7% including the change in perimeter), Technology & engineering services (+3.5%), and Application services (+5.6%). Revenue was down in Other managed services (-6.6%, o/w -7.6% in Q1 17) still impacted by the re-insourcing at HMRC in the UK. The operating margin increased to €672m (+5%) corresponding to a margin rate of 10.5% of revenue (+0.3pt). The gross margin was stable (24.6% of revenue) despite some price pressure in North America and salary increases in India, selling expenses were up 0.1pt and G&A costs were down 0.4pts. By geography, the margin improvement was attributable to the UK/Ireland (+0.6pts to 15.1% of revenue), France (+0.5pt to 7.1% of revenue), the Rest of Europe (+2.2pts to 11.1% of revenue), Asia-Pacific/Latin America (+2.2pts to 6% of revenue). Conversely, North America had a lower operating margin (-1.9pts to 13.2% of revenue). The operating profit was €538m (+6%) after other operating expenses (net) of €-134m (+4.7%), o/w higher restructuring costs (€-50m vs €-31m in H1 16), rather flat acquisition-related amortisation of intangible assets (€-33m) and lower acquisition/integration costs (€-17m vs €-38m in H1 16). Group net profit was €375m (+3%) after lower net financial expenses (€-28m vs €-62m in H1 16) including a gain (€14m) from the early unwinding of currency swaps set up with the funding of the IGATE acquisition, and a higher income tax rate (27.5% vs 19.4% and 26.5% restated from the recognition of a deferred tax income in H1 16). Free cash flow reached €64m (vs €31m in H1 16). Investment in shares was €121m (vs €22m in H1 16), the dividend paid amounted to €262m (+14%) and share buy-backs represented €70m (vs €158m in H1 16). Net debt was €1,929m on 30 June 2017 (vs €2,278m on 30 June 2016).
Organic revenue growth was strong in Q1 17 (+2.6%). There was a stabilisation in the decrease in revenue in North America which is good news. Q1 17 revenue Revenue reached €3,171m (+2.6%, +2.8% at constant currency). The Digital and cloud offerings continued to grow quickly (+24% vs +28% in Q1 16) and represented 32% of total revenue. Organic revenue growth was strong (+2.6% vs +2.9% in Q1 16) despite the on-going re-insourcing at HMRC in the UK. The order intake decreased to €3,001m (-3.2% at constant currency), slightly below revenue (book-to-bill ratio of 95%). New orders are not linear quarter by quarter, in particular in Other Managed services. The comparison was unfavourable in Q1 17 considering the renewal of a major pluri-annual contract in the UK public sector in Q1 16. At constant currency, Application services (61% of total revenue, +5.3%) continued to benefit from strong demand for the digital and cloud-based offerings. The digital transformation also had a positive impact in Consulting services (4% of total revenue, +10.6% including small acquisitions) mainly in Continental Europe. The Local Professional services (16% of total revenue, +5%) benefited from the positive turnaround in France and an increase in the number of working days. Other Managed services (19% of total revenue, -7.6%) was still impacted by the re-insourcing at HMRC in the UK. Staff increase, more “offshore” headcount The workforce comprised 195,800 employees (+7% yoy). The “offshore” headcount represented 57% of the total (+2pts yoy). The attrition rate decreased by 1.4pt to 15.3% due to lower attrition rates in Application services (-1.7pt to 14.3%) and Other Managed services (-2.9pts to 16.5%). Conversely, the attrition rates increased in Consulting services (+1.5pt to 18%) and Technology and Engineering services (+1.1pt to 17.6%).
Capgemini should reinforce its presence in North America with the completion of the agreement related to the acquisition of the North American activities of Ciber for $50m. The operation is expected to be completed by the end of Q2 17. The deal excludes the international businesses of Ciber and some liabilities. The transaction will be implemented through the sale of Ciber’s assets under Chapter 11 for which Capgemini agreed to act as the stalking horse acquirer. The North American activities of Ciber represent total revenue of c.$275m and are loss-making at the operating margin level. The negative impact on the Capgemini’s operating margin should not exceed 20bp in 2017 (Capgemini’s 2017 guidance includes an operating margin of 11.7-11.9% of revenue before this acquisition). Management is expecting a positive contribution in H1 18. The workforce comprises 2,000 employees in the US and 1,000 employees in India. When the operation is completed, the acquired activities will be integrated in the US operations of Sogeti (technology and engineering services).
Despite a soft Q4 16 with organic revenue up 1.9% at constant currency, Capgemini achieved its guidance for revenue growth (+7.9% at constant currency vs +7.5-9.5% targeted) and the operating margin (11.5% of revenue vs 11.3-11.5% targeted). Igate contributed for 12 months (vs 6 months in 2015). Q4 16 figures: Revenue reached €3,263m (-0.2%, +1.9% at constant currency) and new orders were €3,879m (+3.9%, +5.4% at constant currency) representing a book-to-bill ratio of 1.19 (vs 1.14 in Q4 15). The change in overall revenue included a negative currency effect (-2.1%) mainly attributable to the pound vs the euro and a moderate change in the perimeter (+0.3%). Organic growth slowed (+1.6% vs +2.9% in 9m16) and was above the trend in Q4 15 (+0.1%). At constant currency and current perimeter, revenue growth (+1.9%) came mainly from Applications services (+4.9%) and Technology and Engineering services (+1.2%) to a lesser extent. Conversely, revenue decreased in Consulting services (-1.7%) and dropped in the Other Managed services (-5.3%). By geographic area, Europe was a growing region and France was the best performer (+5.9%), largely ahead of the UK/Ireland (+1%) and the rest of Europe (+2.4%) which included a slowdown in Benelux. North America was disappointing (-3.1%) due to the on-going weakness of the energy/utilities sector and slight growth (+1.1%) excluding this sector. Conversely, the Asia Pacific/Latin America area was fast-growing (+11.7%) driven by the strong development in financial services in Asia Pacific. FY2016 figures: Based on revenue of €12,539m (+5.2%, +7.9% at constant currency, +2.6% organically), the operating margin surged to €1,440m (+14%) and the margin rate improved to 11.5% of revenue (vs 10.6% of revenue in 2015) which was at the top of guidance (11.3-11.5%). New orders reached €13,027m (+13%, +14.5% at constant currency) representing a book-to-bill ratio of 1.04x. The order intake benefited from booking synergies related to the integration of Igate (>€300m). The currency impact was negative on revenue: -2.7pts, o/w 80% of this related to the depreciation of the pound vs the euro. The following growth rates are at constant currency: - The digital and cloud revenue continued to increase significantly (+29%) and represented 30% of group revenue. - By division, the Application Services and Technology/Engineering services were up 10.6% and 6.9% respectively (including the impact of Igate) while the Consulting services and Other Managed Services increased by 2.7% and 2.2% respectively. In Other Managed Services, there was a organic decline attributable to the UK public sector as expected (re-insourcing at HMRC), the weakness of the traditional infrastructure services due to the transition to the cloud and, finally, lower equipment resales (not in Q4 16). - Revenue increased in all geographic areas (North America: +14.5% including Igate on 12 months, France: +5%, UK/Ireland: +4.1%, Rest of Europe: +5.3%, Asia-Pacific/Latin America: +8.2%). The improvement in the operating margin (+0.9pts to 11.5% of revenue) was attributable to all divisions and all had double-digit margin rates (Consulting Services: +1.6pts to 10.7% of revenue, Sogeti: +1.2pts to 12.8% of revenue, Application Services: +0.8pt to 12.7% of revenue, Other Managed Services: +0.4pt to 10% of revenue). The picture was positive in all geographic areas (North America: +0.5pt to 15.4% of revenue including Igate for 12 months, UK/Ireland: +1.2pts to 14.6% of revenue, rest of Europe: +0.3pt to 10.5% of revenue, France: +1pt to 9.1% of revenue, Asia Pacific/Latin America: +2.4pts to 6.6% of revenue). Operating profit reached €1,148m (+12%) after higher restructuring costs (€-103m vs €-81m in 2015), amortisation of intangibles related to acquisitions (€-68m vs €-45m in 2015), acquisition/integration costs (€-69m vs €-55m in 2015). Group net profit reached €921m (-18%). The apparent decrease was due to the one-off non-cash gain of €476m related to the reassessment of deferred tax assets on US tax loss carry-forwards accounted in 2015. Excluding this item, group net profit grew by 14%. Net debt was reduced to €1,413m (-20%) at year-end 2016 thanks to substantial operating cash flow and FCF. The operating cash flow increased to €1,319m (+31%) and FCF was substantial at €1,143m (vs €825m in 2015) after stable net capex (€176m). Cash-out flows included principally the dividend paid (€229m) and share buy-backs (€340m). The proposed dividend was €1.55/share, +15% (3% above our expectation).
Organic revenue growth slowed in Q3 16 (+2.1%) compared to Q2 16 (+3.8%) and Q1 16 (+2.9%) but the commercial activity was dynamic in the light of the strong increase in new orders (+14% at constant currency). Q3 2016: Revenue reached €3,019m (-0.6%, +2.2% at constant currency) and new orders were €2,792m (+11.7%, +14% at constant currency). Overall revenue growth included a significant negative currency effect (-2.8pts) and a moderate change in perimeter (+0.1pt). Organic revenue growth was 2.1% (vs 1.5% in Q3 15). The digital and cloud solutions were the growth drivers (+25%) and represented 29% of total revenue. At constant currency and including the small acquisitions, revenue growth (+2.2%) came mainly from Applications services (+4.4%) and Consulting services (+3.1%) which was driven by the strong demand for digital and cloud transformation. Conversely, revenue increased slowly at Sogeti (Technology and Engineering services, +1.3%) and dropped in the Other Managed services (-3.3%) reflecting the impact of the re-insourcing at HMRC. On 30 September 2016, Capgemini had 187,616 employees (+5.4% yoy), o/w c.103,900 (+8.8%, 55.4% of the total workforce) were located in the global production centres offshore.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Capgemini. We currently have 24 research reports from 2 professional analysts.
EBITDA of £10.5m (£10.4mE) was delivered from revenue of £49.2m (£46.7mE) with net cash of £24.1m, (as revealed in August), comfortably ahead of our £21.5m year-end forecast. Newsflow in the period included three acquisitions, the securing of a five year framework agreement for deployment of TRACS Enterprise with a major Train Operating Group, and the successful transition of the CEO role to Chris Barnes. The Group continues to deliver the proven mix of self-funded acquisitions and organic growth, demonstrating comfortable delivery of forecasts reiterated at interims, and a very strong balance sheet giving capacity to deliver much more of the same. With the new CEO able to deliver operational efficiencies to a Group already well versed in delivering successful acquisitions, we look forward to the next part of Tracsis journey. Target 775p reiterated.
The European Council announced on Friday 8 November that it has adopted a regulation on the general safety of motor vehicles and the protection of vehicle occupants and vulnerable road users. This follows an agreement with the European Parliament in March 2019 and is part of the "Europe on the Move" package, launched by the European Commission in May 2018. These new regulations are to help transition towards a mobility system which is safe, clean and automated. Of relevance to Seeing Machines is the Regulation for the adoption of safety features that include advanced driver distraction warning systems and driver drowsiness and attention warning systems. These regulations will apply from May-2022 to all cars, vans, trucks and buses (including SUVs) and amend several existing safety regulations for EU-type approval.
Companies: Seeing Machines
Bango has announced the launch of Direct Carrier Billing (“DCB”) payment services for Google’s YouTube TV Service, with the initial launch via a “leading” but unnamed US Mobile Network Operator (“MNO”). With the ongoing growth in US Over The Top (“OTT) video services continuing to cannibalise the Cable TV operators, we believe DCB for YouTube TV is a strong offering in a large market. The release is light on detail as to the potential value to Bango, and we make no revisions to forecasts. Nevertheless, the launch represents a further win in an area of strategic focus for the group. It also confirms the integration of a major new merchant service into the Bango Platform.
CentralNic (CNIC) is executing on its strategy to build a global domain name and web services provider, acting as a consolidator in a fragmented market. Its key focus is expanding in emerging markets, where internet penetration is lower than in developed economies and the growth rates are higher. The company has spent £41.7m on acquisitions in FY16–18, and a further US$28.9m so far in FY19 (note the company’s reporting currency changed from pounds sterling to US dollars in FY19). Management is confident of ongoing organic revenue growth and highlights a strong pipeline of potential future M&A deals.
Companies: Centralnic Group
MTI Wireless Edge Ltd* (MWE.L, 34p/£29.7m) | ZOO Digital plc* (ZOO.L, 84p/£62.6m)
Companies: MTI Wireless Edge Zoo Digital Group
Instem has bolstered its Informatics offering with the bolt-on acquisition of US-based Leadscope for up to $4.6m. The deal looks highly complementary, adding a leading player in the field of computational toxicology, an area with significant structural growth potential and strong regulatory drivers. We upgrade our FY20 and FY21 EPS forecasts by 6.5% and see scope for material revenue synergies over time. Instem remains one of our best ideas for 2019 and we see the addition of Leadscope as adding to an already strong organic growth outlook.
IndigoVision have announced the completion of the c.€3.0m acquisition of Agorasys SA (‘Agora’), a strategic IP bolton which is expected to add further strength to the Group’s Video Management Software (‘VMS’) tech stack. €2.5m of cash consideration (inc. €2.3m to clear debt) and 34,422 of share consideration is payable upon completion, with the remaining balance deferred dependent on certain performance contingencies. The Agora product delivers integration of multiple systems across disparate locations to a single interface, and enables standardisation of procedures, improved analytics, operating cost rationalisation and a verifiable process audit trail. Current sales at Agora include a high proportion of recurring revenues, with a scalable rental model available to central monitoring stations. Management see strong potential use cases across Utilities and other critical infrastructure verticals once integration into the Group’s product set is completed (expected back-end of FY’20E). We raise FY’20E revenue forecasts by 3.0% to $56.5m, with EBITDA rising 4.3% to $3.9m. The deal is 2% accretive to FY’20E FD earnings based on our forecasts. P/FY’20E EPS valuation sits at 6.1x compared to a discounted peer group multiple of 11.0x.
Companies: Indigovision Group
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
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Seeing Machines has provided a business updated ahead of its Capital Markets Day in London today. It has announced a renewed and strengthened supply chain agreement with Xilinx, the confirmation of a 21% hardware cost reduction with its contract manufacturer for the Guardian Gen 2 product, and good momentum in the Fleet division with new distributors, insurers and expansion into new fields of use.
Companies: Seeing Machines
GetBusy is a leading developer of document management and productivity software products, with a global footprint, and a delivery and revenue model largely transitioned to SaaS. H1’19 results were stronger than expected driven by higher customer numbers, better ARPU and good cost control.
Oxford Metrics has issued a short trading update for the year to September 2019. Revenue is expected to be in line with expectations and net cash at the year end is 10% ahead of our forecast. Due to the mix of revenue across both divisions adjusted PBT is expected to be broadly in line with expectations, although given the strong cash generation in the year we suspect this is a timing issue. We continue to believe Oxford Metrics provides investors with a unique mix of market leading IP, growth and cash generation, while being exposed to some of the most exciting structural trends in the technology space (Augmented/Virtual Reality, Autonomous Vehicles, and Gaming etc.).
Companies: Oxford Metrics
IMImobile have announced the acquisition of 3Cinteractive (‘3C’), a leading US-based messaging platform company for $53.2m (£42.8m) to be funded through a combination of new debt, an equity fundraise and consideration shares. The strategic rationale is compelling, accelerating IMImobile’s presence in the high-growth US market, consolidating a leading position in Rich Content Services (‘RCS’), and offering a number of cross-sell/ upsell opportunities and cost synergies. Based on our conservative assumptions the acquisition and placing will enhance earnings forecasts by 1% in FY’20E, rising to 11% in FY’21E. IMImobile’s EV/FY’20E proforma gross profit multiple of 2.7x looks compelling, and we see risks in forecasts to the upside.
CentralNic Group has a solid set of interim results for the first six months of FY2019E, it was a busy period with the group completing 3 acquisitions immediately post the period end, issuing a €50m listed bond instrument and making solid progress in delivering on its stated accelerated strategy. Revenue for the first six months is up 225% yoy, with c.6% organic growth, in line with long term trends for the group. These results are the first time the group have reported in US Dollars. The group’s main functional currency is USD and we believe this is a sensible decision and should remove some currency related risk from the forecasts. CentralNic has made significant progress in delivering on its stated strategy of supplementing organic growth with quality acquisitions, focusing on recurring revenue businesses, in attractive regions. On our new USD based forecasts, the group trades on a 2019E EV/EBITDA of 8.7x (falling to 7.0x in 2020E) and a P/E of 11.0x.
Companies: Centralnic Group
EMIS reported growth in revenues (+7%), adjusted operating profit (+8%) and adjusted EPS (+11%) in H119. Management restructured the business during H1 to reflect the two key customer groups for EMIS products and, with the disposal of the Specialist & Care division, streamlined the product portfolio. Development of EMIS-X continues on track, with the first application based on the platform launched within the Patient Access app. We view the share price as likely to tread water until the outcome of the GP IT Futures procurement process is announced in the next few months.
Companies: Emis Group
It is evident from the interims that FY 2019 will be notably H2 weighted, as H1 sales have seen a shift to an annuity model away from large licences. Although H1 revenue grew by an impressive 14% YoY to $2.7m, we forecast 72% YoY growth for the FY, leaving $7.8m required in H2. Management remains confident that this is achievable as sales accelerate though the year: $2.5m has been booked to date in Q3, with visibility on a further $1.1m for a total $6.3m of visible revenue YTD. The remaining $4.2m should be derived from a $9.2m near-term pipeline covering a wide range of products into a number of existing and new customers. On that basis, we retain our current forecasts, targeting a return to large licence sales in Q4. There is increased risk in this weighting, but PTRO is investing significantly in sales and delivery capabilities and has a track record of success in cross-selling and up-selling into its global telecoms group customers.