Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on CAP GEMINI. We currently have 8 research reports from 1 professional analysts.
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North America, a market of further investment
11 Apr 17
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).
Substantial free cash flow
17 Feb 17
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).
Growth slowdown, not for new orders
27 Oct 16
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.
Guidance revised upwards
27 Jul 16
Capgemini had a good H1 16 including growth acceleration in Q2 16, in line with expectations. H1 16 earnings. - New orders were strong (€6,341m), above revenue (book-to-bill ratio: 101%). - Revenue was €6,257m (+11.6%, +14.4% at constant currency). Organic growth was 3.3%, o/w +3.8% in Q2 16. Total growth was driven by the digital/cloud offerings (28% of revenue, +32% at constant currency, including the impact of Igate). - At constant currency, including Igate, Application services (60% of total revenue, +17.2%, o/w +18.3% in Q2 16) continued to benefit from demand for the digital and cloud offerings. The digital transformation also had a positive impact in Consulting services (4% of total revenue, +8.1%, o/w +8.8% in Q2 16, close to organic growth). The Technology & Engineering services revenue (15% of the total revenue) grew by 13.1%, o/w 15% in Q2 16, and Other Managed services (21% of total revenue) had a lower growth rate (+9.3%, o/w +7.5% in Q2 16). By geography (at constant currency, including Igate), revenue growth was dispatched as follows: +36.2% in North America (Igate effect), +8.6% in the UK/Ireland, +4.8% in France, +6.9% in the Rest of Europe, +10.3% in Asia/Pacific and Latin America. - The operating margin surged to €638m (+31%) corresponding to a margin rate of 10.2% of revenue (vs 8.7% of revenue in H1 15), benefiting from the integration of Igate (consolidated in H2 15) and cost synergies but not only (growth in the digital and cloud, further industrialisation). - Operating profit increased to €510m (+14%) after higher acquisition and integration costs (€-38m vs €-9m in H1 15) and amortisation of intangible assets acquired related to Igate (€-35m vs €-9m in H1 15). Conversely, restructuring costs were rather similar yoy (€-31m vs €-35m in H1 15). - Group net income increased to €366m (+26%) after net financial costs (€-62m vs €-41m in H1 15) and lower income tax expense (-31%) due to the recognition of a deferred tax asset of €32m. The operating cash flow was positive at €113m (vs €-40m in H1 15), including higher tax paid (€-94m vs €-39m in H1 15). Free cash flow was €39m (vs €-98m in H1 15). Sigificant out-flows included share buy-backs (€-158m) and the payment of the dividend to shareholders (€-229m). On 30 June 2016, net debt was €2,278m (vs €1,767m at year-end 2015).
Organic growth acceleration driven by digital/cloud
27 Apr 16
Q1 16 revenue Revenue reached €3,092m (+11.8%, +13.9% on constant currency). The change in scope relating to the contribution of Igate was significant (+11%). The Group continued to benefit from its fast-growing Digital and cloud offerings (+28% including a small contribution from Igate). Organic revenue growth was good and accelerated (+2.9% vs +1.5% in Q1 15). The order intake reached €3,128m (+17.6% on constant currency), broadly equivalent to revenue. On constant currency and including Igate, Application services (59% of total revenue, +16.2%) continued to benefit from demand for the digital and cloud offerings. The digital transformation also had a positive impact in Consulting services (4% of total revenue, +7.4% corresponding to organic growth). The Local Professional services and Other Managed services (respectively 15% and 22% of total revenue) enjoyed a similar growth rate (+11.2%) considering Igate’s respective activities. The total workforce increased by 24% yoy and the headcount “offshore” surged by 44% yoy reflecting principally the integration of Igate (c.30,000 employees o/w c.80% “offshore”). On 31 March 2016, there were 182,908 employees, o/w 55% “offshore” (100,000 employees), mainly in India (vs 48% of the headcount on 31 March 2015). The unchanged attrition rate at the Group level (16.7%) included a lower attrition rate in Consulting services (-2.8pts to 16.5%) and a higher attrition rate in Application services (+0.3pt to 16%).
Higher operating margin than expected
19 Feb 16
In 2015, Capgemini integrated Igate (1 July 15) which helped the significant increase in the operating margin rate (1.4pts to 10.6% of revenue). Nevertheless, Capgemini on a standalone basis contributed largely to the margin improvement (+0.8pts to 10% of revenue). 2015 figures: Based on revenue of €11,915m (+12.7%, +1% organically), the operating margin surged to €1,262m (+30%) and the margin rate improved to 10.6% of revenue (vs 9.2% of revenue in 2014), above the 10.3% guidance. New orders reached €11.5bn (+5%), o/w €3.7bn in Q4 15 representing a B2B ratio of 1.14. - Organic revenue increased in all geographic areas (North America: +7.8%, France: +1.2%, Rest of Europe: +7.4%, Asia-Pacific/Lagin America: +6.5%) except for Benelux (+0.1%) and the UK/Ireland (-13.9%), which was penalised by a change in the structure of the Aspire contract. The Application Services and Consulting services were fast-growing (respectively +6.3% and +5.8%) while the Local Professional Services were rather flat (+0.3%) and the Other Managed Services plunged (-10.9%) attributable to the UK. - The improvement in the operating margin at the group level (+1.4pts to 10.6% of revenue) was attributable to the North American operations (+2.3pts to 14.9% of revenue including Igate), the UK/Ireland (+2.1pts to 13.4% of revenue) and the rest of Europe (+1pt to 9.6% of revenue). The operating margin rate decreased in France (-0.3pt to 8.1% of revenue) and Asia-Pacific/Latin America (-1.9pts to 4.2% of revenue). The operating profit was up to €1,022m (+20%) after higher restructuring costs (€-81m vs €-68m in 2014), acquisition-related amortisation of intangibles (€-45m vs €-20m in 2014), acquisition and integration costs (€-55m vs €-5m in 2014) and a goodwill impairment related to the Latin American operations. Group net profit reached €1,124m (+94%) after higher net financial expenses (€-118m, +69%) and a one-off non-cash gain of €476m related to the reassessment of deferred tax assets on US tax loss carry-forwards. Capgemini ended the year with net debt of €1,767m, including the debt brought by Igate (vs net cash of debt of €1,218m in 2014). The operating cash flow increased to €1,004m (+23%) and FCF was €825m (vs €673m in 2014). Cash-out flows included principally significant net investment in shares of €3,392m. Capgemini paid $3,961m for the acquisition of Igate. Share buy-backs of €150m are planned in 2016 (subject to approval at the shareholders' meeting) over a multi-year programme of €600m. The objective is to attenuate the dilution related to the employee share programme and incentive instruments.
Earnings upgrade following acquisition
17 Apr 17
Following the recent acquisition of Ingresso we upgrade our estimates by c10% in 2017. Ingresso owns and operates a software platform which enables sales through global third party distribution channels. This looks another smart acquisition by ACSO who continue to create a more efficient flow in the extremely fragmented leisure and ticketing industry. We increase our T/P to 2000p and upgrade to BUY.
N+1 Singer - Servelec Group - Calling the bottom
20 Apr 17
We are increasingly confident that Servelec’s travails are behind it and the business is returning to growth. Recent share price weakness looks unwarranted in this context and the valuation now looks compelling. Our forecasts are essentially unchanged, but we see medium term upside as the group’s markets improve. Servelec remains a key idea for 2017 and we reiterate our Buy recommendation and 325p Target Price.
N+1 Singer - Morning Song 24-04-2017
24 Apr 17
First Derivatives (FDP LN) FY slightly ahead as strong trading momentum continues | Goals Soccer Centres (GOAL LN) A potentially exciting corporate development | mporium Group (MPM LN) 2016 results: course set for exciting 2017 | Vectura Group (VEC LN) VR315 risk outweighs longer-term potential
Pickup in H2 organic growth as expected
20 Apr 17
Headline revenue growth of 19% reflects a full half contribution of ID Scan and a pickup in organic growth to 12% across the year driven by the excellent performance from the higher margin international services. The mix effects of this growth resulted in EBIT of £17m, 4% ahead of our forecasts, and a 1.1pp improvement in the operating margin.
19 Apr 17
Lombard Risk Management* (LRM): Beats demanding growth and profit forecasts (CORP) | Frontier Developments* (FDEV): Steaming ahead (CORP) | Tax Systems* (TAX): Right place, right time (CORP) | Acal (ACL): Stronger H2 and brighter outlook (BUY) | Fenner (FENR): Interim results signal upgrades (BUY) | Minds + Machines* (MMX): US and Europe domain sales (CORP)