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Capgemini — H1 2005 Earnings Presentation

56 slides from Capgemini's earnings presentation, Sep 8, 2005

  1. Slide 1: First Half 2005 results

    First Half 2005 results Paris, 8 september 2005

  2. Slide 2: Introduction

    Introduction Paul Hermelin

  3. Slide 3: Highlights

    Highlights M€ June 30, 2004 June 30, 2005 Revenue Growth (YOY) 2,965 3,472 +17% Operating Margin (% Op. Revenue) -1.5% 1.8% + 3.3% Operating income - 120 123 + 243 Net income -157 58 + 215 Net cash and cash equivalents -125 498 + 623 © 2005 Capgemini - All rights reserved 2

  4. Slide 4: Control and Commitment

    CONTROL and COMMITMENT Organization stability Renewed budget commitment Comprehensive transformation program (Finance/ITICS/Procurement) Rejuvenation of sector & alliances management Business predictability © 2005 Capgemini - All rights reserved 3

  5. Slide 5: September 2004 action list

    September 2004 action list Staff mobilization & motivation ƒ Significant improvement of Utilization Rates ƒ Most BUs at budget and Sales effectiveness over: impact on bonuses ƒ BD costs: from 11% to 7.9% SFCs initiatives ƒ From 16.2% to 12.4% Sogeti-Transiciel ƒ Divisional margin: + 31% ƒ Growth: +

  6. Slide 6: September 2004 action list (cont')

    September 2004 action list (cont’) CS ƒ Launch of revitalization TS plan ƒ H1’05/H1’04: + 20.3% ƒ Several CS units over growth (incl. TO) 10% GOP ƒ Delivery discipline in place ƒ Offshore opportunities OS leveraged ƒ Satisfactory ramp up of ƒ New customer appetite for our 3 Mega Contracts innovation

  7. Slide 7: Update on our 2005 priorities

    Update on our 2005 priorities 1 Accelerate North American Turnaround Drive Sustainable, Profitable Growth in 2 Outsourcing 3 Consolidate P&C European Recovery + 4 Change gears in Rightshore © 2005 Capgemini - All rights reserved 6

  8. Slide 8: First Half 2005 results

    First Half 2005 results Nicolas Dufourcq

  9. Slide 9: Executive summary

    Executive summary Strong improvement in P&C profitability Mega deals ramp up under control First positive operational cash generation in H1 A strong momentum entering H2 Boosting confidence for 2006 © 2005 Capgemini - All rights reserved 8

  10. Slide 10: H1 Overview: Income Statement

    H1 2005 Results H1 Overview: Income Statement M€ H1 2004 H2 2004 H1 2005 IFRS restated IFRS restated Operating Revenue 2 965 3 270 3 472 Operating expenses -3 009 -3 250 -3 410 Operating Margin -44 20 62 (% Operating Revenue) -1.5% 0.6% 1.8% (% French Gaap equivalent) -0.7% 2.3% 2.4% Other operating

  11. Slide 11: IFRS impact on margins

    H1 2005 Results IFRS impact on margins H1 Operating margin % 1.8 French Gaap equivalent 2.4 0.6 H1 Full year Revenue and costs recognition 0.30 0.05 Pension benefits 0.25 0.30 Goodwill amortization 0.05 0.05 0.6 0.40 © 2005 Capgemini - All rights reserved 10

  12. Slide 12: Revenue Evolution

    H1 2005 June Actuals Revenue Evolution Revenue quarterly evolution in M€ 2000 1764 1800 1587 1683 1708 1600 1474 1491 1400 1200 1000 800 600 400 200 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q1 2004 Q2 2004 H1 2004 Q3 2004 Q4 2004 H2 2004 FY 2004 Q1 2005 Q2 2005 H1 2005 Amount in M€ (Published) 1.474 1.

  13. Slide 13: Book to Bill by Discipline

    Book to Bill by Discipline Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Consulting Services 1.36 0.99 1.03 0.98 1.02 1.16 Technology Services 0.97 1.33 0.98 1.40 1.11 1.19 Professional Services 1.05 1.06 1.00 1.04 1.04 0.96 P&C 1.08 1.18 0.99 1.21 1.07 1.13 2004: Organic figures © 2005 Capgemini - All rights

  14. Slide 14: Revenue Evolution – Current & Organic Growth by Geography

    H1 – 2005 June Actuals Revenue Evolution – Current & Organic Growth by Geography Current Organic Year on Year on M€ H1 2004 H2 2004 H1 2005 Sequential Sequential Year Year North America 658 693 685 -1.2% 4.0% 1.9% 8.9% Europe & Asia 2 307 2 577 2 787 8.1% 20.8% 10.7% 24.1% of which UK & Ireland 534

  15. Slide 15: Geography Sequential Analysis

    H1 2005 Geography Sequential Analysis H1 2004 H2 2004 H1 2005 Op. Op. Op. M€ Revenue % Revenue Margin % Revenue Margin % Margin North America 658 -39 -6.0% 693 -69 -10.0% 685 -45 -6.6% UK & Ireland 534 -12 -2.2% 753 20 2.6% 864 28 3.2% Nordic 191 -5 -2.7% 200 6 2.9% 215 12 5.5% Benelux 415 23 5.5% 4

  16. Slide 16: GOP P&C/OS

    H1 2005 Results GOP P&C/OS H2 2004 H1 2005 M€ GOP % GOP GOP % GOP Capgemini NA TS/CS -34.9 -10.7% -24.2 -7.6% OS -33.0 -11.0% -23.6 -7.6% Total -67.9 -10.8% -47.8 -7.6% Sogeti US 7.2 11.6% 7.4 11.0% Total North America -60.7 -8.8% -40.4 -5.8% Europe P&C 98.8 5.9% 133.4 7.4% OS 17.8 2.1% 21.1 2.2% To

  17. Slide 17: Discipline View

    H1 2005 Results Discipline View % H1 2004 H2 2004 H1 2005 Consulting Services 0.2% 0.9% 1.3% Technology Services -4.9% 0.0% 3.1% Outsourcing Services -2.4% -2.6% -1.8% Professional Services 5.5% 9.0% 7.5% P&C -1.2% 2.4% 3.8% TOTAL OP. MARGIN -1.5% 0.6% 1.8% % French Gaap equivalent -0.7% 2.3% 2.4% C

  18. Slide 18: Cash situation is very healthy

    H1 2005 Cash situation is very healthy in M€ H1 2004 H2 2004 H1 2005 Net income (157) (377) 58 Depreciation & Amortization 115 117 97 Provisions 15 17 12 Gain on Healthcare disposal in North America - - (138) Income tax 11 219 56 Other 11 (21) (4) Cash-Flow from operations before (5) (45) 81 income

  19. Slide 19: Strong cash management

    H1 2005 Strong cash management 183 -72 100 498 109 (581) -190 286 315 (402) 151 -88 -43 62 Net Cash & Working Operational Net Cash & Cash H1 2005 capital Net Cash & Cash Equivalents Prior Year Prior Year Group GOP H1 2005 H1 2005 evolution Cash Cash from Equivalents as of Bonus restructuring CAPEX (

  20. Slide 20: Key figures on H1 cash generation

    Key figures on H1 cash generation ƒ Cash flow before cash from disposals: +29 ME ƒ Improvement of Accounts receivables & payables: +100 ME • This variation was -7 ME in H1 2004 • In H1 2004 sequential organic growth was 0.8%, it is 8.8% in H1 2005 • Debtor days are 66 in June 2005, to be compared wi

  21. Slide 21: Seasonality unchanged

    Seasonality unchanged Net Cash in IFRS 600 600 500 498 500 400 400 286 315 * 286 300 300 176 172 209 200 200 266 129 114 94 * 100 100 54 109 0 20 -100 Dec -1 -100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -10 -4 -48 15 -45 -66 -200 -200 -111 -148 2004 2005 Cash from disposals excluded © 2005 C

  22. Slide 22: IFRS Impacts on net cash

    IFRS Impacts on net cash French Opening: 402 Me French Closing: 581 Me Carry back : -112 Carry back : -114 Put on minority : - 51 Put on minority : - 60 Oceane : + 52 Oceane : + 87 Other :- 5 Other :+ 4 IFRS Opening: 286 Me IFRS Closing: 498 Me © 2005 Capgemini - All rights reserved 21

  23. Slide 23: Costs structure by Destination

    H1 2005 Results Costs structure by Destination M€ H1 2004 H2 2004 H1 2005 IFRS restated IFRS restated Revenue 2 965 3 270 3 472 Direct & Production costs -2 201 -2 511 -2 705 74.2% 76.8% 77.9% Gross Margin 764 759 767 % of Revenue 25.8% 23.2% 22.1% Business Development Costs -327 -284 -274 % of Reve

  24. Slide 24: Business Development Costs slightly better than Budget

    Business Development Costs slightly better than Budget Business Development Costs as a % of Revenue 12.0% 10.0% 11.3% 10.7% 8.0% 9.2% 9.0% 8.1% 7.6% 7.7% 7.7% 6.0% Group 4.0% 2.0% 0.0% Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 ƒ Comparing H1 ’04 and H1 ’05, the average headcount of the Dedicat

  25. Slide 25: Support Function Costs in regions decrease as planned

    Support Function Costs in regions decrease as planned Support Function Costs as a % of Revenue 18.0% 16.0% 14.0% 15.3% 12.0% 14.2% 13.8% 10.0% 12.1% 12.0% 11.1% 11.8% 10.6% 8.0% Group 6.0% 4.0% 2.0% 0.0% Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 ƒ Comparing FY ’04 and FY ’05, the ratio of regi

  26. Slide 26: Costs structure by Nature

    H1 2005 Results Costs structure by Nature H1 2004 H2 2004 H1 2005 Revenue 2 965 3 270 3 472 Salarial and social charges -1 988 -2 018 -2 142 % of Revenue 67.0% 61.8% 61.6% Purchases and other charges -622 -798 -867 % of Revenue 21.0% 24.4% 25.0% Travel expenses -162 -155 -163 % of Revenue 5.5% 4.7%

  27. Slide 27: Other Operating Income & Expenses

    H1 2005 Results Other Operating Income & Expenses (M€) H1 2004 H1 2005 Restructuring costs (67) (77) People (40) (27) Buildings (27) (50) Impairment of goodwill (8) (1) Stock option costs (1) (4) Capital gains or losses on the sale of - 143 consolidated companies, businesses or assets Total other op

  28. Slide 28: Restructuring measures summary

    H1 2005 Results Restructuring measures summary ƒ H1 2005 P&L impact Costs Redundancies People 27 365 Buildings 50 77 ƒ Cash Flow Impact of on going plans in H1 2005: 101 M€ out of which 88 M€ related to previous plans © 2005 Capgemini - All rights reserved 27

  29. Slide 29: Assets Disposal

    H1 2005 Results Assets Disposal M€ P/L Cash impact Healthcare business 123 143 IS Energy 15 17* Behoust 5 23 TOTAL 143 183 (*) selling price : 21 M€ of which 4M€ to be paid © 2005 Capgemini - All rights reserved 28

  30. Slide 30: Financial Interest Income & Expenses (net)

    H1 2005 Results Financial Interest Income & Expenses (net) M€ H1 2004 H1 2005 Interest on Oceane convertible/exchangeable bonds (10) (9) Interest on bank loans (13) (9) Income from cash and cash equivalents 8 19 Other financial Income & Expenses (11) (10) Financial Interest Income & Expenses, net (2

  31. Slide 31: Income Tax

    H1 2005 Results Income Tax M€ Utilization of tax losses carried forward in France (30) Tax payable on profit (mainly Canada and Netherlands) & Standard minimum tax (16) payable (mainly USA and Italy) Other (10) Total income tax (56) © 2005 Capgemini - All rights reserved 30

  32. Slide 32: Balance sheet

    H1 2005 Balance sheet Dec 31, June 30, Dec 31, June 30, ASSETS 2004 2005 LIABILITIES 2004 2005 Intangible Assets 1 963 1 978 Total equity 2 788 2 879 Property plant & equipment 449 440 Long-term debt 768 1 144 Financial assets 64 51 Deferred tax assets & Provisions for long term receivables 899 897

  33. Slide 33: H1 2005 Capex

    H1 2005 Capex M€ • Intangible fixed assets investments Mainly software in UK (M€ 4), Sogeti-Transiciel (12) (M€ 3), Central Europe (M€ 3) • Tangible fixed assets investments - Mainly computer equipment in North America (M€ 12), Central Europe (M€ 6), India (M€ 5) and (41) Sogeti-Transiciel (M€ 5) •

  34. Slide 34: H2 2004 Capex

    H2 2004 Capex M€ • Intangible fixed assets investments Mainly due to the purchase price allocation of (17) Drägerwerk in Central europe • Tangible fixed assets investments Mainly computer equipment in UK (M€ 13), Central (42) Europe (M€ 6), Benelux (M€ 5) and India (M€ 2) • Disposal of fixed assets

  35. Slide 35: Shareholder's equity

    H1 2005 Shareholder’s equity M€ Amounts Total equity as of Dec 31, 2004 2 788 Issue of "OCEANE" convertible / exchangeable bonds 26 Purchase of a call on Capgemini shares (16) Translation adjustments 23 Valuation of stock options 4 Other changes (4) Net profit 58 Total equity as of June 30, 2005 2 8

  36. Slide 36: Off Balance Sheet Commitments

    H1 2005 Off Balance Sheet Commitments Commitments given • Non cancealable leases (mainly office, computer, vehicles) M€ 1054 • Other commitments: • Global purchase contracts M€ 79 • Other commitments M€ 49 • Captive re-insurance company (up to 20 M€) up to M€ 20 • Indemnity based on the volume of th

  37. Slide 37: Headcount Evolution

    H1 2005 Results Headcount Evolution Jan 1st, 2005 HC 59 324 Recruits 6 655 Acquisition / Big deals 506 Divestments -1 240 Layoffs -1 538 Leavers -4 517 June 30th, 2005 HC 59 190 © 2005 Capgemini - All rights reserved 36

  38. Slide 38: Group Headcount by Geography

    H1 2005 Results Group Headcount by Geography NORTH AMERICA GEO: TOTAL GROUP: NORDIC GEO: • Opening: 8,893 Opening: 59,324 Closing: 59,190 ∆ in P: -134 ∆ in %: -0.2% • Opening: 3,485 • Closing: 6,997 • Closing: 3,427 • Change in Person: -1,896 • Change in Person: -58 • Change in %: -21.3% • Change in

  39. Slide 39: Major Acquisitions/Outsourcing deals and Disposals

    H1 2005 Results Major Acquisitions/Outsourcing deals and Disposals Acquisitions: ƒ Schneider (France, CE, UK, BE) 381 people ƒ Marsh (Benelux) 52 people Disposals: ƒ NA Health 470 people ƒ IS Energy 291 people ƒ Gaz TXU 223 people (to Atmos) ƒ Telco services TXU 87 people (to Lucent) © 2005 Capgemin

  40. Slide 40: Executive summary

    Executive summary Strong improvement in P&C profitability Mega deals ramp up under control First positive operational cash generation in H1 A strong momentum entering H2 Boosting confidence for 2006 © 2005 Capgemini - All rights reserved 39

  41. Slide 41: H1 Operations Overview

    H1 Operations Overview Pierre Danon

  42. Slide 42: H1 Operations Overview

    H1 Operations Overview ƒ Growth: • Win rates • Funnel generation • Book to bill • OS focus ƒ Efficiency: • Overruns • Utilization • Offshore ƒ Performance Management: • Jewels • Momentum • NA, OS margins © 2005 Capgemini - All rights reserved 41

  43. Slide 43: Sales

    Sales P&C Evolution ’04-’05 P&C Evolution ’04-’05 of the Sales productivity of the Win Rate 60% 53% MEuro 50% 43% 43% Technology 40% 33% Services 34% Bookings P&C 2 562 2 500 Consulting 30% Services 19% 20% Outsourcing Services 10% Sales Costs 271 210 0% H1 ’04 H1 ’05 H1 04 H1 05 1 Euro invested in

  44. Slide 44: Major H1 Bookings

    Major H1 Bookings NEA OS France BlueScope Steel limited BPO Extension Direction Générale Steelcase International des Impôts Ascot project Technology Services NA SOGETI HP Airbus Industries Application Management CSE UNIX Server Support International Atomic Energy Agency Application Management © 2005

  45. Slide 45: Demand Generation to grow our Funnel

    Demand Generation to grow our Funnel Funnel Evolution ’04-’05 (unweighted) • Total Funnel H1 ’04 presented 15’903MEuro and 20.00 17’867MEuro for H1 ’05. 18.00 bnEuro 16.00 14.00 • P&C Funnel stays healthy supporting our 12.00 10.00 improvement in Sales efficiency and effectiveness. 8.00 6.00 • As us

  46. Slide 46: H1 Delivery Back Under Control

    H1 05 Delivery Back Under Control ƒ TS Overruns are ½ H1 04 Overruns H1 05 H1 04 OVERRUNS 36 M€ 70 M€ OVERRUNS / REVENUE - 2.8 % - 5.7 % − Same Trend in 4 TS SBU − Overruns on Complex Projects are 20% of total versus 50% + in 04 ƒ NA Blitzkrieg: top 30 Engagements health check ƒ Flying Squads on com

  47. Slide 47: Utilisation Rates

    Utilisation Rates: We have done a good job on utilization in P&C ARVE evolution by Half year & Discipline since 2004 88 86 86 85 83 82 79 78 76 76 74 73 70 67 67 65 64 64 61 58 55 CS TS LPS ƒ Overall Group mobilization in H1 04: • reallocating indirect people to client facing position • weekly monit

  48. Slide 48: Rightshore India growth speeding up

    RightshoreTM India growth speeding up… Strong offshore growth in 2005… Spread all over the Group… India Headcount ƒ H1 offshore growth mix: 4000 •50% US, 50% Europe 3500 3 500 •50% OS, 50% TS 3000 ƒ H1 hits: 2500 2 500 2000 2 000 •Strong push in NA OS 1500 •Improved offshore penetration in the UK 10

  49. Slide 49: Jewels

    Performance Management Jewels SOGETI NL FTEs: 2 014 GOP: 16.5 % SD&M (TS Germany) C4 (CS TME) FTEs: 932 GOP: 19.5 % FTEs: 247 GOP: 15.7 % © 2005 Capgemini - All rights reserved 48

  50. Slide 50: Momentum

    Performance Management Momentum Norway 9.5 % 0.7 % Spain 3.2 % CS Ile de France - 2.4 % 14.2 % 5.3 % % H1 GOP © 2005 Capgemini - All rights reserved 49

  51. Slide 51: Performance Management: NA CS/TS

    Performance Management NA CS/TS: • New structure in place • Restructuring implemented as planned • Delivery under control • Sales decline contained • Break even on sight Q2 Q1 April May June July Aug Sept • Attrition still worrying 2004 239.4 71.4 75.1 59.3 48.2 52.8 59.3 2005 181.4 48.4 60.9 61.6 5

  52. Slide 52: Performance Management: Outsourcing Margin

    Performance Management Outsourcing Margin: • Situation: − Breakthrough growth in the last 2 years − Need for excellent implementation and radical industrialization • Latest Evolution − Successful implementation of Aspire and TXU. Schneider on its way − Industrialization plan being built up: – Virtua

  53. Slide 53: Conclusion

    Conclusion Paul Hermelin

  54. Slide 54: H2 2005 action list

    H2 2005 action list Demonstrate NA turnaround • Stem attrition rate • Leverage growth platforms Launch an OS margin acceleration plan (detailed in Nov.) Respond to customer demand for innovation Increase the usage of offshore services © 2005 Capgemini - All rights reserved 53

  55. Slide 55: Outlook

    Outlook Strong improvement in P&C profitability Mega deals ramp up under control First positive operational cash generation in H1 A strong momentum entering H2 Boosting confidence for 2006 Growth: 12% Margin: Comfortable with market consensus © 2005 Capgemini - All rights reserved 54

  56. Slide 56: First Half 2005 results

    First Half 2005 results Paris, 8 september 2005

Capgemini — H1 2005 Earnings Presentation on 6ix