Capgemini Se · EURONEXT:CAP
Capgemini — FY2006 Earnings Presentation
54 slides from Capgemini's earnings presentation, Feb 15, 2007
Slide 1: 2006 Annual Results
2006 Annual Results Paris, 15 February 2007
Slide 2: In 2006, Capgemini has recorded very solid progress
In 2006, Capgemini has recorded very solid progress Double digit growth for our 4 disciplines Doubling operating margin and net result In Operating Margin Net Result FY 06 / FY 05 M€ 447 x2 (5,8%) Consulting Services + 10,3 % Technology Services + 12,8 % SOGETI + 10,4 % 225 293 Outsourcing Services*
Slide 3: Ready for new heights in North America
Ready for new heights in North America Revenues Operating Margin Q406/Q405 Revenues FY 06 / FY 05 FY 06 FY 06 / FY 05 +10,2 % Project and Consulting + 5,4 % 7,7 % + 9,2pt Q406/Q405 Bookings +15,2 % Outsourcing Services + 2,1 % 2,8 % + 5,2 pt P&C FY06 Book to Bill TOTAL US + 3,8 % 5,4% + 7,3 pt 1,17
Slide 4: MAP drives strong results for Outsourcing Services
MAP drives strong results for Outsourcing Services Revenue Growth Operating Margin Strong Financial Records + 16,1% + 3,1% (+3 pt) Good execution of major new contracts Mid term margin impact Status Renegociation 0,5 pt Achieved 2006 Cost reduction Procurement 1-1,5 pt Achieved 2006 Industrializatio
Slide 5: Investing in innovation and competencies
Investing in innovation and competencies Innovation Competencies Architecture Services TS Bookings 2005 TS Bookings 2006 2622 M€ 2919 M€ Recruitment 188 M€ +40% 18 592 new Hires 1 210 new colleagues integrated through OS Share of Architecture Services in TS bookings Headcount : 67 889 (+11,2%) Testi
Slide 6: Developing our sector approach and aligning organizations to improve portfolio management
Developing our sector approach and aligning organizations to improve portfolio management Sector Innovation Portfolio Management Financial Services Loans and Mortgage and Insurance Kanbay domain expertise Strengthening relations with our Top 30 clients Bookings 2005 Bookings 2006 Telecom, Media Digi
Slide 7: A tier-one player regarding offshore capabilities
A tier-one player regarding offshore capabilities Total offshore Indigo Kanbay headcount 15 291 Country Headcount 2005 Headcount 2006 India 3550 6980 719 5552 China 400 +92% 470 Offshore/ total headcount 23% Poland 750 1570 Offshore/ 33% TS+OS headcount People Recruitment focused on top talent = 1 h
Slide 8: Our 2007 priorities: Going one step beyond
Our 2007 priorities : Going one step beyond Fight For Leadership Keep Transforming NORTH AMERICA : Join top 3 in KANBAY : Drive successful integration selected domain areas I3 : Accelerate the Group positive BPO : Extend footprint beyond F&A momentum FINANCIAL SERVICES : CONSULTING SERVICES : Roll o
Slide 9: Adding Value through our I3 Transformation plan
Adding Value through our I3 Transformation plan Implement new global operating model Leverage Kanbay operating model Grow on-shore headcount cautiously Triple headcount in India to 40 000 by 2010 Specialized workforce in India Leverage the group broad scope of services for our main clients Implement
Slide 10: Adding Value through Kanbay Integration
Adding Value through Kanbay Integration Consolidate Financial Services & Consumer Products positioning Creation of Financial Services SBU Strengthening Consumer Products (initially NA, UK, India) sector (Consulting, ERP & BI capabilities) Dedicated Financial Services platform in Appetite for offshor
Slide 11: Financials
SY_ RB _| Cap \gusey I \S13007 S CONSULTING. TECHNOLOGY. OUTSOURCING BSS TOURNAMENT SPONSOR Financials
Slide 12: Income statement: overview
Income statement: overview FY 2006 M€ FY 2005 H1 2006 H2 2006 FY 2006 vs FY 2005 Revenues 6 954 3 784 3 916 7 700 10.7 % + 12.1% in Organic Operating expenses - 6 729 - 3 603 - 3 650 - 7 253 Operating Margin 225 181 266 447 (% Revenues) 3.2% 4.8 % 6.8 % 5.8 % + 2.6 pts Other operating Income & - 11
Slide 13: 2006 Revenues evolution
2006 Revenues evolution Revenues quarterly evolution in M€ 2200 2035 2000 1915 1881 1869 1808 1800 1764 1708 1674 1600 1400 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 2005 Q2 2005 H1 2005 Q3 2005 Q4 2005 H2 2005 FY 2005 Q1 2006 Q2 2006 H1 2006 Q3 2006 Q4 2006 H2 2006 FY 2006 M€ (Published) 1
Slide 14: Sustained growth in Q4
Sustained growth in Q4 Current Organic Year on Year on Current Sequential year Sequential year Q4 06 / Q4 06 / Q4 06 / Q4 06 / Q4 2005 Q3 2006 Q4 2006 Q3 06 Q4 05 Q3 06 Q4 05 North America 336 338 343 1.3% 1.9% 2.8% 10.2% Europe & Asia 1 472 1 543 1 692 9.7% 15.0% 8.5% 14.7% of which : UK & Ireland
Slide 15: Outsourcing drives Q4 growth
Outsourcing drives Q4 growth CS/TS Revenues related to mega deals (HMRC, Schneider & TXU) recorded in Outsourcing Q4 06 / Q3 06 Q4 06 / Q4 05 Consulting Services 9.8% 4.4% Technology Services 13.2% 12.7% CS / TS 12.4% 10.6% Local Professional Services 12.2% 11.3% CS / TS / LPS 12.4% 10.8% Outsourcin
Slide 16: When analysing the nature of work performed, all disciplines grow double digit
When analysing the nature of work performed, all disciplines grow double digit CS/TS Revenues related to mega deals (HMRC, Schneider & TXU) recorded in Outsourcing FY 06 / FY 05 Consulting Services 8.8% Technology Services 9.5% CS / TS 9.4% Local Professional Services 10.4% CS / TS / LPS 9.6% Outsou
Slide 17: 2006: Strong growth in a favorable market
2006: Strong growth in a favorable market Current Organic Year on Year on Current year year M€ FY 05 FY 06 FY 06 / FY 05 FY 06 / FY 05 North America 1 353 1 341 - 0.9% 3.8% Europe & Asia 5 601 6 359 13.6% 14.0% of which UK & Ireland 1 738 2 126 22.3% 23.7% France 1 666 1 816 9.1% 9.1% Benelux 956 1
Slide 18: 2006 Revenues by sector
2006 Revenues by sector FY 2005 Manufacturing, Retail & Distribution Energy & Utilities FY 2006 14,5% 29,7% Manufacturing, Retail Energy & Utilities 14,0% & Distribution Financial Services 13,1% 6,9% 10,6% 29,0% Financial Telecom, 24,3% Other 14,0% Services Media & Networks 6,5% 9,6% Other Governmen
Slide 19: Bookings evolution by discipline
Bookings evolution by discipline M€ 6 776 8 198 3 500 2 990 Outsourcing 3 000 Project & Consulting 2 391 2 500 1 980 1 760 2 000 1 716 1 705 1 117 1 523 1 396 669 1 273 329 1 500 490 406 277 320 1 000 1 274 1 376 1 311 1 119 1 226 1 230 1 117 500 953 0 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06
Slide 20: Consulting, Technology and Local Professional Services Bookings
Consulting, Technology and Local Professional Services Bookings 1400 1300 1200 2004 1100 2005 1000 2006 900 800 Q1 Q2 Q3 Q4 2006 Annual Results 20
Slide 21: Book to Bill CS / TS / LPS – FY 2006
Book to Bill CS / TS / LPS – FY 2006 CS / TS / LPS M€ Bookings Revenues BBR North America 822 704 1.17 Rest of the world 4 212 3 984 1.06 TOTAL 5 034 4 688 1.07 At budget rates 2006 Annual Results 21
Slide 22: Charge-out rate – Consulting Services – Quarter evolution
Charge-out rate – Consulting Services – Quarter evolution 1480 1380 1272 1246 1280 1218 1225 1222 1210 1200 1189 1180 1080 980 2005 2006 At constant rates and perimeter 2006 Annual Results 22
Slide 23: Charge-out rate – Technology Services – Quarter evolution
Charge-out rate – Technology Services – Quarter evolution India included 700 636 626 622 623 621 615 616 617 600 India excluded 687 700 669 663 677 682 661 662 500 652 2005 2006 600 500 At constant rates and perimeter 2005 2006 2006 Annual Results 23
Slide 24: Charge-out rate – Local Professional Services – Quarter evolution
Charge-out rate – Local Professional Sces – Quarter evolution 445 439 450 435 415 418 419 422 410 350 2005 2006 At constant rates and perimeter 2006 Annual Results 24
Slide 25: ARVE – Quarter evolution by discipline
ARVE – Quarter evolution by discipline Consulting Services Technology Services Local Professional Services 90 86 86 86 86 86 85 85 85 79 79 80 80 80 80 78 79 79 70 69 69 66 67 66 66 66 62 60 50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2005 2006 2005 2006 At c
Slide 26: Consulting Services & Local Professional Services at double digit operating margin in H2
Consulting Services & Local Professional Services at double digit operating margin in H2 H1 2005 H2 2005 FY 2005 H1 2006 H2 2006 FY 2006 Consulting Services 1.8% 7.4% 4.5% 8.9% 11.5% 10.1% Technology Services 3.7% 6.5% 5.1% 6.4% 8.5% 7.5% Local Professional Services 8.0% 10.2% 9.1% 8.4% 11.2% 9.8% C
Slide 27: Strong operating margin improvement in all geographies but France
Strong operating margin improvement in all geographies but France FY 2005 H1 2006 H2 2006 FY 2006 Op. Op. Op. Op. M€ Revenues Margin % Revenues Margin % Revenues Margin % Revenues Margin % North America 1 353 -26 -1.9% 660 28 4.3% 681 44 6.4% 1 341 72 5.4% UK & Ireland 1 738 67 3.8% 1 040 61 5.9% 1
Slide 28: North America is now solidly in the black
North America is now solidly in the black Operating Margin FY 2005 H1 2006 H2 2006 FY 2006 Consulting / Technology Services -4.1% 6.7% 5.5% 6.1% Outsourcing Services -2.4% 0.1% 5.2% 2.8% Local Professional Services 9.9% 11.8% 14.7% 13.3% TOTAL -1.9% 4.3% 6.4% 5.4% At current rates and perimeter 2006
Slide 29: France: a strong improvement in CS/TS and a solid LPS can not compensate for OS
France : a strong improvement in CS/TS and a solid LPS can not compensate for OS Operating Margin FY 2005 H1 2006 H2 2006 FY 2006 Consulting / Technology Services 7.9% 7.9% 10.1% 9.0% Outsourcing Services -20.7% -33.3% -44.7% -39.4% Local Professional Services 5.2% 4.5% 6.9% 5.7% TOTAL 2.6% 0.7% -0.
Slide 30: SG&A are down in absolute terms despite a double digit growth in revenues
SG&A are down in absolute terms despite a double digit growth in revenues M€ FY 2005 H1 2006 H2 2006 FY 2006 Revenues 6 954 3 784 3 916 7 700 Cost of services rendered -5 377 -2 915 -3 005 -5 920 % of Revenues 77.3% 77.0% 76.7% 76.9% Gross Margin 1 577 869 911 1 780 % of Revenues 22.7% 23.0% 23.3% 2
Slide 31: Ratios of costs by nature impacted by big deals ramp-up
Ratios of costs by nature impacted by big deals ramp-up M€ FY 2005 H1 2006 H2 2006 FY 2006 Revenues 6 954 3 784 3 916 7 700 Personnel costs -4 175 -2 223 -2 113 -4 336 % of Revenues 60.0% 58.7% 54.0% 56.3% Purchases and subcontracting exp. -1 808 -987 -1 081 -2 068 % of Revenues 26.0% 26.1% 27.6% 26
Slide 32: Other operating income & expense: restructuring costs continue to trend down
Other operating income & expense: restructuring costs continue to trend down M€ FY 2005 FY 2006 Restructuring costs (164) (94) People (83) (67) Transition to Offshore (11) Buildings (81) (16) Impairment of goodwill (6) (3) Expenses related to stock options and share grants (12) (17) Other operating
Slide 33: Operating margin almost entirely translated into cash
Operating margin almost entirely translated into cash 264 -263 -161 323 -148 498 1 632 -30 -66 447 1 336 -136 904 Working 2006 Payment Capital Cash Net Cash Net Accrual Amorti- Payment Operating of evolution & 31.12. Kanbay Capital of Debt of Debt Bonus zation and Bonus CAPEX Dividends Margin Restru
Slide 34: Finance expense
Finance expense M€ FY 2005 FY 2006 Interest on convertible bonds (30) (43) Other interest expenses (27) (24) Income from cash and cash equivalents 33 57 Finance costs, net (24) (10) Other financial income & expense, net (14) (18) Finance expense, net (38) (28) 2006 Annual Results 34
Slide 35: Income tax
Income tax M€ FY 2005 FY 2006 Current income taxes Taxes payable on profit (21) (39) Taxes not based on taxable income (mainly USA, Italy) (13) (10) Deferred income taxes France Utilization of deferred tax assets on tax loss carry-forwards (33) (43) Reassessment of deferred tax assets on tax loss ca
Slide 36: Balance Sheet
Balance Sheet Dec. 31, Dec. 31, Dec. 31, Dec. 31, ASSETS 2005 (1) 2006 EQUITY & LIABILITIES 2005 (1) 2006 Goodwill 1 809 1 849 Total equity 2 750 3 697 Other intangible assets 142 122 Long-term financial debt 1 145 1 160 Property, plant & equipment 399 375 Deferred tax 121 118 Provisions for pension
Slide 37: Capex
Capex Other Tangible (M€) intangible Total assets assets December 31, 2005 142 399 541 Acquisitions 30 131 161 Disposals (10) (22) (32) Depreciation for the period (35) (131) (166) Translation adjustments & others (5) (2) (7) December 31, 2006 122 375 497 2006 Annual Results 37
Slide 38: Shareholder's equity
Shareholder’s equity M€ Total equity as of January 01, 2006 2 750 Dividends paid out for 2005 (66) Valuation of stock options and share grants 17 Increase in share capital upon exercice of options 19 Increase in share capital (Dec. 6th), net proceeds 498 Income and expense recognised directly in equ
Slide 39: Off balance sheet commitments
Off balance sheet commitments Off Balance Sheet Commitments as of December 31, 2006 : Commitments given • Non canceable leases (mainly offices, computers, vehicles) € 867M • Other commitments: • On suppliers contracts € 91M • Other commitments € 42M • Put option related to 5% in Capgemini Japan give
Slide 40: Headcount evolution
Headcount evolution Headcount as of Dec. 31, 2005 61 036 Recruits (*) 18 592 Acquisitions / Big Deals 1 495 Disposals - 856 Layoffs - 1 728 Leavers - 10 650 Headcount as of Dec. 31, 2006 67 889 (*) out of which: Sogeti 4 282 India 3 897 Poland production centers 1 086 2006 Annual Results 40
Slide 41: Group headcount by discipline
Group headcount by discipline Dec. 31, 2005 Dec. 31, 2006 Consulting Services 4 988 5 149 Technology Services 23 206 25 223 Outsourcing Services 17 032 20 694 Local Professional 15 147 16 570 Services Not classified (incl. Group 663 253 central functions) TOTAL 61 036 67 889 2006 Annual Results 41
Slide 42: Annualized attrition
Annualized attrition 2005 2006 Consulting Services 21.0% 19.3% Technology Services 15.0% 16.3% Outsourcing Services 12.7% 15.3% Local Professional Services 16.8% 17.8% TOTAL 15.3% 16.6% 2006 Annual Results 42
Slide 43: Kanbay Preliminary P&L (unaudited)
Kanbay Preliminary P&L (unaudited) In M$ 2006 Revenues 414.0 Operating expenses -359.2 INCOME FROM OPERATIONS 54.8 13.2% Stock options -7.6 Non recurrent charges -12.8 Financial results & equity in affiliate 0.9 PRETAX INCOME 35.2 8.5% Income Tax -9.2 NET INCOME 26.0 6.3% 2006 Annual Results 43
Slide 44: Balance Sheet – Kanbay (unaudited)
Balance Sheet – Kanbay (unaudited) (in millions of US$) ASSETS (M$) LIABILITIES & (M$) STOCKHOLDERS’ EQUITY Cash & Cash Equivalents 48 Trade accounts payable 7 Short term investments 46 Deferred revenue 5 Accounts receivables – Related party 28 Customer deposits - Amounts due to subcontractors 2 Acc
Slide 45: 2006 Annual Results
2006 Annual Results Paris, 15 February 2007
Slide 46: Back up
SS SN RUGBY S WORLD CUP <3 2007 Back up me Allis)
Slide 47: Q4 Revenues by discipline
Q4 Revenues by discipline Local Professional Consulting Services Services Q4 2005 16,5% 11,5% Technology Services 35,1% 36,9% Q4 2006 Outsourcing Services Local Consulting Professional Services Services 16,1% 10,6% 34,7% 38,6% Outsourcing Services Technology Services At constant rates and perimeter
Slide 48: H2 Revenues by geography
H2 Revenues by geography Current Organic Year on Year on Current Sequential year Sequential year H2 06 / H1 H2 06 / H2 H2 06 / H1 H2 06 / H2 H1 2005 H2 2005 H1 2006 H2 2006 06 05 06 05 North America 685 668 660 681 3.1% 1.8% 7.3% 7.8% Europe & Asia 2 787 2 814 3 124 3 235 3.6% 15.0% 2.7% 15.1% of wh
Slide 49: H2 Revenues by geography
H2 Revenues by geography H2 2005 South Asia Pacific Europe North America 1,0% 4,4% H2 2006 France 18,2% South Asia Pacific 24,4% Europe North America 1,1% France 25,2% 4,3% 17,4% 6,7% UK 23,3% & Ireland Central 14,2% Europe 5,8% 6,9% 27,7% Benelux Nordic Countries Central Europe 13,6% 5,7% UK & Irel
Slide 50: H2 Revenues growth by discipline
H2 Revenues growth by discipline CS/TS Revenues related to mega deals (HMRC, Schneider & TXU) recorded in Outsourcing H2 06 / H1 06 H2 06 / H2 05 Consulting Services -6.3% 4.8% Technology Services 3.7% 11.5% CS / TS 1.2% 9.8% Local Professional Services 0.4% 10.1% CS / TS / LPS 0.9% 9.9% Outsourcing
Slide 51: H2 Revenues by discipline
H2 Revenues by discipline Local Professional Consulting Services Services H2 2005 16,2% 11,4% Technology Services 34,6% H2 2006 37,8% Consulting Outsourcing Local Services Services Professional Services 15,7% 10,5% 33,9% 39,9% Outsourcing Services Technology Services At constant rates and perimeter
Slide 52: 2006 Revenues by geography
2006 Revenues by geography FY 2005 South Asia Pacific Europe 0,9% North America FY 2006 France 4,5% 18,8% South Asia Pacific 24,3% Europe North America 1,0% France 25,0% 4,4% 17,4% UK 6,6% & Ireland 23,6% Central 13,9% Europe 6,0% 6,7% 27,6% Benelux Nordic Countries Central Europe 13,6% 5,7% UK & Ir
Slide 53: 2006 Revenues by discipline
2006 Revenues by discipline Local Professional Consulting Services Services FY 2005 16,1% 11,4% Technology Services 34,8% FY 2006 37,7% Consulting Outsourcing Local Services Services Professional Services 15,9% 11,0% 34,0% 39,1% Outsourcing Services Technology Services At constant rates and perimete
Slide 54: 2006 Annual Results
2006 Annual Results Paris, 15 February 2007