Capgemini UK grows despite Aspire declines

Capgemini’s executive team, led by Group CEO and Chairman, Paul Hermelin, painted a decidedly upbeat picture of the Group’s FY12 results on a call last night despite was what described as a continuing “soft market”. This was made possible as Capgemini beat guidance on revenue (up 5.6% headline crossing the Eur10b mark, and by 1.2% organically and at constant currency), operating margin (a 30bp improvement to 7.7%; or 8.0% before amortisation of acquired intangibles), and free cash flow (which was up significantly from Eur164m in FY11 to Eur496m in FY12). Free cash flow generation remains a priority for 2013.

It appears that the focus on ‘top line initiatives’ such as big data (up 16%) is paying off. Revenue from these grew by 26% in the year and now account for 14% of total revenues. This is all important as opportunities to win large outsourcing deals are limited, as evidenced by the fact that outsourcing services revenues were up just 0.5% while technology services revenues grew 3.5% with performance in the latter described as “dynamic”. Sector bets in areas like “smart energy solutions” (now a third of energy & utility customer revenues) and tax/public security (which kept the global public sector business – excluding Aspire – in positive territory) also appear to be benefitting the Group.

Across the geographies, Capgemini hasn’t exactly fired in all cylinders but performance in the problem regions of France (struggling with declines in consultancy services so down 2.1% like-for-like) and Benelux (down 11.8%) did start to stabilise in Q4. And “remarkable” growth in North American businesses of 7% (organic) and a strong show from the Asia Pac and Nordic regions put things back on an even keel for the full year.  The geographic mix is changing with Europe now making up 72% of Group revenues vs. 80% in 2010. The aim is to bring this down to 60%.

As we know by now, the UK is an odd beast due to the HMRC Aspire contract which dominates the business (see Capgemini UK and its two halves). We are hoping to get more detail on the UK numbers (and will bring them to you when we do). However, what we do know is that the UK business had like-for-like growth of 0.9% (to Eur2,104m). We are told that the “dynamism of technology services more than made up for the slowdown in outsourcing due to expected reduction in public sector expenditure”. Indeed, the UK technology services business experienced double digit growth while UK outsourcing services were down 2.1%. To keep the UK business motoring in positive territory in spite of the turmoil Capgemini faces in UK Government is quite an achievement.  The operating margin in UK&I was also up (by 0.6%) to 7.7%.