Reflecting much of the tone of archrival Atos Origin’s results yesterday (see Atos holds UK ranking – probably), Capgemini also saw UK revenues shrink a little in 2010, by 1% to some £1.64b. This should be sufficient to keep Capgemini among the Top 5 suppliers of software and IT services to the UK market, while Atos has yet to breach the Top 10.
Cap seemed to come out of the UK downturn faster than Atos, with Q4 revenues up nearly 8% vs +1% for its smaller peer. However, Atos pipped Capgemini on UK (adjusted) operating margin, with Cap falling back a full point to 7.9% vs a 60bps slip to 8.5% at Atos. In 2009, Cap and Atos had a similar exposure to the UK public sector with around 60% of UK revenues deriving from government customers (see UK Public Sector SITS Supplier Landscape 2010). Doubtless this proportion was lower in 2010!
Across the group, Capgemini’s revenues fell by 1% like-for-like (+4% as reported) and adjusted operating margins trimmed 30bps to 6.8%. However, IFRS operating margins improved by 160bps to 5.6% as restructuring costs fell to one-third their level in 2009, at €71m. Management is aiming for 9-10% revenue growth this year (vs ‘slight organic growth’ at Atos) and 50-100bps on the margin (like Atos).
Part of the margin expansion for Cap will come from increasing offshore headcount, which now stands at 35% of the 109k total (2009: 31% of 91k), with some 31,000 in India. Cap boosted its Indian presence last November, buying Temenos specialist, Thesys Technologies (see here). Some 5-6k of Cap's worldwide net employee increase came from its acquisition of leading Brazilian IT services player, CPM Braxis (see Capgemini has a Brazilian), though most of CPM’s business is ‘onshore’.
I will be doing my usual ‘compare and contrast’ of the performance of the major European SIs (Cap, Atos, Logica, Steria) once all the results are out – though, dare I say it, you will need to be a TechMarketView Foundation Services client to see it! Puni Rajah (prajah@techmarketview.com) is the one to contact to find out how.