EuroBusinessMedia (EBM): Capgemini, a global leader in consulting, technology and outsourcing services, reports results for the full year 2015. Paul Hermelin, welcome. You are the Chairman and CEO of Capgemini. What are the highlights of these 2015 results?
Paul Hermelin (PH): Yesterday the board approved our results and they were quite pleased because it’s a very solid performance, because we met and beat all of our commitments. So, to summarize, our growth exceeds 12% - that was our commitment, to reach 12.7% - so that’s a good performance in this market. The margin is progressing rapidly - 10.6% - clearly ahead of the guidance of 10.3%, more than the market consensus, which is a big step forward, somewhat helped by the IGATE integration over six months. But even without IGATE, we have finally reached my 10% ambition as of 2015 and I’m very pleased with that. The net result increased massively because we could recognize some deferred tax assets, so more than a billion euros and the net of that (because it’s a non-cash item), good progression of our net result, double digit certainly. All that led the board to decide on a dividend, and the dividend proposed to the general assembly of shareholders will reach 1.35 euros per share compared to 1.20 – so again a good progression, a double digit progression. So all that shows that the group progresses pretty well and that has reached a level profitability that was my long-term objective for a couple of years.
EBM: What are the takeaways geographically?
PH: The first point is, thanks to IGATE in the second half North America now represents 31% of the group. It’s still a little less than North America in the overall market, but it’s a big progress and it’s now by far the first region. Besides that, emerging countries are still a little below 10, but I would say today as the demand from emerging markets is a little bit shaky, I think the group will take advantage, and so a big share is in Europe. And I was very happy to see that in Continental Europe we grew mid-single digits - and that’s pretty new for Europe - and we had some very strong growth in Nordic and in Germany while we had some mild growth in France and in Holland. So in all Europe there is progress everywhere, it’s quite satisfactory for a European originated group, but our bright spot is the United States and the main market of the industry.
EBM: How is the IGATE integration proceeding?
PH: So far, first we should report that the IGATE performance in the second half is exactly in line with what we had shown the board and the market, so no deviation at all. While we managed IGATE as is in the second half, we prepared the integration. The integration has now been fully organized as of January 1st. The Go-to-Market has been aligned, all the parts of IGATE have been allocated to new operations – we had to build new organizations, design them, budget them, that’s all done. Processes are currently under simplification and merger - IT support, support function, real estate -, all that will be done along 2016, so it’s going well actually, and we started to sign many cross deals – I mean selling IGATE offerings to Capgemini clients and selling Capgemini offerings to IGATE clients. So I’m quite happy and above all we didn’t lose anybody; out of the 70 top players and the announcement of the integration, everybody is still there, we kept all the clients so I’m very happy. Now we have to deliver the synergies, the synergies that have been incorporated in our 2016 guidance and I think we will deliver them.
EBM: Speaking of acquisitions, you have just announced the acquisition of Fahrenheit 2012. Can you tell us more?
PH: So, what the market has acknowledged is that IGATE brought us a massive additional customer base in the US. What was remarkable about that acquisition is that IGATE was servicing 280 clients and out of these clients Capgemini had only three. So IGATE brought us 277 additional clients. But it was a little more of the same, reinforcing us in the US, reinforcing us in India, but the market said “What are you doing notably in the new digital world?” So we will now add a few small jewels to complete our skills set. We just bought a little company specialized in sales force in Germany – oinio - that we made public in January. Fahrenheit 2012 is a consultancy focused on innovation and the design of new services and new products. It’s a small company that we will welcome in our consulting operations in North America – our consulting operations are doing extremely well, but that will be a fantastic acceleration. It’s small, but it will bring us some kind of new consulting skills in the innovation, design and digital world.
EBM: What progress are you making in your offerings in the social, mobility, analytics, cloud or SMAC segment?
PH: To follow generally accepted market terms, we will now call it Digital and Cloud, which is a little bit of a simplification. In Digital, we have completed our set of offerings and we will even get further and add a few new ones. Digital started with all the new channels, the mobility, people using their mobiles to go shopping. So all digital customers. We have added what we do in Big Data and we will launch rapidly something around Digital Manufacturing. Cloud, we have announced a new set of offerings called Cloud Choice; we have been acknowledged by some of the main players in the industry and we record a good growth on the total since we have grown by 23% and now it represents 22% of total revenue. So it’s a big growth engine for the group and with these kind of figures we are on a par with the best-in-class of the industry players. But I would not forget that even the people buying these new advance offerings want the best value for their money, so we invest simultaneously in competiveness and for that’s it’s about methodology, but it’s mainly about our global delivery organisation that now thanks to the IGATE integration exceed 100,000 people, which puts us really at the forefront of the industry.
EBM: And finally, looking ahead to the rest of this year, how do you see organic growth developing and how will you reach your margin targets?
PH: So, with care because the market is volatile, we had to prepare a guidance. For once we will communicate on growth including IGATE but at constant currency. So we do not bet on currency. But for growth including IGATE we foresee top-line growth between 7.5% and 9.5% for 2016. We will progress further our margin - 10.6% in 2015, we predict something between 11.1% and 11.3% -, so a further step forward toward our mid-term ambition. And for free cash flow, whereas last year we had committed on more than 600, this year, notably reinforced by IGATE, our commitment is to generate a free cash flow of above €850 million. All that shows a group in pretty good health.
EBM: Paul Hermelin, Chairman and CEO of Capgemini, thank you very much.
PH: Thank you.
