Cap Gemini results offset by acquisition

27 Feb 2004

Cap Gemini Ernst & Young’s acquisition of IT services firm Transiciel and its subsequent consolidation into the company’s accounts have resulted in the company seeing a 12.5pc drop in revenue to €5.7bn for the financial year 2003.

Operating income is €155m a 36pc increase versus 2002 level of €114m; with operating margin 2.7pc in 2003 against 1.6pc in 2002.

The Group’s net income is -€197m, taking into account namely €251m expenses mainly related to restructuring charges (€141m resulting from headcount reduction and 70m euros from the ongoing office space rationalisation program launched in 2002), a net financial expense of €14m, an income tax charge of €47m and a goodwill depreciation charge of €38m.

Before the consolidation of Transiciel balance sheet, the Group’s net cash position amounts to €454m at December 31, 2003, which is comparable to the €465m at December 31, 2002. This was achieved despite the €297m euros of cash outflow related to restructuring. Transiciel financial debt of €188m brings the Group’s net cash position down to €266m.

In its 2003 overview, the company said that the IT recovery claimed by many has yet to materialise fully. It said: “For the third consecutive year, the IT services industry suffered the effects of an unfavourable economic environment: despite some encouraging signs in the U.S., the general economic conditions did not elicit a clear recovery in IT investments, which had collapsed following the end of the ‘Internet bubble’. Even if we were able to observe a slight pick-up in demand at the end of the year from telecoms operators and the financial services sector, it was only the public sector that significantly increased its IT spending in 2003.”

Looking to 2004, the company said: “Outsourcing should be the key growth driver for the market as well as for the Group, however this should not help improving profitability. Indeed, increasing exposure to this business requires significant commercial efforts; in addition, full effects of outsourcing contracts are generally not delivered during their initial phase.

“Local Professional Services business should keep growing; the first half-year priority will be to successfully integrate Transiciel business.

“The first signs of firming demand in Consulting could be an early indicator that our clients will resume investing. However, it is too early to anticipate the extent into which this will benefit to our Project & Consulting business”, the company stated.

By John Kennedy