The Board of Directors of Capgemini SE, chaired by Paul Hermelin, convened in Paris on February 12, 2020 to review and authorize the issue of the accounts of Capgemini Group for the year ended December 31, 2019.
Paul Hermelin, Chairman and Chief Executive Officer of Capgemini Group and Aiman Ezzat, who will become Chief Executive Officer of Capgemini Group following the Shareholders’ Meeting of May 2020, comment: “With the strong 2019 performance we continue the momentum started several years ago. Once again, we outpaced market growth, as we committed to do. Our operating margin is up for the 9th consecutive year and we have significantly exceeded our free cash flow target. This sound financial performance demonstrates the strength of our business model and our financial discipline.
With this good set of results, we start 2020 on a solid footing. We can rely on a strong backlog, and on our ability to win major projects, as demonstrated in 2019. We can also count on the depth of our offer portfolio.
We are determined to expand in the “Intelligent Industry” market. We reaffirm our confidence in the final steps to complete the friendly offer to acquire Altran. This will enable us to take leadership in the digital transformation of industrial companies, a highly promising segment.”
2019 KEY FIGURES
In 2019, Capgemini continued to outpace the market and further improved its profitability and organic free cash flow* generation.
The Group generated revenues of €14,125 million in 2019, up 7.0% on 2018. Growth is 5.3% at constant exchange rates*, in line with the 2019 target of “around 5.5%” (adjusted target announced at the Q3 2019 publication). Organic growth* (i.e. excluding the impact of currency fluctuations and changes in Group scope) was 4.2%.
Digital and Cloud now account for over 50% of the Group’s activities, with growth exceeding 20% at constant exchange rates in 2019.
Bookings were up sharply, rising 11% at constant exchange rates to €15,138 million. This reflects the Group’s ability to win large digital transformation contracts and secure multi-year client commitments.
The operating margin* is €1,741 million, or 12.3% of revenues, an increase of 9% or 20 basis points year-on-year, in line with annual objectives. The portfolio of innovative offerings drove this value creation, as illustrated by the increase in gross margin of the same amount. In a mixed economic environment, the Group demonstrated its ability to continue combining growth and profitability. The United Kingdom & Ireland and France were the main contributors to this performance, as well as North America to a lesser extent.
Other operating income and expenses were down to a net expense of €308 million from €346 million in 2018. This was mainly due to the marked decrease in restructuring costs, as anticipated, from €122 million in 2018 to €82 million in 2019.
Operating profit totaled €1,433 million, or 10.1% of revenues, compared with €1,251 million, or 9.5% of revenues, in 2018.
The net financial expense is €79 million, virtually unchanged on last year’s expense of €80 million. The income tax expense increased from €447 million in 2018 to €502 million this year and includes €60 million due to the transitional impact of the US tax reform, compared with €53 million last year. Adjusted for this expense, the effective tax rate decreased from 33.7% in 2018 to 32.6%.
Net profit (Group share) grew by a strong 17% to €856 million in 2019. Basic earnings per share was €5.15 for 2019. Normalized earnings per share* was €6.40, or €6.76 adjusted for the transitional tax expense in the U.S. (i.e. up 12% year-on-year).
Organic free cash flow* was up sharply at €1,288 million, far exceeding the €1,100 million target set at the beginning of the year. This was mainly due to a higher operating margin and, to a lesser extent, lower restructuring costs. The Group also benefited from a €30 million improvement in working capital requirements in 2019.
Capgemini disbursed €578 million net for acquisitions in 2019 (including €411 million, excluding costs, for the block of 11.43% of Altran shares), and paid €282 million in dividends. The Group also allocated €150 million to share buybacks under the multi-year program. The 6th employee share ownership plan led to a gross capital increase of €254 million.
The Board of Directors has decided to recommend at the Shareholders’ Meeting of May 20, 2020, the payment of a dividend of €1.90 per share, an increase of 12% on the dividend paid in 2019. The corresponding payout ratio is 35% of net profit3(Group share), in line with the Group’s distribution policy.
OPERATIONS BY REGION
North America revenues (32% of Group revenues) grew 2.6% at constant exchange rates, on a challenging comparison basis as the region grew 14.4% in 2018. The Services and Energy & Utilities sectors were the most dynamic. The operating margin improved 30 basis points year-on-year to 13.9%.
The United Kingdom & Ireland region (12% of Group revenues) recorded robust growth of 4.7% at constant exchange rates for the year, despite the slowdown recorded as anticipated in the final months of the year. The Manufacturing, Energy & Utilities and Consumer Goods & Retail sectors were the main growth drivers, while the Public sector remained almost stable. The operating margin rate jumped to 15.2%, from 12.6% in 2018.
In France (21% of Group revenues), revenues rose year-on-year by a strong 5.9%. Demand was fueled in particular by the Manufacturing, Services and Public sectors. The operating margin rate improved further to 12.1% of revenues, an annual increase of 100 basis points.
Growth momentum remained robust in the Rest of Europe (27% of Group revenues), with a 6.2% increase in revenues at constant exchange rates. The Energy & Utilities, Consumer Goods & Retail and Manufacturing sectors were the strongest. Operating margin for the region eroded from 13.0% in 2018 to 11.8%.
Finally, the Asia-Pacific and Latin America region (8% of Group revenues) was particularly dynamic. Revenues grew 12.8% at constant exchange rates, with all the main sectors contributing to this performance. The operating margin rate nonetheless declined to 11.2%, from 12.8% in 2018.
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