The Board of Directors of Capgemini SE, chaired by Paul Hermelin, convened yesterday in Paris to review and adopt the accounts[1] of Capgemini Group for the first half of 2024.
Aiman Ezzat, Chief Executive Officer of the Capgemini Group, said: “As expected, our growth trajectory started to improve in Q2 and is trending in the right direction in almost all businesses, sectors and regions. The recovery is particularly visible in North America. However, the slope of recovery in the second half will be affected by the recent deterioration of the outlook in the automotive and aerospace sectors and the slower recovery in financial services. In this context, we now expect a low single-digit constant currency exit rate, and target a constant currency growth rate of -0.5% to -1.5% for the full year. Despite this, we confirm our operating margin and free cash flow targets for the full year, demonstrating the resilience of the Group.
Our leadership in AI services is clearly recognized by industry analysts. Generative AI is still driving many client discussions and we are engaging in larger programs to deploy uses cases at scale. We are currently working on over 350 new projects, and we have over 2,000 deals in the pipeline. We also scaled our capabilities, having trained more than 120,000 employees on generative AI tools and continue to invest in tools, assets and platforms.
Client demand is primarily focused on improved efficiency and cost transformation. The traction for our value-added services in the fields of cloud, data & AI, sustainability, and intelligent industry remains strong.
In an environment that remains soft in the short term, all our resources are mobilized around growth. As demonstrated by the performance of our Strategy & Transformation business, we are well positioned to capture the market upturn.”
1ST HALF KEY FIGURES
|
(in millions of euros) |
H1 2023 |
H1 2024 |
Change |
|
Revenues |
11,426 |
11,138 |
-2.5% |
|
Operating margin* |
1,413 |
1,384 |
-2% |
|
as a % of revenues |
12.4% |
12.4% |
+0 bp |
|
Operating profit |
1,151 |
1,147 |
-0% |
|
as a % of revenues |
10.1% |
10.3% |
+20 bp |
|
Net profit (Group share) |
809 |
835 |
+3% |
|
Basic earnings per share (€) |
4.70 |
4.88 |
+4% |
|
Normalized earnings per share (€)* |
5.80 |
5.88 |
+1% |
|
Organic free cash flow* |
-53 |
163 |
+216 |
|
Net cash / (Net debt)* |
(3,244) |
(2,775) |
Capgemini generated revenues of €11,138 million in H1 2024, down -2.5% year-on-year on a reported basis and -2.6% at constant exchange rates*. On an organic basis (i.e., restated for changes in Group scope and exchange rates), revenues contracted by -3.0%.
As anticipated, the demand environment is starting slowly to improve. Having passed the trough in Q1, revenue growth rates improved in Q2 as expected, in all businesses and almost all regions and sectors. Q2 Group revenues thus contracted by -1.9% at constant exchange rates and ‑2.3% on an organic basis.
In the first half of the year, clients remained focused on driving efficiency through cost transformation programs. Demand for non-strategic discretionary deals remains soft. In that context, Capgemini’s most innovative services in Cloud, Data & AI and Intelligent Industry continued to enjoy solid traction.
Bookings totaled €11,793 million in the first half of 2024, down -1.7% at constant exchange rates, leading to a book-to-bill ratio of 1.06 for the period. Booking trends also improved in Q2: at €6,138 million, Q2 bookings were stable year-on-year at constant currency and the book-to-bill ratio reached 1.09, which is above historical average and reflects ongoing robust commercial momentum.
The operating margin* amounts to €1,384 million or 12.4% of revenues, a stable % year-on-year. The continued shift in Capgemini’s mix of offerings towards more innovative and value-added services more than compensated for the inflation impact, illustrating the resilience of the Group’s operating model. The investment in selling efforts to fuel future growth was offset by the improvement in gross margin, to 26.7%.
Other operating income and expenses represent a net expense of €237 million, down by €25 million year-on-year.
Consequently, the operating profit amounts to €1,147 million, almost flat year-on-year in value and up +20 basis points in % of Group revenues, to 10.3%.
Net financial result is an income of €20 million compared with a €22 million expense in H1 2023, reflecting mainly higher interest income.
The income tax expense is €326 million, up by €13 million. The effective tax rate is 28.0% in H1 2024, compared with 27.8% for the same period last year.
Taking into account the share of profits of associates and non-controlling interests, the Group share in net profit for H1 2024 is up +3% year-on-year at €835 million. Basic earnings per share increased by +4% year-on-year to €4.88. Normalized earnings per share* stands at €5.88, compared with €5.80 in H1 2023.
Finally, organic free cash flow* generation amounted to €163 million in H1 2024, compared with -€53 million for the same period last year. Capgemini announced or closed four acquisitions since the beginning of the year. Total cash outflow for acquisitions amounted to €30 million in H1. The Group also paid dividends of €580 million (€3.40 per share) and allocated €325 million (net) to share buybacks.
OPERATIONS BY REGION
At constant exchange rates, revenues in the North America region (28% of Group revenues in H1 2024) decreased by -5.4% year-on-year. The Financial Services, TMT (Telecoms, Media and Technology) and Consumer Goods & Retail sectors contributed the most to this decline, partly offset by growth in the Manufacturing sector. Operating margin increased to 15.5%, compared with 15.2% in H1 last year.
Revenues in the United Kingdom and Ireland region (12% of Group revenues) declined by -2.8%, mostly driven by the Financial Services and Consumer Goods & Retail sectors. Conversely, the Energy & Utilities and Services sectors enjoyed a solid growth. Operating margin rose from 18.4% to 20.5%.
Activity in France (20% of Group revenues) was down -2.7%. Solid momentum in the Public Sector was more than offset by visible softness in the TMT, Manufacturing and Financial Services sectors. Operating margin decreased from 11.1% in H1 last year to 9.1%.
Revenues in the Rest of Europe region (31% of Group revenues) were virtually stable at -0.1%. The underlying sector performance proved quite contrasted, with a strong momentum in the Energy & Utilities and Public sectors offset by a visible contraction of the TMT sector. Operating margin increased to 11.1%, compared with 10.5% in H1 2023.
Finally, revenues in the Asia-Pacific and Latin America region (9% of Group revenues) were down -1.6%. This contraction was mainly driven by the decline of the Financial Services sector, partly offset by the Consumer Goods & Retail and Public sectors which proved quite dynamic over the period. The region reported an operating margin of 10.5%, up from 10.2% in H1 last year.
OPERATIONS BY BUSINESS
At constant exchange rates, total revenues* of Strategy & Transformation services (9% of the Group’s total revenues in H1 2024) increased by +2.7% year-on-year at constant exchange rates. Client demand for strategic consulting on their transition towards a more digital and sustainable model is supplemented by their growing interest in exploring the broad GenAI opportunity.
Total revenues of Applications & Technology services (62% of the Group’s total revenues and Capgemini’s core business) declined by -3.4%.
Lastly, Operations & Engineering (29% of the Group’s total revenues) total revenues decreased by -1.8%.
OPERATIONS IN Q2 2024
Revenue growth rates started to improve in Q2 in all businesses and almost all regions and sectors. Group revenues totaled €5,611 million, -1.9% year-on-year at constant exchange rates and -2.3% on an organic basis.
As expected, North America is the region which improved the most in Q2 with a revenue contraction limited to ‑3.7% at constant exchange rates compared with -7.1% posted in Q1, mainly driven by an improvement in the TMT sector – although still contracting in Q2. The Rest of Europe region posted slight growth of +0.4%, with continued momentum in the Energy & Utilities sector, while the Financial Services and Services sectors returned to growth. Revenues in the United Kingdom and Ireland decreased by -2.5%, with softness in the Financial Services and Consumer Goods & Retail sectors partly offset by a dynamic Energy & Utilities sector. Activity decreased by -2.7% in France despite a solid momentum in the Public Sector. Finally, revenues in the Asia-Pacific and Latin America region declined moderately at -1.6%.
HEADCOUNT
The Group’s total headcount stands at 336,900 as at June 30, 2024, down -4% year-on-year and virtually stable since the end of March. The offshore workforce stands at 192,500 employees or 57% of the total headcount.
BALANCE SHEET
Capgemini’s balance sheet structure was relatively unchanged in H1 2024.
Cash and cash equivalents and cash management assets represent €2.9 billion as at June 30, 2024. Taking into account total borrowings of €5.7 billion, Capgemini’s net debt* stands at €2.8 billion as at June 30, 2024, compared with €3.2 billion as at June 30, 2023 and €2.0 billion as at December 31, 2023.
SUSTAINABILITY
In terms of environmental sustainability, Capgemini has been accelerating its internal sustainability upskilling program through its own Sustainability Campus. In June, the Group made the Sustainability awareness module mandatory to all employees, starting in August 2024. Capgemini was recognized again by an Ecovadis Platinum rating in recognition of its sustainability achievement, with an overall score of 87 points out of 100, up 7 points from last year, and remained part of the CDP (Carbon Disclosure Project) A-List. The Group also extended the scope of its Energy Command Center (ECC) in India in partnership with Schneider Electric, from 8 campuses (operated since 2022) to 23 campuses and more than 70 buildings. In addition, the ECC is now offered as a service, leveraging Capgemini’s and Schneider Electric’s joint expertise in energy optimization to help organizations accelerate their transition towards smarter and more sustainable energy management.
In terms of diversity and inclusion, Capgemini is continuing to shape inclusive futures for all. The Group recently launched the 2nd cohort of EmpowHer, its sponsorship program to bring women to executive leadership positions. In February, Capgemini published its D&I policy, illustrating its focus and commitments. In May, the Group launched its fourth global employee network group, CulturALL, which celebrates the rich heritage, unique customs, and traditions that each employee brings to the table, with 160 nationalities across over 50 countries represented within the Group. In addition, Capgemini has been recognized as one of the “Best Places to Work for People with Disabilities” this year.
OUTLOOK
The Group’s financial targets for 2024 are updated as follows:
- Revenue growth of -0.5% to -1.5% at constant currency (was 0% to 3%);
- Operating margin of 13.3% to 13.6% (unchanged);
- Organic free cash flow of around €1.9 billion (unchanged).
The inorganic contribution to growth should be around half a point (was ranging from a marginal impact up to 1 point).
CONFERENCE CALL
Aiman Ezzat, Chief Executive Officer, accompanied by Nive Bhagat, Chief Financial Officer, and Olivier Sevillia, Chief Operating Officer, will present this press release during a conference call in English to be held today at 8.00 a.m. Paris time (CET). You can follow this conference call live via webcast at the following link. A replay will also be available for a period of one year.
All documents relating to this publication will be posted on the Capgemini investor website at https://investors.capgemini.com/en/.
