Capgemini SE · EURONEXT:CAP

Capgemini — Q3 2005 Earnings Presentation

49 slides from Capgemini's earnings presentation, Nov 9, 2005

  1. Slide 1: Third Quarter 2005 Revenues

    Third Quarter 2005 Revenues Analysts Meeting Paris, November 9th, 2005

  2. Slide 2: Introduction

    Introduction Paul Hermelin Chief Executive Officer

  3. Slide 3: A group in a positive dynamic (1)

    A group in a positive dynamic (1) Q3 revenue growth YOY: + 10% Top line growth in all disciplines European growth: + 13.0% © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 2

  4. Slide 4: A group in a positive dynamic (2)

    A group in a positive dynamic (2) NA P&C: new model in place, topline stabilizing, attrition to be monitored OS: successful start of our mega deals delivery, positive H2 divisional margin Offshore: rapid growth (India: + 80%), awareness and mobilization everywhere CS/TS: growth fuelled by stronger d

  5. Slide 5: OS "MAP" is now our number one priority

    OS “MAP” is now our number one priority Significant growth: from 14% of Capgemini business mix in 2001 to 39% today OS mix to be improved: weight of IM and of mega deals “MAP” Ambition Actions : • Drive divisional margin from – 0.2% in H1 05 to 8% • Rebalance the portfolio • Adapt the mix toward BPO

  6. Slide 6: Mobilization of the Group management team

    Mobilization of the Group management team Office of the CEO ƒ Strengthen our sales and customer portfolio management ƒ Support performance and improve operational effectiveness ƒ Address the people challenge we face with innovation and offshore Executive Committee ƒ OS “MAP” preparation and implemen

  7. Slide 7: Q3 2005 Financial Highlights

    Q3 2005 Financial Highlights Nicolas Dufourcq Chief Financial Officer

  8. Slide 8: Revenue Evolution

    Revenue Evolution 1 764 1 708 1 683 1 674 1 587 1 474 1 491 in M€ Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q1 Q2 H1 Q3 YTD Q4 H2 FY Q1 Q2 H1 Q3 YTD 2004 2004 2004 2004 Q3 04 2004 2004 2004 2005 2005 2005 2005 Q3 05 Amount in M€ (published) 1,474 1,491 2,965 1,587 4,552 1,683 3,270 6,235 1,708 1,764

  9. Slide 9: Growth by Discipline

    Growth by Discipline Q3 05 / Q2 05 Q3 05 / Q3 04 Consulting Services -4.8% 3.3% Technology Services -6.5% 6.8% Professional Services -4.3% 10.5% P&C -5.6% 7.0% Outsourcing Services -1.4% 15.0% Total Group -4.0% 10.0% Revenue CS/TS related to mega deals recorded in OS © 2005 Capgemini - All rights re

  10. Slide 10: Growth by Discipline

    Growth by Discipline Q3 05 / Q2 05 Q3 05 / Q3 04 Consulting Services -4.7% 2.2% Technology Services -3.9% 18.7% Professional Services -4.3% 10.5% P&C -4.1% 13.2% Outsourcing Services -3.7% 3.8% Total Group -4.0% 10.0% Revenue CS/TS related to mega deals reclassified in CS/TS © 2005 Capgemini - All r

  11. Slide 11: Revenue by Discipline

    Revenue by Discipline At constant rate and perimeter CS 2004 restated for IFRS impact Q3 2004 15% 15% TS OS 36% 34% PS Q3 2005 16% 13% 39% 32% © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 10

  12. Slide 12: Revenue Evolution – Current & Organic Growth by Geography

    Revenue Evolution – Current & Organic Growth by Geography Current Organic Year on Year on M€ Q3 2004 Q2 2005 Q3 2005 Sequential Year Sequential Year North America 367 343 332 -3.1% -9.5% 1.4% -1.3% Europe & Asia 1 220 1 421 1 342 -5.6% 10.0% -5.2% 13.0% of which UK & Ireland 377 442 432 -2.1% 14.5%

  13. Slide 13: Revenue by Geography

    Revenue by Geography At constant rate and perimeter Q3 2004 2004 restated for IFRS impact SE AP Q3 2005 2% NA 4% FR SE AP 23% NA 21% 1% FR 4% 20% 8% 24% 23% CE 13% 5% UK 7% 26% BE CE 14% NO 5% UK BE NO © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 12

  14. Slide 14: Bookings

    Caps CONSULTING. TECHNOLOGY.OUTSOURCING

  15. Slide 15: Bookings Evolution by Geography and Discipline

    Bookings Evolution by Geography and Discipline Year on Year North America -6.4% Rest of World 3.5% All Disciplines 1.2% North America -4.6% Rest of the World -0.1% P&C -1.0% North America -11,0% Rest of the World 16,2% OS 8,7% Restated for perimeter changes (Healthcare & Japan) © 2005 Capgemini - Al

  16. Slide 16: Bookings Evolution – excluding Megadeals

    Bookings Evolution – excluding Megadeals M€ 2 500 OS 2 072 1 907 P&C 2 000 1 841 1 701 1 713 1 585 1 680 764 554 1 399 1 500 785 485 483 1 250 488 1 235 549 1 251 276 289 314 402 1 000 1 308 1 287 1 195 1 152 1 230 1 122 1 097 1 123 500 848 946 937 0 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q

  17. Slide 17: Unweighted Funnel by Discipline (2004 – 2005)

    Unweighted Funnel by Discipline (2004 – 2005) 20000 17 725 18000 16 503 17 129 15 682 16000 14 889 14 687 13 547 14000 13 105 12000 11 925 10 876 12 026 9 269 10 541 10000 7 800 9 349 7 859 8000 6000 4000 3 978 4 021 4 099 4 436 3 958 3 805 3 862 4 117 2000 1 769 1 606 1 521 1 288 1 336 1 241 1 364

  18. Slide 18: Weighted Funnel (2004 – 2005)

    Weighted Funnel (2004 – 2005) 6000 5000 4 646 4 450 4 465 4 226 4 200 3 991 4000 3 439 3 795 983 342 1 136 1 489 975 848 850 435 3000 2000 3 858 3 251 3 314 3 482 3 005 3 158 2 945 3 143 1000 0 Jan. 8 Apr. 1 Jul. 4 Oct. 7 Jan. 6 Apr. 7 Jul. 7 Oct. 6 Deals below 500 M€ Exceptional deals (>500m€) © 20

  19. Slide 19: KPIs

    Caps CONSULTING. TECHNOLOGY.OUTSOURCING

  20. Slide 20: Quarterly Charge Out Rate by discipline since 2004

    Quarterly Charge Out Rate by discipline since 2004 1500 1200 1153 1150 1131 1150 1121 1127 1136 900 614 615 617 620 628 614 620 600 407 410 403 406 410 414 417 300 Consulting Services Technology Services Professional Services Restated for perimeter changes (Health and Japan) © 2005 Capgemini - All r

  21. Slide 21: Quarterly Utilization Project & Consulting since 2004

    Quarterly Utilization Project & Consulting since 2004 81 80.2 80.2 80 79 78.6 78.0 78 77.5 77 76.7 76 75.7 75 74 73 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 20

  22. Slide 22: North America Project and Consulting update

    North America Project and Consulting update Salil Parekh General Manager, North America

  23. Slide 23: North America P&C gaining stability

    North America P&C gaining stability ƒ Q3 results are in-line with our expectations ƒ The 2 primary risks in the restructuring appear to be under control H2 revenue at the Attrition in same level as October below H1 revenue 30% ƒ On-track to be very close to break-even in H2 ƒ Anticipate to be solidl

  24. Slide 24: Recap of "Booster"

    Recap of “Booster” NA 2004 Loss - $85M Restructuring New Operating model ƒ $120M annualized ƒ Organization streamlined savings in operating cost In 2005 around 6 geographical structure “Booster” units ƒ VP headcount from 200 $106M restructuring cost ƒ Business focus on to 130 growth, via attractive

  25. Slide 25: Q3 results In-line with expectations

    Q3 results In-line with expectations Bookings 2005 vs 2004 (M$) 80 60 40 2004 20 2005 0 Apr. May Jun. Jul. Aug. Sep. ƒ Q3 Bookings: 200 M$ Stabilization over Q3 of 2004 ƒ Q3 Revenue: 167 M$ Small sequential growth over Q2 05 ƒ Book-to-bill: 1.20 Stability and a possibility of growth ƒ Orderbook: 240

  26. Slide 26: Business approach rests on 4 areas

    Business approach rests on 4 areas Stemming from our selection of growth GROWTH platforms in sectors that are showing strong demand Continue to leverage more to improve OFFSHORE pricing and profitability CONSULTING Leveraging our strength in specific areas EXPANSION to gain from market growth and hi

  27. Slide 27: Growth from Sector Focus and Portfolio Re-Balancing

    Growth from Sector Focus and Portfolio Re-Balancing ƒ Telecom, Media, and Entertainment – wireless, wireline, cable, media ƒ Retail – continuing need for transformations, especially in store operations SECTORS ƒ Financial Services – expanding buyers in wealth management, policy administration, and a

  28. Slide 28: People: attrition remains our first priority

    People: attrition remains our first priority ƒ Attrition is below 30% in October, for the first time in over 16 months ƒ Expansion of headcount in August, September, and October ƒ Recruiting at about 75 new staff members per month ƒ We have put in place a program to address the underlying causes of

  29. Slide 29: Operational Rigor

    Operational Rigor ƒ We have put in place a process to review weekly in-depth the basic elements of our business such as: Pipeline Current unweighted pipe at $900 million Sales Weekly focus on the top-20 deals across NA Financials and risk on material deals Deal Reviews $168 in Q3: 8.2% growth over Q

  30. Slide 30: Conclusion

    Conclusion WE HAVE ƒ 2 months of operating profit ƒ First sign of attrition in mid-20s ƒ Revenue stable in H2 05 with respect to H1 05 WE EXPECT ƒ End H2 2005 very close to break-even ƒ Be solidly in the black in 2006 © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 29

  31. Slide 31: Global Outsourcing Update

    Global Outsourcing Update Paul Spence CEO Outsourcing

  32. Slide 32: Agenda

    Agenda ƒ Recap of Capgemini Outsourcing portfolio ƒ Update on progress since February ƒ Project MAP status ƒ Ambitions for Capgemini Outsourcing © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 31

  33. Slide 33: Capgemini Outsourcing Portfolio

    Capgemini Outsourcing Portfolio SERVICE LINES GEOGRAPHICAL MIX 2004 Business Process Outsourcing ROW Outsourcing Solutions 40% France 4% UK Applications Management Benelux 7% 6% Portfolio Central 9% Network 44% Help Desk Infrastructure Infrastructure Management 30% Data Centre Services 60% North Ame

  34. Slide 34: Capgemini Outsourcing: 2005 in perspective

    Capgemini Outsourcing: 2005 in perspective ƒ H1 Divisional Margin published at -0.2% ƒ H1 focused on absorbing Megadeals • Inland Revenue Tracking to plan • TXU Tracking to plan • Schneider − 31 countries and >600 employees transitioned successfully Run − Service delivered as planned − Detailed desi

  35. Slide 35: What we have done on sales

    What we have done on sales ist o le a l list •S rce F in le na • o i ou •S rce •F •S S ou • le e ld ld o ol e st o o •S rce •S r c a li •S •S o u o u in •S •S •F o le ist old old old •S rce a l •S •S •S ou in •S •F ƒ Increased focus on small and mid size deals starting to pay off ƒ Deals won in ’05

  36. Slide 36: What we have done

    What we have done ƒ Rationalization • Sole source negotiations for margin dilutive offerings • Piloted virtualisation/automation tools in Amsterdam DC w/ 30% cost savings as a result ƒ Rightshore • Offshore headcount to double in 2005 ƒ Procurement • Identified and implemented €10M of annualized sav

  37. Slide 37: Project MAP launched in September

    Project MAP launched in September Communication to the Market Powerstart Analysis and Mobilization Path forward training, Data and information aggregation Executive / Focus Kick-off, Planning, Scope definition, Team 1. Sales Interviews Board Alignment Approval 2. Rationalization Financial Analysis A

  38. Slide 38: Action Plan

    Action Plan Mid term Margin Impact Business mix TBD Platform Based REVENUE Contract Renegotiation 0.5% Procurement 1.0-1.5% DELIVERY 1.5-2.0% Rightshore COSTS Rationalisation 1.0-1.5% SG&A Support Costs 1.0-1.5% © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 37

  39. Slide 39: Rationalization

    Rationalization ƒ Facts • Over 70 sites globally • 11% of resources in 48% of sites • Space utilization estimated at 66% • In some centers processing and storage capacity running at 50% • Currently using over 350 tools from 90 vendors ƒ Implications • Implement Command centers: By using center virtu

  40. Slide 40: Rightshore

    Rightshore ƒ Facts • 2400 people in our centres in India, Poland and China by year end • In addition over 500 with partners • Current offshore penetration at 15% of own resources • North America ahead at 25%, other countries still lagging ƒ Implications • Speed up the Rightshore push outside North A

  41. Slide 41: Procurement

    Procurement Partner ƒ Facts Other • Over €1bn of spend Goods & 30% 4% • Fragmented supplier base >3000 Service 4% suppliers Facilities 8% 29% Management IT&T • Too many contractors >1600 FTEs 25% ƒ Implications Contractor • Renegotiate agreements with Partners • Rationalize supplier base with a focu

  42. Slide 42: Renegotiation

    Renegotiation ƒ Facts • 29 contracts (out of 515) still losing money • Corresponds to 8% of revenues ƒ Implications • Bill or Cut • Solution redesign • Rightshore • Target 3 renegotiation per quarter • Strengthen deal review on smaller contracts ƒ Result • Increase revenue or reduce costs of deliver

  43. Slide 43: Support Costs

    Support Costs ƒ Facts • Fragmented support across multiple countries • Duplication of investments • Global OS concept not fully leveraged • Small countries have high support functions costs ƒ Implications • Reduce duplication in support by leveraging Regional synergies • Reduce complexity • Streamli

  44. Slide 44: Business Mix

    Business Mix ƒ Facts • Portfolio still majority of IM • AM & BPO margins tend to be higher • Growth fuelled by mega deals with not enough medium size deals • Not enough focus on exploiting existing Capgemini client base ƒ Implications • Increase Application Management and BPO in business mix • Oppor

  45. Slide 45: OS Restructuring guidance for 2006

    OS Restructuring guidance for 2006 €70m 90/95% cash 15 month payback © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 44

  46. Slide 46: Summary

    Summary Divisional Margin positive in H2 2005 First step 4% Divisional margin in 2006, with 5% in H2 © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 45

  47. Slide 47: Conclusion

    Caps CONSULTING. TECHNOLOGY.OUTSOURCING

  48. Slide 48: Outlook

    Outlook Growth: close to 14 % Margin: in line with September guidance © 2005 Capgemini - All rights reserved Third Quarter 2005 Revenues 47

  49. Slide 49: investor.capgemini.com

    Cap CONSULTING. TECHNOLOGY.OUTSOURCING investor.capgemini.com

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