Capgemini Growth Accelerates in Q3 2017

Capgemini Group reported consolidated revenues of €3,046 million in the third quarter of 2017, up 3.4% year-on-year at constant exchange rates.
For Paul Hermelin, Chairman and Chief Executive Officer of Capgemini Group: “Group growth accelerated in the third quarter. In North America, we reaped the benefits of our investments with a 6.9% growth at constant exchange rates. The strong momentum of our activities in the Manufacturing and Retail & Consumer Goods sectors drives our performance in this region.

Our Digital and Cloud activities continue to grow at a rapid pace (+23% at constant exchange rates in Q3). The acquisition of the US e-commerce expert, Lyons Consulting Group, further strengthened our position in this segment as a global leader in digital commerce.

Finally, our ongoing ability to accompany our clients’ transformations has been a key growth driver for the Group since its creation 50 years ago, as demonstrated by the worldwide agreement signed over the summer with McDonald’s. We’ve become their global IT strategic provider notably for the digitalization of their customer experience.

With these third-quarter results, we confirm our targets for revenue growth, operating margin and free cash flow for 2017.”

(in millions of euros) Change
Revenues20162017 As reportedAt constant exchange rates *
9 months9,2769,459+2.0%+3.2%

 The Group generated revenues of €3,046 million in Q3 2017, up 0.9% on Q3 2016 reported revenues and 3.4% at constant exchange rates. Organic growth* (i.e. excluding the impact of currency fluctuations and changes in Group scope) was 3.1%. Digital & Cloud revenues grew 23% at constant exchange rates. The multi-year contract signed with McDonald’s to support its digital transformation is a good example of this growth momentum.
In the first nine months, revenues grew 3.2% at constant exchange rates and 2.9% on an organic basis with Digital & Cloud accounting for 36% of Group revenues.

Consulting Services (4% of Group revenues) grew 16.0% at constant exchange rates in Q3, notably thanks to the investments made in Digital in North America and a sharp increase in the Rest of Europe. Technology & Engineering Services (15% of Group revenues) reported 3.8% revenue growth at constant exchange rates, spurred by North America and France.

Application Services (63% of Group revenues) increased 5.7% at constant exchange rates and remain the driving force behind Group growth. Strong demand for innovative offerings continues to fuel Application Services momentum, with growth rates of around 10% in France, Central Europe, Scandinavia, Italy and Asia. Other Managed Services (18% of Group revenues) reported a 6.3% decrease in revenues: the decline in Infrastructure Services in the United Kingdom – anticipated since the beginning of the year – and in Latin America was only partially offset by growth in Business Services.

In Q3, the growth momentum accelerated in North America (31% of Group revenues) reflecting the impact of the investments made over the past year. Growth reached 6.9% at constant exchange rates, driven by the Manufacturing and Retail & Consumer Goods sectors. The positive growth recorded this quarter in the Energy & Utilities sector also contributed to the good performance. The United Kingdom & Ireland (13% of Group revenues) reported revenues down 10.8%, reflecting a decline in the public sector in line with our forecast and a stable private sector (65% of region revenues). In France (21% of Group revenues), Q3 revenue growth of 4.7% was mainly driven by the Financial Services and Retail & Consumer Goods sectors. The Rest of Europe (27% of Group revenues) reported Q3 revenue growth of 6.8% at constant exchange rates. Revenue growth is around 10% in Germany, Italy and Scandinavia, with the Manufacturing and Financial Services sectors as key drivers and held stable in Benelux. Finally, the Asia-Pacific and Latin America region (8% of Group revenues) reported revenue growth of 2.0% at constant exchange rates. Latin America contracted significantly, while Asia-Pacific grew close to 10%.

At September 30, 2017, the Group’s total headcount is 198,600, an increase of 5.9% year-on-year, with nearly 113,000 employees in offshore centers (57% of the total headcount).

Bookings totaled €2,700 million in Q3 2017, a 1% decline at constant exchange rates year-on-year.

For 2017, the Group forecasts revenue growth at constant exchange rates of 3.0%, an operating margin of 11.7% to 11.9% and organic free cash flow generation in excess of €950 million.

In addition:
· The impact of currency movements on revenues on a full-year basis is now expected to be around -1.6 points, following the strengthening of the Euro against the Group’s main currencies;
· As announced in February 2017, the Group has decided to discontinue its equipment resale activity in Brazil, which represented approximately €60 million in 2016; to ensure comparable analysis of quarterly trends, organic growth and growth at constant exchange rates are presented after restating 2016 and 2017 revenues for this activity;
· The impact of acquisitions on revenue growth is estimated at this stage to be a few tens of basis points.

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