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Capgemini’s H2CY11 revenue at EUR4.9bn, up 10.1% YoY, was marginally
ahead of the Street estimate, while it surprised on the operating
profitability side. Its operating profit, stood at EUR355mn (operating margin
of 7.2%). For the full year CY11, it reported growth of 11.5% including
inorganic (organic growth of 5.6%). It has guided for limited organic growth
(Street estimates 2%) in revenues for CY12 as it believes delay in decision
making, uncertain macro‐economic environment, coupled with higher
competition from Indian vendors, could further decelerate growth. The
positive from the result is guidance for better margin in CY12.
Delays in closure impacting growth
Although the company is seeing opportunities in the market, delays in decision making
are impacting project closure. This is also reflected in the deceleration in order book
which has declined on a YoY basis for the past three quarters. Management stated that it
continues to witness pressure in its public sector vertical (~24% of revenues) and pricing
continues to be under pressure. Thus, although it ended CY11 on a strong note, owing to
reduced visibility and uncertain macro‐economic environment it has guided for limited
organic growth in revenues for CY12.
Commentary positive for North America
Capgemini saw significant traction in North America as revenues grew 15.2% QoQ.
Further, management indicated that they recorded a strong January month with better
activity level. Demand environment certainly remains less buoyant compared with H1 of
last year but market segment remains similar to Q4CY11 with select pockets of weakness.
The company is confident of sustaining growth momentum in the geography given a
healthy beginning in January.
Outlook: Feeling the offshore pressure, advantage Indian peers
Clearly, Capgemini’s new order booking is being hit by stiffer competition in outsourcing
deals where Indian vendors have become aggressive and weakness in spending in the
government vertical. Further, management commentary indicated that clients in some
parts of Europe are massively opening up to outsourcing (structural positive for Indian
vendors) corroborating to commentary and performance of some Indian vendors.
However, in the near term, delayed decision making is likely to hit growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Capgemini’s H2CY11 revenue at EUR4.9bn, up 10.1% YoY, was marginally
ahead of the Street estimate, while it surprised on the operating
profitability side. Its operating profit, stood at EUR355mn (operating margin
of 7.2%). For the full year CY11, it reported growth of 11.5% including
inorganic (organic growth of 5.6%). It has guided for limited organic growth
(Street estimates 2%) in revenues for CY12 as it believes delay in decision
making, uncertain macro‐economic environment, coupled with higher
competition from Indian vendors, could further decelerate growth. The
positive from the result is guidance for better margin in CY12.
Delays in closure impacting growth
Although the company is seeing opportunities in the market, delays in decision making
are impacting project closure. This is also reflected in the deceleration in order book
which has declined on a YoY basis for the past three quarters. Management stated that it
continues to witness pressure in its public sector vertical (~24% of revenues) and pricing
continues to be under pressure. Thus, although it ended CY11 on a strong note, owing to
reduced visibility and uncertain macro‐economic environment it has guided for limited
organic growth in revenues for CY12.
Commentary positive for North America
Capgemini saw significant traction in North America as revenues grew 15.2% QoQ.
Further, management indicated that they recorded a strong January month with better
activity level. Demand environment certainly remains less buoyant compared with H1 of
last year but market segment remains similar to Q4CY11 with select pockets of weakness.
The company is confident of sustaining growth momentum in the geography given a
healthy beginning in January.
Outlook: Feeling the offshore pressure, advantage Indian peers
Clearly, Capgemini’s new order booking is being hit by stiffer competition in outsourcing
deals where Indian vendors have become aggressive and weakness in spending in the
government vertical. Further, management commentary indicated that clients in some
parts of Europe are massively opening up to outsourcing (structural positive for Indian
vendors) corroborating to commentary and performance of some Indian vendors.
However, in the near term, delayed decision making is likely to hit growth.
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