EuroBusiness Media (EBM): Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, reports results for the full-year 2014. Paul Hermelin, welcome. You are the Chairman and CEO of Capgemini. How would you describe your level of satisfaction with the Group’s performance in 2014?
Paul Hermelin: Satisfaction is a tough one. I’m very encouraged by the results because we had nice ambition for the year, we guided the market for further progression last February and we have beaten everything. We have beaten the top-line ambition, we have done better in margins, we have done better than the consensus in net income and better on cash. So it’s a solid year and it gives us very good momentum to enter 2015. And it’s all the more the case as we ended the year on a very solid note. The growth we had guided foe was 2-4% for the year; we ended in the fourth quarter above 5%. We had guided for further margin progression in a range of 8.8-9% and we delivered 9.2%; and in the second half, it was even 10.4% which solidifies our ambition to reach 10% as a stable annual performance. We grew our net income by more than 30% and cash collection is at €668m, far above our initial guidance which was €550m. So it’s a quite promising year because it helps us deliver all our ambitions. Based on that, the Board has decided to raise the dividend. And the dividend that was decided to be proposed to the General Assembly is €1.2 per share, and I think it’s a good sign because last year we could increase it after 5 years of stability. It’s the second year in a row where we can increase the dividend.
EBM: In 2014, what were some of the levers that you activated to achieve your results and do you foresee continuing to use those in 2015?
Paul Hermelin: The market now has acknowledged the power of our industrialisation platform, notably based on our Indian platform. And now we grew to 56,000, so we are seen as one of the most dynamic players there and that enables us to offer the best of breed price points. That’s good. The market must now acknowledge that we are very advanced on the innovation race. We have shown with big rewards offered by the most advanced technology partners that we are recognised as their advanced partner in system integration – be it by SAP Hana, the Big Data tool, be it by Pivotal in the BI space – and we are building that innovation platform. Today, we track what we call the most advanced offering used under a strange acronym, SMAC; SMAC standing for Social, Mobile, Analytics and Cloud. The SMAC revenue grew from 11% of the revenue to 14%, and we’ll probably reach 15% very soon, so we are gaining traction. Our strategic offer grew solid double-digit, so we today have a second leg, and it’s better to have two legs to walk and to run: so, the industrialisation leg and the innovation leg.
EBM: North American business represents the highest margin business within Capgemini. In light of the uptick in the US, what will this mean for your margins this year?
Paul Hermelin: The first point is, as you said, the US are accretive to the Group, so with the surge of the dollar, mechanically, it will have a bigger weight in the Group mix and will help us achieve some margin progression. But what is interesting in the US is that now we have reached the level of offshore we just wanted, so it’s something close to 70%. Now, the growth happens both offshore and onshore. So when we grow 8-10%, we grow 8-10% in the US or in Canada and 8-10% India, because there is no longer the cannibalisation of onshore world by offshore. So, today we are growing and we will grow further and we will deliver the best margins because of the market appetite for innovation and the high offshore leverage.
EBM: The market landscape in the US has recently shifted with Atos’s acquisition of Xerox. What plans has Capgemini have on the acquisition front? Will you be focusing on BPO, IT consulting or systems integration businesses?
Paul Hermelin: Just talked about what we should do. We have a very strong balance sheet, we have been rerated by Standard & Poor’s, so we have a good borrowing capacity. So we are acquisitive and we are acquisitive in the US. In the US, two kinds of targets. Either what I would call jewels, high added value. They can be difficult to integrate but they provide new skills, new clients, new domains of competence. And a second point will be volume. Today we are number 20 in the US. We have some very strong sectors, specialities, but we are seen as a tier two player, if not tier three. Just to volume, we could move to the top ten league and it’s important, so we are looking both sides. So be it in IT or BPO or even in consulting, we are acquisitive, but as always regarding acquisitions, you talk about them when you have closed something. Intent is of no importance in the acquisition world.
EBM: With a number of encouraging indicators, such as the lower euro, lower oil price and quantitative easing, there is hope that we will see better trends in Europe later in 2015. Now, given that 70% of Capgemini’s revenues come from Europe, how does this position Capgemini against its most direct global peers?
Paul Hermelin: A year ago, everybody was optimistic about a European rebound and the market got disappointed. Again, there is some hope. You can see some trace of that optimism in our fourth quarter. We had a mediocre year in Benelux; the fourth quarter showed some growth. We have now some good momentum in Germany and the Nordic countries. France is unclear: we managed to grow, but by half a point. So, can France help us with our growth ambition? It’s not sure yet. So, my view is better market, but in the troubled and what will remain the troubled European market there will be two segments: cost competitiveness for our clients with more offshore and more industrialisation (and we saw that when signing a large bank in Europe that managed and was daring to go offshore to reduce their costs of exploitation), and we start to see some appetite for innovation for the famous digital world, digital customer experience and, in Germany, people talk about digital manufacturing.
EBM: And finally, what is your outlook, ambition and guidance for 2015?
Paul Hermelin: We enter 2015 with a solid energy. We have a large contract in the UK that is about to be redesigned, so that will weigh on our top line. So, today, we guide our revenue, in current revenue, because we think the reorganisation of our English contract will be balanced by the currency impact, so a growth of 3-5% for 2015. In margins, another year of progression: we closed at 9.2%, we guide in the range of 9.5-9.8%, so the 10% is really visible for early 2016. And for cash collection, another year above €600 million.
EBM: Paul Hermelin, Chairman and CEO of Capgemini, thank you very much.
Paul Hermelin: Thank you Adrian.
