EuroBusiness Media (EBM): Capgemini, a global leader in consulting, technology and outsourcing services reports results for the first half. Paul Hermelin, welcome you are the CEO of Capgemini. What are the highlights of these first half results?
Paul Hermelin: I’m very pleased with this first half, where clearly we beat the consensus on each and every line. What I’m very proud of would be first, we delivered a growth of 3% in the second quarter and 2.6% organic growth, which I think is exactly in line with our guidance. We recorded solid improvement in some key geographies, I’m thinking of the US where we grew now nearly 8%, 7.9% which I think is right. And solid progression in our margin. Our margin has progressed by 60 basis points. We guided for the year for an improvement of 30 to 50 bp, so we had a good start to the year and we delivered a very solid net progression, +35 bp, so it’s a good half-year, frankly. What I think is nice is that the group now progressed based on two big engines. I could say we walk on two legs - I’ve never tried to walk on three legs, so I don’t know how it would feel – and you walk relatively well on two legs, and the two legs are competiveness (with our offshore engine) and innovation, and the market is very reactive and positively reacting to that.
EBM: What are the most successful sectors?
Paul Hermelin: In terms of industry segments, the first point, a surprising success, is Consumer Goods and Retail which is based on Digital, so it works well. Large consumer products companies now invest in Digital clients, they operate through social networks à la Facebook etc. and so are completely changing their marketing strategy and they need to align their information systems. So it’s innovation and very exciting. Solid progress also in the world of Energy and Utilities, but there it’s more about cost reduction. There is some digitalisation of client relationships, but a lot of our efforts are around offshoring and cost reduction and we still record good progress in Financial Services. Financial Services grew mid-single digits. We grew nearly 10% last year, so after the crisis we recovered and it’s growing both for banks and insurance companies. These are our three main sectors today.
EBM: Earlier this year you launched a top line initiative called “Digital Customer Experience”. Is it gaining traction?
Paul Hermelin: That’s what I just referred to. Frankly, the new world of customers is completely overwhelmed, transformed by many factors. The first one everyone can obviously realise is the mobility factor that completely transforms access to information. So people use their smartphone to access their data, their world, the shops where there would be trade promotion. It’s a new world. So, mobility. First would be analytics, and the marketing itself has changed. Third would be everything related to the cloud, so it’s a complete transformation. So the digital customer is the entry of the Digitalisation in the customer value and later on we will deal with the digitalisation of the production. But today, what is truly hot - and it’s hot for luxury brands as it is for any large retailer – we did some beautiful work for Unilever, we work for luxury brands, it’s a very exciting world.
EBM: What are the most frequent challenges you see companies facing and what solutions can be brought to solve them?
Paul Hermelin: As I mentioned earlier, we have two big demands. The first one is that people want the same service for a lower price. Frankly, it’s a cost battle. So it’s a battle that we must address with standards, standardisation, tools, methodologies, mutualisation of platforms and, of course, the offshore platforms. So today we are growing our offshore machine. We are by far the most advanced European player. We’ve now reached more than 52,000 people in India and close to 65,000 for all offshore locations. It’s growing. Today the offshore ratio has reached 45%, so it’s gaining traction. So that’s a big demand. The other one is just innovation and it is well summarised in the US by an acronym, SMAC. As you know a SMAC is a kiss in any comic, so that kiss is about Social, Mobility, Analytics and Cloud… so SMAC. And we could have several SMACS if we add Security. So SMACS and we could kiss everybody.
EBM: You’ve stated that you would like to make an acquisition, notably in the US. Is there any news to report on the M&A front?
Paul Hermelin: It’s very obvious. We have the strongest balance sheet in the industry, so we have a net cash positive situation, so we are looking for acquisitions. We should really be prudent because the share prices are at a very high level, notably in the US, after 4 years of a bullish market. But we scrutinise, we will do something, we must do something in the US. We are a little too European. We like Europe, we are born in Europe, but 70% of our mix in Europe might be a little bit too much. So we will do, we will move, but we look at opportunities with care, and I hope we can announce something (not in the next weeks, frankly).
EBM: Lastly, what is your outlook for the rest of the year? Do you confirm your full-year guidance?
Paul Hermelin: Absolutely. Frankly, after a very successful first half, we are extremely comfortable to confirm the guidance. It’s too early to try to change it, but we said we are going to grow 2 to 4%; we grew in H1 by 2.6%. It’s in the middle and we will deliver our guidance. We said 30 to 50 basis points for operating margin. We are a little ahead, so very comfortable. And we will have an organic cash flow that will be in the €500 million mark, so I think we are in line. That gave the board confidence to launch a stock purchase plan for the employees and I think the group is in a good position to achieve a good financial performance, while delivering its strategic ambition in 2014.
EBM: Paul Hermelin, CEO of Capgemini, thank you very much.
Paul Hermelin: Thank you Adrian.
