Credit Suisse 2008 Euro Tech Conference

Transcription

1 Credit Suisse 2008 Euro Tech Conference Manuel Chaves d Oliveira, Director of Investor Relations

2 Contents Capgemini new trends at work 2007, 2008 and beyond 2008 Capgemini. All rights reserved 2

3 Our business is pretty simple: it boils down to a few formula Operating margin = [revenues direct costs indirect costs] sales costs admin costs Revenues = 1. In consulting, system integration and local professional services: [billable headcount x utilisation rate x average daily sale price x number of days x productivity ratio] productivity is the % of work actually billed to clients close to 100% with overruns as the difference 2. In outsourcing: work units x unit price Costs Direct costs = billed headcount x average salary (fully loaded) Indirect costs = unbilled headcount x average salary (fully loaded) Sales costs Admin Costs 2008 Capgemini. All rights reserved 3

4 Pyramid and mark-up are essential F E Managing the pyramid is essential in our business Rather counter-intuitively, its base should be as wide as possible We specifically track the VP/Staff ratio. In 2007 alone it moved from 1 / 42 to 1 / 49 Mark-up is our key focus (sale price / direct cost of the resource) D C B A 0.00% 10.00% 20.00% 30.00% 40.00% 2008 Capgemini. All rights reserved 4

5 Managing the pyramid now includes offshore Average salary increase onshore: 3.8% (4% in 06) Average remuneration increase onshore : -0.6% Average salary increase offshore: 16% (14% in 06) Average remuneration increase offshore : +6.4% Group average remuneration cost evolution: -3.8% In spite of + 6.4% increase in India average costs, the growing weight of India in the average headcount (from 7% in 06 to 11 % in 07) and the cost differential between Onshore and India (5 times) pulls down the overall Group average cost, leading to the -3.8% above Capgemini. All rights reserved 5

6 Don t neglect bookings: they are the future! Bookings are tomorrow s revenues Tougher to analyse in outsourcing as large deals can skew patterns, even more so with a young portfolio In the other businesses, bookings and quite often the book to bill ratio have a strong predictive power, even though change in client behaviour can distort them We tend to look even more at the funnel: the opportunities ahead of us, that is business that is for us to win. It can be dissected by stage and it can be weighted by the estimated probability to win 2008 Capgemini. All rights reserved 6

7 Capgemini s four disciplines Local Professional (Sogeti) -Headcount 07: Applications management -Infrastructure -High-Tech consulting Consulting -Headcount 07: Strategic Consulting - Business Transformation 16.2% 8.7% 36.6% 38.5% % of FY 2007 Revenues -Headcount 07: Outsourcing -Headcount 07: Applications Management -Business Process Outsourcing -Infrastructure Management Technology -IT Systems architecture -Software package implementation -Applications development -IT consulting 2008 Capgemini. All rights reserved 7

8 2007 organic growth & operating margin Local Professional (Sogeti) +9.5% 12.0%* Consulting +4.5% 10.5%* 16.2% 8.7% Group : +9.0% & 7.4% 36.6% 38.5% * Before corporate costs Outsourcing +7.8% 4.7%* Technology +11.0% 8.9%* 2008 Capgemini. All rights reserved 8

9 Key characteristics Local Professional (Sogeti) + Highly reactive + Moving up the value chain + Below the radar - Potentially hit by OpEx cuts Consulting + Key C-level exec access + Transformational skills - Higher cyclicality 16.2% 8.7% 36.6% 38.5% Outsourcing + Long Term contracts + Highest intimacy + Add-on potential Technology + The heart of our expertise + Mastering complexity leads to good margins and visibility - Lower average profitability - Delivery risks 2008 Capgemini. All rights reserved 9

10 North America UK & Ireland France Benelux Rest of Europe / Asia Main geographies and sectors % of 2007 revenues 19.8% 25.6% 22.6% 13.4% 18.6% 2007 organic growth +9.4% +4.4% +8.6% +11.7% +13.9% 2007 operating margin* 6.5% 6.8% 4.4% 15.0% 10.7% Manufacturing, Retail & Distribution Telecom, Media & Networks 27,8% 9,3% 25,9% 13,1% 16,9% 7,0% Energy & Utilities Financial Other Public Sector * Before corporate costs 2008 Capgemini. All rights reserved 10

11 Contents Capgemini new trends at work 2007, 2008 and beyond 2008 Capgemini. All rights reserved 11

12 Trend #1 Offshore The cost advantage started the whole thing It has narrowed marginally but in no way disappeared Scarcity of resources will keep momentum intact India remains the destination of choice The competitive landscape reflects the new shape of our industry Growth (%) Capgemini Logica Accenture EDS CSC IBM ATOSOrigin 5% Source: Gartner IT Worldwide Market Metrics Database, April 2007 Tata Satyam Infosys Wipro Patni Operating margin (%) 2008 Capgemini. All rights reserved 12

13 The trend is clear, the only doubt is on timing In North America, onshore has become the exception UK is barely lagging behind The Nordic countries were surprisingly fast to adopt offshore, the lack of available resources a clear catalyst The Netherlands are next followed by Germany and the rest of Europe In some cases, other offshore locations make sense as cultural proximity compensates for marginally higher costs (LatAm for Iberia or North Africa for France) 2008 Capgemini. All rights reserved 13

14 To compete, a sub-contracting model is not enough Global OS TS UK Krakow FS BU TS NL TS FR TS ESP TS NA Casablanca Mumbai Kolkata Pune Hyderabad Bangalore Chennai Buenos aires Sub contracting Strong interface Seamless Fully integrated Partial workload sub-contracted offshore Strong offshore interface to support onshore added-value services Offshore P&L integrated with onshore BU. Onshore industrialization Fully-leveraged model with shared responsibilities 2008 Capgemini. All rights reserved 14

15 Trend #2 increased complexity Distributed delivery is not the only needed skill Transformational outsourcing is the best example of the new client requirements While a traditional outsourcing capacity is still required, it must be complemented by the analytical skills specific to consulting to analyse required changes, and those of high end system integration to realise the new system Business Process Outsourcing is another domain where multiple skills are required Capgemini. All rights reserved 15

16 Trend #3 Open source is here to stay, SAAS still a question mark Open source is becoming an increasing part of the landscape It is not so much replacing packaged applications than complementing them in much more open environments. Software As A Service grabs nice headlines, but its impact remains marginal A move from the licence model to a subscription based one would have limited impact on services, and could even increase change of suppliers The real risk would be clients sacrificing customisation for lower costs: we don t see any sign of such a trend! 2008 Capgemini. All rights reserved 16

17 Contents Capgemini new trends at work 2007, 2008 and beyond 2008 Capgemini. All rights reserved 17

18 In 2007 we moved further ahead Constant growth in revenues and margin over the past 4 years leading to a good 2007 performance Revenue +40% +43% 640 (7.4%) 447 (5.8%) 293 (3.8%) +50% 440 (5.1%) Revenue (in M ) Operating Margin Operating margin 8.6% Operating margin (value and % of revenues) Net result (value and % of revenues) H1 04 H2 04 H1 05 H2 05 H1 06 H2 06 H1 07 H2 07 Net cash 889 M Dividend 1 (+ 43%) 2008 Capgemini. All rights reserved 18

19 while building the base of a global delivery model Offshore X8 over the last 4 years % % Total offshore % (+64% organic) India % (+70% organic) Poland % Rest of the world * % Total onshore % (+4.2% organic) FY 04 FY 05 FY 06 FY 07 Offshore ratio 24% in 2007 (13% in 2006) Exc. Sogeti and CS 33% in 07 (20% in 06) Offshore Onshore Over 380 clients served from India * : China, Morocco, Argentina, Brazil Numbers are important, but the real competitive advantage will be gained by moving to an integrated model 2008 Capgemini. All rights reserved 19

20 Public sector and outsourcing increase the Group s resilience Public sector revenue in billion euros & % of total revenues Outsourcing revenue in billion euros & % of total revenues % 36,6% % % Figures excluding Sogeti Overall, close to 60% of revenues are repeatable 2008 Capgemini. All rights reserved 20

21 We set ourselves ambitious goals for 2008 Revenues should grow from 2% to 5% organically This takes into account a flattish Outsourcing as the HMRC contract decreases from its peak level of 2007 We are yet to see any clear sign of a slowdown, but considering the macro environment it could well happen in some regions in H2. This could draw us to the lower end of the range Wild currency movements should lead to a lower reported growth, if any Operating margin will reach 8.5% in any case We will accelerate the Group s transformation if need be 2008 Capgemini. All rights reserved 21

22 Headcount growth will now be mostly offshore Net staff onshore increase / total net staff increase Technology Outsourcing Sogeti 18% Onshore decrease 78% Units using integrated P&L models Units using internal rate cards Zoom on Technology Telecom media France UK North America BPO Financial Iberia decrease flat 10% 3% 8% 24% 45% 2008 Capgemini. All rights reserved 22

23 Q1 was solid and perfectly in line with our targets Q1 08 / Q1 07 Consulting Technology Local Professional CS / TS / LPS Outsourcing 3.7% 2.1% 9.0% 4.1% 2.9% TOTAL GROUP * Q1 organic growth excluding HMRC was 6.8% Easter in Q1 impact is 1.3% at Group level At constant rates and perimeter 3.7%* North America France UK & Ireland Benelux Rest of Europe & Asia TOTAL Q Q1 08 / Q % 5.3% -4.5% 7.6% 7.2% 3.7% 2008 Capgemini. All rights reserved 23

24 Utilisation down sequentially but improving through the quarter 90 Consulting Technology Local Professional Q1 Q2 Q Q4 Q Q1 Q2 Q Q4 Q Q1 Q Q3 Q4 Q At constant rates and perimeter 2008 Capgemini. All rights reserved 24

25 Charge-out rates up at Sogeti and reflect offshore ramp-up in TS Consulting At constant rates and perimeter Local Professional 600 Technology Capgemini. All rights reserved 25

26 Bookings up 10% yoy and a 1.13 book to bill in CS/TS/LPS M Outsourcing Consulting/Technology/Local Professional Svces At constant rates & perimeter 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Consulting / Technology / Local Professional Bookings Revenues Book-to-bill ratio North America Rest of the world TOTAL Capgemini. All rights reserved 26

27 In summary We are in good shape and expect further progress Our industry is experiencing deep changes and we are ahead of the game As everyone, we see some clouds shaping on the (macro) horizon, but we are still to see any impact on our business While we remain sensitive to cycles, we have been working on our portfolio of activities and are much less fragile than in the past The evolution toward an integrated business model remains the best way to handle any market slowdown 2008 Capgemini. All rights reserved 27

28 Credit Suisse 2008 Euro Tech Conference Manuel Chaves d Oliveira, Director of Investor Relations