ubs - french equity conference - capgemini · ubs - french equity conference paris, 27 march 2006...

UBS - French Equity Conference

Paris, 27 March 2006

Paul Hermelin, CEO

12005 Annual Results

In 2005, Capgemini got back into the race1. Capgemini won market share

Q1 + 20.3%Q2 + 22.1%Q3 + 9.8%Q4 + 9.6%FY + 15.0%

Organic growth

2005/2004

3. Capgemini returned to profit

2. Capgemini has significantly improved operating performance

-4420

62

163

H1 2004 H2 2004 H1 2005 H2 2005

-1.5%

-600

-500

-400

-300

-200

-100

0

100

200

300

Operating margin

2004 2005

-534

+141

-24

+225

Net Income +675 ME

Operating margin+3,6 pt

4. Capgemini achieved its major goals

1 Consolidate Project & Consulting European recovery

2 Accelerate the North American turnaround

3 Drive sustainable, profitable growth in outsourcing

4 Change gears in RightshoreTM

+0.6%+1.8%

+4.7%


M€FY 2004IFRS restated

H1 2005 H2 2005 FY 2005FY 2005

vsFY 2004

Operating Revenue 6 235 3 472 3 482 6 954-6 729

2253.2%

175-186214-38

-35141904

61,036

+11.5%*Operating expenses -6 259 -3 410 -3 319Operating Margin -24 62 163(% Op. Revenue) -0.4% 1.8% 4.7% +3.6 ptOther operating Income 6 143 32Other operating expense -263 -82 -104Operating income -281 123 91Financial Interest Income & Expenses, net

-27 -9 -29

Income tax expense -226 -56 21Profit/(Loss) for the period -534 58 83Net cash and cash equivalents 285 498 904 +618Number of employees (end of period) 59,324 59,190 61,036

(*)+15% organic

Strong growth & margin improvement


In 2005, Capgemini won market share

RightshoreTM

US presenceAlliances

“From consulting to outsourcing & Business Process Outsourcing”

Transformation capabilityFront-office

Collaborative Business Experience“decentralization and entrepreneurship”

Due to our unique position… ...These clients trusted us in 2005

Le chiffre d’affaire du groupe progresse de +15%Toutes nos activités sont en croissance

Versus European competitors

Versus global Tech competitors

Versus Indian Pure Play competitors

Versus other leadersIn the sector

Group revenues are up +15%All our businesses are growing

http://www.steelcase.com/na/


Revenues Current Organic

Q3 05 Q4 05

332 336

1 472

442

447259

114

113

57

23

17

TOTAL 1 674 1 808 8.0% 7.4% 7.3% 9.6%

1 343

432

393228

114

87

50

20

18

Sequential Year on Year Sequential Year on Year

North America1.3% 3.2% -1.7% 4.9%

Europe & Asiaof which :

9.6% 8.4% 9.6% 10.8%

UK & Ireland 2.2% 17.5% 1.7% 15.6%

France 13.7% 12.5% 13.9% 12.5%

Benelux 13.7% 9.1% 13.7% 9.1%

Central Europe 0.3% -11.7% -0.3% 5.6%

Nordic 29.3% -3.9% 29.7% 5.0%

Iberia 15.0% 9.7% 15.0% 9.7%

Italy 14.0% -9.6% 14.0% -9.6%

Asia Pacific -6.4% -23.9% -0.1% -10.3%

Q4: Current & organic growth by geography


Q4 05 / Q3 05 Q4 05 / Q4 04Consulting Services 13.1% 8.2%Technology Services 10.9% 10.5%Professional Services 11.3% 7.4%Project & Consulting 11.4% 9.2%

Outsourcing Services 0.7% 10.4%TOTAL GROUP 7.3% 9.6%

CS/TS Revenues related to mega deals recorded in Outsourcing

Q4 05 / Q3 05 Q4 05 / Q4 04Consulting Services 12.7% 7.4%Technology Services 11.4% 23.3%Professional Services 11.3% 7.4%Project & Consulting 11.7% 15.9%

Outsourcing Services -1.8% -2.8%TOTAL GROUP 7.3% 9.6%

CS/TS Revenues related to mega deals reclassified in CS/TS

Q4: Growth by discipline –Outsourcing is still a growth provider for P&C


In 2005, Capgemini returned to profit

Project & Consulting Europe

TOTAL US

Incl. Consulting & Technology services US

Outsourcing

Operating Margin

European P&C levels of profitability are in line with our peersNorth America profitable in H2 2005 Outsourcing on a strong improvement trend, accelerated by MAP

Group Operating margin

Net Income (M€)

3.4% (e)

- 8.0%-11.9% (e)

- 2.0%

8.7%2.8%

- 0.8%1.5%

2004

6.3%- 6.6%-8.2%- 1.2%

H1 2005 H2 2005

- 0.4% 1.8% 4.7%

-534 +58 +83

+141


M€

Outsourcing 1 267.1 -14.9 -1.2% 1 340.3 19.4 1.5%Group OPERATIONS 3 471.5 80.1 2.3% 3 482.2 183.9 5.3%

Corporate -18.4 -20.6TOTAL 3 472 62 1.8% 3 482 163 4.7%

Consulting / Technology servicesOutsourcing

Sogeti US

TOTALProject & ConsultingOutsourcingTOTALProject & Consulting

H1 2005 H2 2005

Op. Margin % Revenue Op. Margin %

-1.9 -0.8%

3.6%11.0%2.8%8.7%0.7%5.9%7.7%

12.38.7

19.1157.7

7.1164.8

-8.2%

164.4

249.5

339.778.8

668.01 813.61 000.62 814.22 141.9

-8.2%9.0%

-6.6%6.3%1.1%4.5%4.3%

-25.8

-25.15.9

-45.0115.010.2

125.295.0

Revenue

314.2

305.665.2

685.01 825961.5

2 786.5

NorthAmerica

Europe

2 204.4Row

&

2005: Europe P&C close to industry standards –even at the operating margin level, CS/TS NA close to breakeven in H2


FY 2004 H1 2005 H2 2005 FY 2005Consulting Services 1.1%

-2.0%Professional Services 7.8% 8.0% 10.2% 9.1%Project & Consulting 1.1% 4.3% 7.6% 6.0%

-2.0%-0.4%

4.5%Technology Services

7.4%1.8%3.7% 5.1%

-1.2%

6.5%

1.8%1.5%4.7%

Outsourcing Services 0.1%TOTAL GROUP 3.2%

CS/TS Revenues related to megadeals recorded in Outsourcing

All disciplines contribute to margins improvement


In 2005, Capgemini achieved its major goals

1 Consolidate Project & Consulting European recovery

These businesses have begun a new expansion cycleA few lead indicators point the way forward

Top performers (Divisional Margin)

(%)

123456789

Sd&MSogeti NetherlandsTME C4France CSPortugal Sogeti SwedenFrance TS WestSogeti BeluxNetherlands CS/TS

18.417.014.512.111.611.411.010.910.9

Best operational swings

-10

-5

0

5

10

15FR CS+TS NL CS+TS UK CS+TS Norway Finland Denmark Italy Spain

2004 Divisional margin

+7,2 +4,6 +5,5 +8 +10,1 +4,7+3,7 +4,7

2005 Division margin



2 Accelerate US turnaround

Turnaround plan has delivered above forecastTurnaround will be confirmed during H1 2006

Sales Performance

P&C bookings H2 2005 : + 5% vs. H2 2004+ 3% vs. H1 2005

P&C bookings Q4 2005 : + 10% vs. Q4 2004

Return to profitUS Operating margin : + 2.8% en H2 2005 vs. - 8% in 2004TS & CS Operating margin close to breakeven

Lower Attrition

Headcount : 3,200 in Dec. 05 vs. 2,900 in July 05Stabilize onshore headcountDouble offshore headcountStabilize attrition rate at around 25%

Operating Efficiency

Pipeline P&C > $ 1BnOverruns : - 50% vs. 2004

2% of revenues in Q4 2005


In 2005, these clients trust us in North America

http://www.timewarner.com/corp/index.html

http://www.timewarner.com/corp/index.html

http://www.gm.com/

http://www.conocophillips.com/

http://www.lowes.com/lowes/lkn?action=home&lks=loweslogo

http://www.circuitcity.com/ccd/home.do



3 Drive sustainable, profitable growth in outsourcing

Over 15% of outsourcing work mobilizes skills from CS and TS businessesMAP launched to accelerate outsourcing profitability

Mega Deals

HMRC

Business Process Outsourcing / Application Mgt / Infrastructure Mgt

significant additional work2 millions (+40%) online assessment as of 31/01/06

TXU

Schneider

18 months ahead of schedule1,400 Rightshore seatsMeasured client satisfaction (99%)

BPO breakthrough in Finance & Administration

Rebalanced portfolio (19 new deals between € 10-50M)

Growth of AM vs. IM

Strong commercial drive :

GM : € 498M

Metropolitan Police : € 503M

Swansea : € 91 M

Zurich : € 41 M

Successful transition (31countries)Global Core System production delayed by 6 months / one year


€ 50 - 250M

€ 10 - 50M

In 2005, these clients trusted Capgemini for outsourcing

> € 250M

http://www.zurich.com/main/

http://www.lr.org/code/home.htm

http://www.steelcase.com/na/

http://www.maetis.nl/Internet/

http://www.uwv.nl/

http://www.internationalpaper.com/index.html


M€FY 2004IFRS restated

H1 2005 H2 2005 FY 2005FY 2005

vsFY 2004

Operating Revenue 6 235 3 472 3 482 6 954-6 729

2253.2%

175-186214-38

-35141904

61,036

+11.5%*Operating expenses -6 259 -3 410 -3 319Operating Margin -24 62 163(% Op. Revenue) -0.4% 1.8% 4.7% +3.6 ptOther operating Income 6 143 32Other operating expense -263 -82 -104Operating income -281 123 91Financial Interest Income & Expenses, net

-27 -9 -29

Income tax expense -226 -56 21Profit/(Loss) for the period -534 58 83Net cash and cash equivalents 285 498 904 +618Number of employees (end of period) 59,324 59,190 61,036

(*)+15% organic

Strong growth & margin improvement


ASSETS Dec. 31,2004

Dec. 31, 2005 LIABILITIES Dec. 31,

2004Dec. 31,

2005Intangible Assets 1 963 1 951 Total equity 2 788 2 992Property plant & equipment 449 399

Financial assets 64 48Deferred tax assets & long term receivables 899 938

Provisions for pensions & other post employment benefits

426 448

Total non-currentassets 3 375 3 336 Other non current

liabilities 259 273

Accounts & notes receivables 1 814 1 868 Total non-current

liabilities 1 453 1 866

Other receivables & assets held for sale 195 180 Accounts & notes

payable 2 082 2 490Financial receivables & short-term investments 1 001 1 805 Other current

liabilities 313 257

Cash 251 416

Total Assets 6 636 7 605 Total Liabilities 6 636 7 605

Long-term debt 768 1 145

Balance Sheet


285

225

228

277

-92

-193

-129

-69-36

-45 46

201

23

687

194

904

Net Cash as of

1.1.2005 IFRS

2005 Op. Margin

2005 Amortization & Provisions

2005 Bonuses part not

paid

2005 CAPEX

Payment of 2004

Bonuses

Payment of prior years

restructuring

Payment of 2005

restructuring

Payment of Income

Tax

Payment financial assets & expenses

Improvement debtors days

Increase of accounts payable/

Improvement creditors

days

Other

Net cash before

disposals as of

31.12.2005

Cash from disposals of

activities

Net cash as of

31.12.2005

-11

A strong focus on cash has delivered excellent results

Cash from disposals

of Behoust


In 2005, Capgemini set out its future1. Launch of the MAP initiative 2. Doubled ‘RightshoreTM’ Capability

4. Capgemini has adapted to new demand in the market3. Capgemini recruited and

invested in training

2005

Div

isio

n M

argi

n

2%

8%

Jan 2005 Feb 2006

Indi

an h

eadc

ount

2000

4000

14,500 new hires

1.7 M training hours

2006

4%

Service Oriented ArchitectureRightshoreTM EuropeBPO Finance & Administration3rd Generation ERP…


In 2005, Capgemini launched the MAP initiative

Revenues

Production costs

Business Mix

Re-negotiation

Purchasing

Rightshore

Rationalization

General Expenses Support Function

TBD

0.5%

1 – 1.5%

1.5 – 2%

1 – 1.5%

1 – 1.5%

Impact on Op. MarginLevers

MAP in implementation phase since Dec. 2005Goal: divisional operating margin of 4% in 2006

Project : Governance structure in place Full time team of 14 people (OS+CS)

RationalizationNew organization in Service Line (Europe, US, BPO)Sale of hardware maintenance business France to Unisys

PurchasingGood start to the Cap 30 program

Rightshore : Growth led in 2006 by GM and Eli Lilly

Re-negotiation3 contracts currently under re-negotiation in Q1 2006

Support Functions:Closure of site in UK and NetherlandsBPO of F&A functions


In 2005 Capgemini increased “RightshoreTM” capability

Capgemini is the leading European company in offshoreTarget is to have 10,000 people in India by 2007

India

China

Poland

Spain

France

2,050

200

350

150

300

Headcount ‘04Country Headcount ‘05 Type

3,550

400

750

300

450

Offshore TS/OS/BPO

Offshore BPO

Nearshore BPO/OS

Nearshore OS

Local TS/OS

+80%

50% of offshore staff works for Europe

Outlook 2006Open Calcutta site (with BPO)Create a second site in Krakow (Poland) Oviedo gets stronger (Spain )Opening of Capgemini University in IndiaAccelerate on-campus recruitment at Indian universities


Recruitment

Training

Skills Management

14,500 new hires

700 new colleagues integrated through outsourcing

1,7 M training hours delivered in 2005 (+15%) 4,000 people had access to training leading to qualification :

• Project management• Architecture• Consulting and transformation• Program engineer

Control retention : Attrition stable at 15 %

Improved management of fast track talent/high performers

France

Europe (excl. FR)

NA

India

APAC

4,000

6,200

1,550

2,150

600

HiresCountry

In 2005, Capgemini recruited and invested in training


• Global delivery

• 3rd Generation OS

• BPO and Application Outsourcing

• Dynamic management of offerings / SOA

• Stronger sectors

• Develop business consultancy & transformational outsourcing

Growth

Cost Control

• Innovation

• Business value

• Transformation

Client needs Capgemini

• RightshoreTM

• Focus

• Business Mix

In 2005, Capgemini adapted to new market demands


2006 Priorities

Focus on adding value to clients• Invest in innovation (SOA, 3rd generation ERP

Business Intelligence…) and competencies • Develop sector approach and improve portfolio

management• Grow RightshoreTM capability

Confirm North American turnaround

Implement MAP initiative• Develop BPO and Application Management• Target divisional margin of 4% in 2006

1

2

3



Paul Hermelin, CEO



Back-up slides


2004 restated for IFRS impact

H1 2004 Q3 2004 Q4 2004 H2 2004 FY 2004 Q1 2005 Q2 2005 H1 2005 Q3 2005 Q4 2005 H2 2005 FY 2005

3 482 6 954

11.5%

15.0%

11.5%

15.0%

0.3%

0.7%

6.5%

9.7%

1 808

8.0%

7.3%

7.4%

9.6%

1 674

- 5.1%

5.5%

1.708

1.5%

M€ (Published) 2.965 1.587 1.683 3.270 6.235

15.8%

3 4721 764

3.3%Sequential Current Growth 6.5% 6.1% 10.3%

18.3%

Sequential Organic Growth 11.6%

6.2%

9.0%

Year-on-Year Current Growth 17.1%

21.6%Year-on-Year Organic Growth

Revenue quarterly evolution in M€

1474 14911587

1683 1708 1764 16741808

0200400600800

100012001400160018002000

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

Sustained growth throughout the year


Revenues Year on Year

FY 04 FY 05 Current Organic

5.2%

17.6%

36.1%12.6%11.5%

9.2%

15.7%5.5%

-0.9%-13.1%

North America 1 351

15.0%

0.2%Europe & Asiaof which

4 884

1 353

5 601

UK & Ireland 1 288 1 738 35.0%France 1 479 1 666 12.6%

Benelux 857 956 11.5%Central Europe 477 443 -7.1%

Nordic 391 415 6.2%Iberia 206 218 5.5%

Italy 93 92 -0.9%Asia Pacific 93 73 -21.5%

TOTAL 6 235 6 954

14.7%

11.5%

M€

2005: Current & organic growth by geography


FY 05 / FY 04Consulting Services 2.1%Technology Services 7.4%Professional Services 7.9%Project & Consulting 6.4%


CS/TS Revenues related to mega deals recorded in Outsourcing

CS/TS Revenues related to mega deals reclassified in CS/TSFY 05 / FY 04

Consulting Services 2.6%Technology Services 20.8%Professional Services 7.9%Project & Consulting 13.6%


2005: Growth by discipline


19%

26%

6%14%

6%

24%4%

1%

FY 2005

Benelux

North America

UK & Ireland

Nordic Countries

At constant rates and perimeter2004 restated for IFRS impact

21%

21%

6%14%7%

25%

5%1%

FY 2004

North America

UK & Ireland

Nordic Countries

Central Europe

France

South Europe

Asia Pacific

Benelux Central Europe

France

South Europe

Asia Pacific

Revenues by regions:UK & Ireland is now the group’s first region


15%

7%

27%11%

28%12%

19%

12%

8%20%

13%

28%

FY 2004

FY 2005Energy & Utilities

Financial Services

Other

Government

Telecom, Media & Networks

Manufacturing, Retail& Distribution

Energy & Utilities

Financial Services

Other

Government

Telecom, Media & Networks

Manufacturing, Retail& Distribution

At constant rates and perimeterexcluding Sogeti

Revenues by sector: a balanced portfolio


FY 2004

FY 2005

13%16%

33%38%

15%17%

36%32%

Consulting Services

TechnologyServices

Outsourcing Services

Professional Services

Consulting Services

TechnologyServices

Outsourcing Services

Professional Services

At constant rates and perimeter2004 restated for IFRS impact

Revenues by discipline:The Group’s rebalancing is mostly over


Bookings evolution (incl. megadeals) –A solid close to 2005

Restated for perimeter changes (North American Healthcare & Japan)

1 308

764

1 287

554

848

402 2 380

4 124

1 097

488

1 195

3 015

946

289

1 270

1 962

1 123

276

1 230

483

937

314

1 277

1 110

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

OutsourcingProjet & Consulting

M€

2 072 1 8411 250

6 504

1 585

4 210

1 235

3 232

1 3991 713

1 251

2 387


300

600

900

1200

1500

1121 1153 1150 1131 1150 1127 11361175

614 615 617 620 628 614 620 620

407 410 403 406 410 414 417 418

Consulting Services Technology Services Professional Services

Q3Q3 Q1 Q3Q1 Q3Q2 Q2 Q4Q4 Q1 Q3Q1 Q3Q2 Q2 Q4Q4 Q1


Q1 Q2 Q2 Q4Q42004 2005 2004 2005 2004 2005

Quarterly charge-out rate since 2004:prices are stable or even improving

Technology Services onshore COR is improving


50

60

70

80

90

686869

656562

6564

74 7576 76

7879 79 79

8384

86 86 85 86 86 86

Consulting Services Technology Services Professional Services

Q1 Q2 Q2 Q4Q42004 2005

Q3Q3 Q1 Q1 Q2 Q2 Q4Q42004 2005

Q3Q3 Q1Q1 Q2 Q2 Q4Q42004 2005

Q3Q3 Q1

Quarterly utilization rates since 2004: stabilized at good levels



FY 2004 H1 2005 H2 2005Op.

Margin % Revenue Op.Margin %

19 2.8%

4.4%

6.0%

12.3%

10.1%

1.9%

3.7%

4.7%

24.3%

n/a

4.7%

39

12

60

23

16

4

2

9

-21

163

668

874

200

488

227

840

107

43

35

-

-45

3 482

-6.6%

3.2%

5.5%

8.8%

5.9%

3.5%

3.5%

-1.8%

0.9%

n/a

1.8%

28

12

41

13

28

4

-1

0

-18

62

Op.Margin % Revenue

-8.0% 685

864

215

468

216

826

111

49

38

-

3 472

0.6%

0.3%

5.4%

3.1%

3.6%

0.0%

-10.8%

3.3%

n/a

-0.4%

-108

8

1

46

15

54

0

-10

3

-33

-24

FY 2005

M€ Revenue Revenue Op.Margin %

North America 1 351

1 288

391

857

477

1 479

206

93

93

-

6 235

1 353 -26 -1.9%

Italy 92 1

UK & Ireland 1 738 67 3.8%

Nordic 415 24 5.8%

Benelux 956 101 10.6%

Central Europe 443 36 8.1%

France 1 666 44 2.6%

Iberia 218 8 3.7%

Asia Pacific 73 9 12.1%

Corporate - -39 n/a

TOTAL

1.1%

6 954 225 3.2%

Operating margins by regionsAll regions profitable in H2 2005


M€ FY 2004 H1 2005 H2 20053 472 3 482

-2 67276.7%

81023.3%

-2507.2%

-39711.4%

1634.7%

-2 70575.6% 77.9% 77.3%

76722.1%

-2747.9%

-43112.4%

621.8%

FY 2005Revenue 6 235 6 954

Cost of services rendered -4 712 -5 377

Gross Margin 1 523 1 577% of Revenue 24.4% 22.7%Business Development Costs -611 -524% of Revenue 9.8% 7.6%Support Function Costs -936 -828% of Revenue 15.0% 11.9%Operating Margin -24 225% of Revenue -0.4% 3.2%

Cost structure by destination:SG&A significantly lower in a growth year


M€ FY 2004 H1 2005 H2 2005 FY 2005Revenue 6 235 3 472 3 482

-2 02858.2%

-92526.6%

-1494.3%-116

3.3%-101

2.9%-3 31995.3%

1634.7%

6 954Salarial and social charges -4 001 -2 147 -4 175% of Revenue 64.2% 61.8% 60.0%

% of Revenue 23.0% 25.4% 26.0%

% of Revenue 5.0% 4.6% 4.5%

% of Revenue 4.5% 3.6% 3.5%

% of Revenue 3.7% 2.8% 2.8%

% of Revenue 100.4% 98.2% 96.8%Operating Margin -24 62 225% of Revenue -0.4% 1.8% 3.2%

Purchases and other charges -1 437 -883 -1 808

Travel expenses -309 -160 -309

Office rents and related charges -282 -124 -240

Depreciation and Amortization -230 -96 -197

Total operating expenses -6 259 -3 410 -6 729

Cost structure by nature:megadeals drive purchases but costs are under control


in M€ FY 2004 H1 2005 H2 2005 FY 2005(534) 141

20628

(166)3536

280

(36)(32)330542(92)176(7)

619285904

232 24

Gain on disposal of assets (14) (138) (28)

Cash-Flow from operations beforeincome tax (34) 88 192

Tax paid 4 (10) (26)Change in restructuring debt 53 (27) (5)Changes in working capital 295 38 292

Opening net cash and cash equivalent 186 285 498Closing net cash and cash equivalent 285 498 904

22632

318(101)

23(141)

99

Net income 58 83Depreciation & Amortization 97 109Provisions 12 16

Income tax 56 (21)Other 3 33

Operating cash flow 89 453Capital expenditure (net) (43) (49)Net investments 150 26Translation. perimeter changes & other 17 (24)

Change in net cash and cash equivalent 213 406

Cash position


Headcount as of Jan. 1, 2005 59 324

Recruits 14 453

Acquisitions / Big Deals 712

Disposals -1 415

Layoffs -2 801

Leavers -9 237

Headcount as of Dec. 31, 2005 61 036

Headcount evolution


FY 2004 FY 2005Consulting Services 5 631 5 235

Technology Services 19 341 20 770

Outsourcing Services 16 798 16 606

Professional Services 12 969 14 048

Enabling 4 585 4 377

TOTAL 59 324 61 036

Headcount by discipline

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