UPDATE: Capgemini Shares Surge On Raised Full-Year Guidance
29 Juli 2010 - 11:46AM
Dow Jones News
Shares in French IT services group Capgemini SA (CAP.FR) soared
Thursday after the group raised its full-year outlook and posted
better-than-expected first half results as IT services markets
continue to improve.
At 0854 GMT, the company's shares were trading up 6.7% at
EUR36.15, outperforming a 0.5% rise in the CAC-40 index, as
analysts welcomed the first-half results and were positively
surprised by the raised guidance.
Paris-based Capgemini, Europe's largest computer services
company, said it now expects full-year like-for-like revenue to
drop between 0.5% and 1.5%, compared to its previous forecast for a
drop of between 2% and 4%.
For the second half, the group said it expects like-for-like
revenue to grow between 3% and 5%.
Capgemini also edged up its full-year margin target as markets
are expected to continue improving. It said its earnings before
interest and tax, or EBIT, margin should exceed 6.5% this year
compared to previous guidance of between 6% and 6.5%.
"Even though the effects of the crisis haven't completely
vanished yet, we are observing a clear improvement...we are
returning to growth," Capgemini Chief Executive Paul Hermelin said
in a conference call.
The CEO said that the level of bookings also suggests the
improvement will continue in the second half of the year.
Bookings rose 14% on a like-for-like basis in the first half,
with outsourcing recording the greatest increase.
The group's book to bill ratio - the ratio of orders received to
orders filled - was 1.17 in the first half for its three cyclical
activities of consulting, technology and local professional
services.
Along with rivals Atos Origin (ATO.FR) and U.K.-based Logica PLC
(LOG.LN), the company has faced tough market conditions since last
year, as big customers delayed investment and purchasing plans amid
the financial and economic crisis. But there have been signs of
recovery in orders since the start of the year as clients have a
renewed appetite to invest in new projects.
Atos Origin Wednesday said it expects revenue to stabilize in
the second half as markets will improve progressively.
Still, worries about public sector budget cuts have weighed on
Capgemini shares and caused Atos shares to drop sharply Wednesday
after the group said it would cut staff in the U.K. to prepare for
an anticipated slowdown in U.K. public sector spending.
Hermelin said that Capgemini had already felt the first signs of
a slowdown in cyclical activities in the UK public sector, notably
in consulting, but that in the medium-term, the government's
spending cut will be an opportunity to win new contracts that will
help the government save costs.
Capgemini's net profit for the first six months of the year rose
2.4% to EUR101 million, from EUR78 million last year, above
expectations of EUR85.3 million.
Earnings before interest and tax fell to EUR245 million from
EUR287 million last year, but beat analysts expectations of EUR226
million. This gave the company an EBIT margin of 5.8%.
Revenue in the first half fell 3.8% to EUR4.21 billion from
EUR4.38 billion in the same period a year ago, also ahead of
analysts' forecasts of EUR4.08 billion.
On a like-for-like basis, which strips out acquisitions,
disposals, and currency movements, revenue fell 6.1% in the first
six months of the year.
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54;
ruth.bender@dowjones.com
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