GFI to pull out of Northern Europe
Published:17-March-2005
By BR staff writer
Shares in IT services vendor GFI Informatique fell 7.4% to 5.24 euros on the Paris Bourse after it announced it is pulling out of Northern Europe in order to improve its profitability.
However, chief executive and chairman Jacques Tordjman told ComputerWire he has no plans to sell the company outright, despite growing interest in the French IT services market from large international outsourcing vendors.
He said: "My objective is to return this company to where it was two years ago, when we were one of the 10 largest European services companies... I have lots of people contacting me [about buying GFI out], but it is not what I want to do for the time being."
French automaker Renault's decision to award $790m in IT outsourcing contracts last week has sparked interest from the vendor community in what has traditionally been an outsourcing-averse country.
Tordjman said: "There are clear signs that French companies, including government agencies, are becoming more mature in their use of outsourcing." He said GFI signed an 18m euro ($24m) outsourcing contract with an unnamed French insurance company earlier this week.
In the 12 months ending December 31, 2004, GFI made a net loss of 27.2m euros ($36.2m) compared to a profit of 1.5m euros ($2m) the previous year, on revenue that grew 3.6% to 517.9m euros ($689m).
GFI was hit with goodwill amortization charges of 29.8m euros ($40m) last year, but there was also a significant downturn in its performance at an operating level, making a loss before interest and tax of 7.3m euros ($9.7m) compared to a year-ago gain of 17.1m euros ($22.8m).
Tordjman, who owns 10% of the company, told ComputerWire he is looking for buyers for the company's operations in Germany, the UK, Benelux, and Switzerland, which between them accounted for 40m euros ($54m) in 2004 sales, or 7.7% of the group total. The units are likely to be sold piecemeal to a number of suitors as their activities differ from country to country.
GFI will aim to replace this revenue with further acquisitions in France, Portugal, and Spain, according to Tordjman. Two years ago, GFI attempted to purchase domestic rival Thales IS, but failed because of financing difficulties. However, he predicts there will be no mergers between France's second-tier group of IT services suppliers, into which GFI falls.
"The French services market is unique because the companies ar erun by entrepreneurs," said Tordjman. "I believe that GFI, Unilog, Sopra, and Steria will never merge because of the differences in management style and business culture."
Based on 2004 sales, GFI ranks as the sixth largest vendor in France, behind market leaders Capgemini and Atos Origin.
