IT services supplier Capgemini continued its recovery in the first half of the year, with the growth of its Indian delivery capabilities boosting its bottom line.
In the six months ended June 30, 2006, the Paris-based company increased operating profit 64.7% to 229m euros ($313m) while net profit more than doubled to 168m euros ($230m) from 71m euros ($97m) in the year-ago period.
The company’s operating margin continues to inch up, reaching 6.1% in the first half from 5.8% in full-year 2006, and it flagged up the increased sourcing of skills from India as a factor. Some 22% of the group’s 80,000 employees are now based in offshore locations, and it is aiming for a margin of 7% for 2007 as a whole.
Sales rose 16.2% to 4.4bn euros ($6bn), and by 11.5% on a constant currency and like-for-like basis. The company highlighted growth of 21.5% in the Nordic region, 13.6% in Southern Europe, and 12.5% in its recovering North American operation. The Benelux region was Capgemini’s most profitable territory with an operating margin of 14.3%, but problems persist in France where it posted a margin of only 2.5%.
Bookings were 4.2bn euros ($5.7bn), down 11% on the level of the year-ago period. New outsourcing orders totaled 1.2bn euros ($1.6bn) which included a 230m-euro ($314m) deal to lead a consortium to manage the IT infrastructure of Dutch water management body Rijkswaterstaat.
Capgemini said it is aiming to grow sales by at least 9% in 2007, which would take it up to 8.4bn euros ($11.5bn). The company’s cash resources fell 72% from the end of last year to 452m euros ($618m), due largely to the $1.25bn cost of acquiring US systems integrator Kanbay International.
Capgemini’s shares have fallen by just under 11% this week which can be partially attributed to the evaporation of the speculation that it is a takeover target for Indian services vendor Infosys Technologies, although investment analysts also said profitability had fallen slightly short of their expectations.