2005 Financial Report - Capgemini

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30 ANNUAL THE GROUP Capgemini and improving: • video/telephone conferencing and other collaborative working tools; • virtual and flexible working. Where possible, employees are expected to use public transport or, for example, special company bus services, in preference to private transport. 2005 saw a decrease in travel expenses per head of over 6%. Local initiatives include: • in the Dutch practice, employees are given a rail card as an incentive to use public transport instead of company cars; • in the UK a number of sites have car share, site buses and bicycle racks and facilities. The travel and expenses policy also allows staff to claim mileage for use of a motorcycle or bicycle; • in India, a Capgemini bus commuting system was set up for employees to reduce pollution from car exhausts; • in Central Europe, employees are encouraged to car pool and to use diesel-run company cars or rental cars; • in Sweden, train rather than air travel is encouraged wherever feasible. Environmental indicators In 2004 the Group first consolidated a set of data to better understand the environmental impact caused by Capgemini’s power consumption, office space and the type of equipment used. At the end of 2005, Capgemini had 383 sites covering just under 800,000 square meters. This represents a reduction in total surfaces by about 8% since 2004 while end of year employee numbers increased by 3%. Equating to fewer square meters per person, the company expects as a result to save some energy consumption (air conditioning, heating, etc). The buildings are mostly rented and many have been recently renovated with the majority being air-conditioned. Whilst a survey was carried out on power consumption by Capgemini’s sites, for many locations this information is included in overall maintenance charges and is not provided separately by the owner. Calculations for kWh per square meter are therefore estimates only, and based on survey returns for 56% of the total surface area of facilities, average out at 248.5 kWh per square meter. A number of regions have started to record their paper consumption and based on survey returns for 62% of the surface area of facilities, an estimated annual average of around 16kg per person was used. Most regions actively recycle paper. 6.7 The Corporate Social Responsibility external offering In 2005, the Group has been steadily developing its expertise in offering support and experience to clients in the com- REPORT 2005 Capgemini plex issues of Corporate Social Responsibility. Differentiated from its competitors, since 2001 Capgemini’s offering, “Becoming Sustainable”, not only looks at the development of sustainable CSR strategies but also leads clients through the comprehensive process of implementation. Capgemini’s expertise includes: • designing sustainable development strategies and supporting implementation; • designing and deploying sustainable products; • assessing necessary changes based on existing regulations or forecast changes; • building reporting tools to better grasp what is at stake and monitor progress; • tailoring risk-management policies; • raising awareness of sustainable development through diagnostics and training. In providing these services, the Group leverages: • a strong local and international industry knowledge, providing in-depth understanding of the issues at play and of developments in value-creation models; • a holistic approach to sustainable development issues, that includes the economic and financial dimension; • a global network of experts – “The Capgemini Sustainability Community”; • active involvement in independent institutions, such as France’s Collège des Hautes Etudes de l’Environnement et du Développement Durable and the Centre de Recherche sur le Développement Durable at the Reims Management School; • experience in organizing events such as seminars and conferences. In 2005 Capgemini carried out very tangible assignments with its clients to create practical and implementable CSR improvements. Highlights include: • helping the Purchasing Department of Renault-Nissan to define its sustainability strategy and run its environmental and social projects through the supply chain; • defining and implementing a group-wide HSE (Hygiene, Security and Environment) and sustainability reporting tool for a multinational glass and construction materials company. 2006 will see an increase of internal programs and client projects with CSR and sustainability benefits and will be reflected into Capgemini’s main service offers where relevant. VII – RISK ANALYSIS 7.1 Market risks 7.1.1 Counterparty risk The financial assets which could potentially give rise to counterparty risk essentially consist of financial investments. These investments mainly comprise money market securi-
ties managed by leading financial institutions and, to a lesser degree, negotiable debt instruments issued by companies or financial institutions with a high credit rating from a recognized rating agency. There is therefore no significant counterparty risk for the Group on these short-term investments. Moreover, in line with its policy for managing currency and interest rate risks (see below), Capgemini enters into hedging agreements with leading financial institutions; counterparty risk can therefore be deemed negligible. 7.1.2 Liquidity risk The principal financial liabilities whose early repayment could expose the Group to liquidity risk are the two convertible bonds mentioned above (OCEANE 2003 and OCEANE 2005) and the E500 million multicurrency syndicated line of credit renewed on November 14, 2005 for five years. The OCEANE documentation contains the usual provisions relating to early repayment at the initiative of bondholders in the event of pre-defined occurrences. The documentation relating to the syndicated line of credit stipulates, in addition to the usual early repayment events in this type of agreement, the obligation for Cap Gemini to comply with certain financial ratios. This obligation had been complied with as of December 31, 2005. It is also stipulated that a change in the credit rating attributed to Capgemini by Standard & Poor’s would not affect the availability of these sources of financing and would therefore not expose the Group to liquidity risk. However, the cost of financing of the syndicated line of credit could be increased or decreased. 7.1.3 Interest rate risk Cap Gemini’s exposure to interest rate risk can be analyzed in terms of (i) its cash position: as of December 31, 2005 the Group had €2,136 million in liquid assets invested at market rates compared to gross borrowing of €1,232 million and (ii) the Group’s conservative policy with respect to management of interest rate risk: the uncapped variable portion of gross borrowing represented only 7% (capped and uncapped variable rate debt combined accounted for 41% of the total). As a consequence, an increase in interest rates would have a negligible (and possibly positive) impact on Capgemini's net finance costs. Conversely, a low interest rate environment (below 2%) would expose the Group to an increase in its net finance costs. 7.1.4 Currency risk Capgemini’s exposure to currency risk is low due to the fact that the bulk of its revenue is generated in countries where operating expenses are also incurred. However, the growing use of offshore production centers in Poland, India and China exposes Capgemini to currency risk with respect to a portion of its delivery costs. The amounts in question are still relatively immaterial but given that this trend is set to increase in the future, Capgemini has already defined and implemented a global policy to minimize exposure to exchange rate fluctuations and to manage the resulting risk, particularly through systematic hedging of the corresponding intercompany flows. These hedges mainly take the form of forward purchases and sales of currency. 7.1.5 Financial instruments Financial instruments are used in particular to hedge interest rate and currency risks. All hedging positions relate to existing assets or liabilities and/or business or financial transactions. Gains and losses on financial instruments – designated as hedges - are recognized on a symmetrical basis with the loss or gain on the hedged items. The fair value of financial instruments is estimated based on market prices or data supplied by banks. 7.1.6 Legal risks The Group’s activities are not regulated and consequently do not require any specific legal, administrative or regulatory authorization. In the case of some services, such as outsourcing or specific projects carried out for clients who are subject to specific regulations, the Group itself may be required to comply with those regulations. The Group is not aware of any litigation or claims that are liable to have, or that have had in the last twelve months, a material impact on its operations, financial position or future prospects, other than those recognized in the financial statements or disclosed in the notes thereto. 7.2 Risks related to operations Capgemini is a service-provider. The main risks to which the Group is exposed are (i) failure to deliver the services to which it has committed, or (ii) failure, especially in the case of fixed-price contracts, to deliver services within the contractual time-frame to the required level of quality and within the initial budget. Preventative and control procedures are in place, from initial commitment to final project acceptance by the client. Other risks not directly associated with project execution are less predictable. Project Execution Contracts are subject to a formal approval procedure prior to signature, involving a legal review and an assessment of the risks relating to the project and to the terms of execution. The authority level at which the contract is approved depends on the size, complexity and risk profile of the project. The Major Commitments Committee, which meets weekly if required, examines the most substantial commercial negotiations, proposals for strategic alliances, and contracts with specific risk exposures. Capgemini has developed a unified set of methods known ANNUAL REPORT 2005 Capgemini 31
Page 1 and 2: CONTENTS 02 Financial highlights 03
Page 3 and 4: THE CAPGEMINI GROUP I - HISTORY Fou
Page 5 and 6: gence of new players in the global
Page 7 and 8: tions and industry trends, and so o
Page 9 and 10: In fact, the requirement for banks
Page 11 and 12: Simplified organization chart for t
Page 13 and 14: and profitable growth, enabling a p
Page 15 and 16: Graduate Mobility scheme allowing g
Page 17 and 18: Chinese team members. The team is r
Page 19 and 20: Year Average headcount End of year
Page 21 and 22: In order to fine-tune its assessmen
Page 23 and 24: 6.3.5 Learning, a major priority Ge
Page 25 and 26: way dialog through its approach to
Page 27 and 28: In terms of women’s representatio
Page 29: • taking environmental impact int
Page 33 and 34: usiness interruption, arising from
Page 35 and 36: STOCK MARKET CAPITALIZATION From Ja
Page 37 and 38: MANAGEMENT REPORT PRESENTED BY THE
Page 39 and 40: - Consulting + 2.6% - Technology Se
Page 41 and 42: was more than offset by the investm
Page 43 and 44: fer of the special long-term capita
Page 45 and 46: i.e., 116% of his theoretical varia
Page 47 and 48: two convertible bonds mentioned abo
Page 49 and 50: XII - AUTHORIZATION TO BUY BACK THE
Page 51 and 52: Code, the Board of Directors inform
Page 53 and 54: some years the main corporate gover
Page 55 and 56: the list of the beneficiaries of th
Page 57 and 58: used in the Netherlands and the US,
Page 59 and 60: diarity and define three levels of
Page 61 and 62: forecasts for the next six months a
Page 63 and 64: GROUP CONSOLIDATED FINANCIAL STATEM
Page 65 and 66: CONSOLIDATED STATEMENTS OF INCOME F
Page 67 and 68: CONSOLIDATED STATEMENTS OF CASH FLO
Page 69 and 70: (1) See Note 1.K. (2) At December 3
Page 71 and 72: Intragroup transactions are elimina
Page 73 and 74: at the date of acquisition, which i
Page 75 and 76: Accounts and notes receivable Accou
Page 77 and 78: epresents a commitment to convert o
Page 79 and 80: NOTE 5~OTHER OPERATING INCOME AND E
Page 81 and 82:
NOTE 8~INCOME TAX EXPENSE Income ta
Page 83 and 84:
The Group has no contractual or imp
Page 85 and 86:
NOTE 10~INTANGIBLE ASSETS Changes i
Page 87 and 88:
NOTE 11~PROPERTY, PLANT AND EQUIPME
Page 89 and 90:
Deferred tax assets over one year p
Page 91 and 92:
Deferred tax liabilities can be ana
Page 93 and 94:
NOTE 16~OTHER RECEIVABLES At Decemb
Page 95 and 96:
usiness day) at a price of €41.90
Page 97 and 98:
cisable by the TXU group during the
Page 99 and 100:
B) Fair values At December 31 (in m
Page 101 and 102:
NOTE 20~PROVISIONS FOR PENSIONS AND
Page 103 and 104:
The total relating to other employe
Page 105 and 106:
NOTE 23~ACCOUNTS AND NOTES PAYABLE
Page 107 and 108:
Under IFRS, the sale of carry-back
Page 109 and 110:
B) Analysis of depreciation, amorti
Page 111 and 112:
II. SEGMENT REPORTING BY BUSINESS S
Page 113 and 114:
NOTE 30~LIST OF CONSOLIDATED COMPAN
Page 115 and 116:
Country Consolidated % interest Con
Page 117 and 118:
III. RECONCILIATIONS BETWEEN THE FR
Page 119 and 120:
C) Reconciliation between French GA
Page 121 and 122:
E) Reconciliation between French GA
Page 123 and 124:
G) Reconciliation between French GA
Page 125 and 126:
I) Analysis of IFRS transition rela
Page 127 and 128:
equity in the IFRS balance sheet at
Page 129 and 130:
effective interest rate to the carr
Page 131 and 132:
SUBSIDIARIES AND INVESTMENTS in mil
Page 133 and 134:
STATUTORY AUDITORS’ SPECIAL REPOR
Page 135 and 136:
ment for contributions in kind and
Page 137 and 138:
TEXT OF THE DRAFT RESOLUTIONS PROPO
Page 139 and 140:
the date hereof, for a term of two
Page 141 and 142:
issuance costs against the related
Page 143 and 144:
the Statutory Auditors, the General
Page 145 and 146:
Appropriation and distribution of e
Page 147 and 148:
Proposed renewals to financial auth
Page 149 and 150:
exchange offer to acquire all of th
Page 151 and 152:
Current ownership structure The own
Page 153 and 154:
List of Directorships and other off
Page 155 and 156:
FIRST OFFICES HELD IN 2005 OTHER OF
Page 157 and 158:
DIRECTORS’ INTERESTS This informa
Page 159 and 160:
DECLARATION BY THE PERSON RESPONSIB
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2005 Financial Report - Capgemini

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