2005 Financial Report - Capgemini

38 ANNUAL
MANAGEMENT REPORT
Capgemini
utilization rates and an improvement in the sales prices for
these services.
France accounted for 24% of total Group revenue, making
it the second largest of the Group’s major “regions”. In 2005,
against a background of overall price stability, it posted revenue
growth of 12.6% on the back of the Schneider contract’s
startup phase despite a slowdown in Outsourcing activities
outside of the major contracts. Here again, improved general
market conditions resulted in better use of available
resources, particularly in Local Professional Services. Another
noteworthy point was the year-on-year headcount
increase of more than 1,200.
Accounting for 14% of total Group revenue, the Benelux region
recorded 11.5% growth in 2005, with an improvement in key
indicators in the Consulting, Technology and Local Professional
Services segments and a marginal slowdown in Outsourcing
Services due to several contracts expiring during the year.
The Nordic region, which accounts for 6% of total Group
revenue, also witnessed an upsurge, climbing 15.7% likefor-like
but only 6.2% based on published figures, due to
the sale of the Swedish and Norwegian infrastructure management
activities in late 2004. The recovery in the region
also paved the way for a significant improvement in staff
utilization rates, combined with a modest increase in the
sales prices of our services.
Central Europe (Germany, Switzerland, Austria and the
Eastern European countries) contributed 6% of revenue,
posting strong growth of 9.2% on a like-for-like basis,
although the sale of the Group’s interest in IS Energy led to
a 7.1% fall in revenues based on published figures. As with
the above-mentioned zones, the strong upturn in Consulting
and Technology services drove both an increase in headcount
and an improved staff utilization rate.
Southern Europe (Italy, Spain and Portugal), accounting
for 4.5% of total Group revenue, experienced a difficult year
with Spain and Portugal up a modest 5.5%, but Italian
operations in stagnation.
The Asia-Pacific region now accounts for only 1% of total
Group revenue after a 13.1% like-for-like drop in revenue
due to the completion of a major project. The disposal of
activities in Singapore, Malaysia and Japan changes this figure
to a drop of 21.5% once the currency effect and the impact
of changes in scope are added back in. In contrast, the Group’s
activity in India underwent vigorous expansion, with the
headcount leaping from less than 2,000 to over 3,500 in
REPORT 2005 Capgemini
one year. However, the full effect of this growth is not reflected
in the region’s results since India is a production center,
and revenue is recognized for the region that ordered
the services. On a related note, the Group has continued to
roll out the Rightshore strategy by developing production
centers in Poland and China, where headcounts more than
doubled in 2005.
North America, with nearly 20% of total Group revenues,
also experienced significant like-for-like growth of 5.2%
which exactly offset the reduction in the Group’s scope of
consolidation following the sale of its Healthcare activity in
June 2005. The ramp-up of the TXU contract and the solid
performance of Sogeti offset the still significant downturn
in the Consulting and Technology businesses which came
in 7.2% below the year-earlier figure. It should be noted in
this regard that the Group launched the Booster turnaround
plan at the beginning of 2005, comprising three key
initiatives:
• implementing a simplified operating structure based around
five regional entities;
• drastically cutting costs in order to achieve a significant
reduction in the breakeven point, while maintaining the
capacity to capitalize on growth; and
• refocusing management culture around the key values of
pragmatism, accountability and operating efficiency.
Implementing this plan naturally did not have an instantaneous
effect and the first half of 2005 still witnessed a
fall in its billable headcount, either through layoffs or resignations.
However, the new operating model and the determined
turnaround effort applied to this segment of Group
activities resulted in a strong recovery in sales, leading to
an improvement in the staff utilization rate and a reduction
in contract overruns. As a consequence, revenues and
orders picked up significantly in the second half, with a
notable acceleration in the fourth quarter.
b) Operations by business segment:
Outsourcing experienced marked growth of 32.9% while
the Group’s other business segments increased overall by
only 6.4%, broken down as follows:
- Consulting + 2.1%
- Technology Services + 7.4%
- Local Professional Services + 7.9%
But the real picture is somewhat different: in fact, as was
noted earlier, major Outsourcing contracts very often generate
add-on services that involve Consulting and Technology
activities. When the share of these other activities included
in Outsourcing is reallocated to these segments, real growth
is as follows: