2005 Financial Report - Capgemini

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42 ANNUAL MANAGEMENT REPORT Capgemini income tax of €280 million; - a reduction in net working capital requirements in an amount of €298 million, attributable to an increase in operating payables (comprising trade payables and personnel); - conversely the payment of income taxes in an amount of €36 million. • €78 million in net cash from investing activities, comprising: - inflows from the disposal of assets totaling €215 million, essentially relating to the North America Healthcare activity (€143 million), and the Group’s interests in the Capgemini Japan subsidiary (€30 million) and IS Energy in Germany (€21 million); - the acquisition of (i) intangible assets and property, plant and equipment for a total of €106 million and (ii) financial assets amounting to €39 million. III. COMMENTS ON THE CAP GEMINI SA FINANCIAL STATEMENTS 3.1 Income statement The Company’s operating revenue for the year ended amounted to €162 million (including €160 million in royalties received from subsidiaries) compared with €130 million for 2004 (including €126 million in royalties). This increase in operating revenue for 2005 was attributable to the Group methodology user royalties billed to the new Sogeti Transiciel sub-group, in addition to the increase in the Group’s revenue. Operating income came in at €133 million compared to the year-earlier figure of €88 million. The improved performance stems from the cumulative effect of increased royalties and a reduction of approximately €13 million in expenditures, particularly in advertising. Net interest income stood at €28 million, compared to substantial net interest expense the previous year following the recognition of provisions for impairment in value of investments in several subsidiaries and affiliates. This result reflects: • €263 million in dividend income, of which nearly the entire amount (€258 million) corresponds to an exceptional dividend paid by our Dutch subsidiary Capgemini NV following the reorganization of Sogeti in the Benelux region; • €322 million in additions to the provision for the impairment of interests held in certain subsidiaries (in the Netherlands, UK, and Italy), partially counterbalanced by €76 REPORT 2005 Capgemini million in reversals from provisions following the liquidation of the New Zealand subsidiary and the restructuring of our telecoms activities in Spain and the UK; and • €11 million in financial income on cash investments net of the financial expense incurred with respect to the Company’s debt. The Company once again had net other expense of €9 million (compared with other expense of €324 million in 2004), chiefly due to the expense recognized with respect to internal reorganization operations during the year. After accounting for a tax benefit of €21 million (€43 million in 2004), the Company posted a profit of €173 million, compared with a €949 million loss in 2004. 3.2 Balance sheet Net investments fell to €6,009 million at December 31, 2005 from €6,245 million a year earlier. This €236 million decrease can be mainly attributed to: • additional provisions recognized for the impairment of investments in certain subsidiaries for a total of €306 million; • increases in the share capital of several subsidiaries in an amount of €385 million, including €336 million for Sogeti- Transiciel SAS; • a €282 million net reduction in loans granted to certain subsidiaries, including a loan of €162 million to Sogeti- Transiciel SAS; and • a €35 million reduction in the net carrying value of shares in companies sold or liquidated as part of internal restructuring operations. Shareholders’ equity stood at €6,611 million, reflecting an increase of €178 million compared to the previous year, with substantially all of the difference corresponding to the profit for 2005. Debt increased from €666 million to €1,148 million, essentially reflecting the recognition of the 2005 OCEANE bonds for an amount of €437 million (to which is added €58 million in redemption premiums) and the increase in accrued debts with respect to investments in subsidiaries and affiliates, for an amount of €140 million. Net cash and cash equivalents as of December 31, 2005 came to €271 million, versus €249 million a year earlier. 3.3 Reallocation to the legal reserve of part of the amounts from the former long-term capital gains reserve The Board of Directors has noted that the 2004 Ordinary Shareholders’ Meeting adopted a resolution that decided the trans-
fer of the special long-term capital gains reserve account to the “other reserves” account. The Board of Directors now recommends retransferring from the “other reserves” account to the legal reserve the amount of €19,564,446.76, which corresponds to the fraction of the legal reserve funded during previous fiscal years with respect to the special long-term capital gains reserve account, thereby increasing this reserve to €99,444,435.20. 3.4 Results appropriation The Board of Directors recommends, as a sign of Cap Gemini’s return to profitability and the Board’s confidence in the future of the Group, departing from the traditional practice of distributing to shareholders one-third of the profit for the year and instead distributing one-half. As the consolidated profit amounts to €141 million, if this recommendation is accepted it would result in the payment to each of the 131,581,978 shares making up the share capital at December 31, 2005 of a dividend of €0.50, for a total amount of €65,790,989, representing close to 47% of Group profit. As the income distributable by the parent company amounts to €173,440,186.21, the balance would be allocated to: • the legal reserve in the amount of €5,821,147.20 (in addition to the €19,564,446.76 previously reallocated), bringing the total legal reserve to 105,265,582.40 and thereby entirely funded; • the remaining amount of €101,828,050.01 to retained earnings. The dividend would be paid from a date that the Board of Directors recommends setting at May 16, 2006. This dividend will be eligible for the 40% tax rebate referred to in sub-paragraph 2º of paragraph 3 of article 158 of the French Tax Code for individuals subject to personal income tax in France. Moreover, pursuant to article 243 bis of the French General Tax Code, the General Shareholders’ Meeting is reminded that no dividend has been distributed for the previous three fiscal years (2004, 2003 and 2002). 3.5 Share capital and ownership structure The exercise of stock options previously granted to Group employees resulted in the issuance of 198,800 new shares thereby increasing the Company’s share capital by 198,800 x 8 = €1,590,400 (from €1,051,065,424 to €1,052,655,824.) Moreover, pursuant to article L. 233-13 of the French Commercial Code, the Board of Directors informs shareholders that during the fiscal year Serge Kampf reduced his interest below the legal disclosure threshold of 5% and that to the best of the Company’s knowledge, as of December 31, 2005, no shareholder held over 5% of the Company’s capital or voting rights. 3.6 Stock options The Extraordinary Shareholders’ Meeting of May 23, 2000 authorized the Board of Directors to grant stock options to certain employees of the Group and its French and foreign subsidiaries. The authorization was given for a period of five years commencing May 23, 2000, and the number of shares to be subscribed on exercise of the options was limited to 12 million. The Board of Directors used this authorization to set up the Fifth Stock Option Plan. On April 1, 2005, the Board of Directors used this authorization for the last time to grant options on 1,623,000 shares to 351 employees. The option exercise price was set at €27, representing the average of the prices quoted for the Company’s shares over the 20 trading days preceding the date of grant. The Extraordinary Shareholders’ Meeting of May 12, 2005 authorized the Board of Directors to grant stock options to certain employees of the Company and its French and foreign subsidiaries. The authorization was given for a period of 38 months commencing May 12, 2005 and the number of shares to be subscribed on exercise of the options was limited to 6 million. The Board of Directors used this authorization to set up the Sixth Stock Option Plan and on October 1, 2005 granted options on 1,915,500 shares to 650 employees. The option exercise price was set at €30, representing the average of the prices quoted for the Company’s shares over the 20 trading days preceding the date of grant. In the event of a notice of authorization of a tender offer or public exchange offer for the Company’s shares published by Euronext, option holders would be entitled to exercise all their options immediately – or all of their remaining unexercised options – without waiting for the end of the vesting period specified at the time of grant. During 2005, 198,800 shares were subscribed on exercise of options granted under the Fifth Plan (equal to 0.15% of the share capital on December 31, 2005). No further shares could be subscribed under the First, Second and Third Plans, for which the exercise periods expired on November 1, 1995, April 1, 1999 and April 1, 2002, respectively. 3.7 Returned shares In the agreements entered into on May 23, 2000 with Ernst & Young in connection with the sale to Cap Gemini of its consulting business, it was provided that if any of its former partners who had become Group employees decided to leave the Group before a specified period had elapsed, they would be required to return some or all of the shares they had received at the time of the sale. The number of shares to be returned depends both on the reason for and the timing of the individual’s departure. Pursuant to these agreements, a total of 5,042 Capgemini shares were returned to the Company between February 23, 2005 and February 22, 2006: The Board recommends, as was the case last year, that these shares be sold on the market rather than being cancelled. 3.8 Exercise of equity warrants issued within the framework of the alternative public exchange offer for Transiciel shares The public exchange offer filed on October 20, 2003 for Transiciel shares provided the following two options: ANNUAL REPORT 2005 Capgemini 43
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 and 30: • taking environmental impact int
Page 31 and 32: ties managed by leading financial i
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: was more than offset by the investm
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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