Capgemini bullish after 24% surge in digital and cloud revenues
French IT services group expanding through bolt-on acquisitions
Capgemini on Thursday said companies’ demand for digital and cloud services is fuelling its growth as the French IT services group unveiled its full-year results for 2017.
Digital and cloud revenues were up 24 per cent year-on-year at constant exchange rates, reaching almost €5bn and fuelling overall revenue growth of 4 per cent to €12.8bn during 2017. The group’s net profit grew 11 per cent to €820m.
“What used to drive the IT services market was offshoring to countries like India,” says Paul Hermelin, Capgemini’s chairman and chief executive. “Today, the major shift is companies’ digital transformation.”
The strongest demand for digital and cloud services are from clients in the consumer, retail, financial services and manufacturing sectors, he added.
Competitors of Capgemini, which provides consulting and IT services, range from the likes of Accenture, to the re-emergence of the consulting arms of the “Big Four” professional services firms, as well as smaller niche players.
The group has been expanding the business with bolt-on acquisitions, announcing this month a €400m acquisition of LiquidHub, a US-based digital transformation specialist focused on customer engagement.
“There’s a convergence between traditional IT services companies and marketing agencies,” says Jonathan Brassington, chief executive of LiquidHub. “Firms with the ability to bring capabilities in both of these spaces are positioned to be winners.”
Analysts last year highlighted Accenture and Capgemini as potential buyers for advertising agencies such as Publicis or WPP.
Mr Hermelin said in October that Capgemini could be pushed towards a deal in the advertising sector if rival Accenture made a takeover in the industry. Speaking on Thursday he sounded less convinced: “All of the large agencies are exposed to their industry pressures. It’s safer for us to buy niche players that are easier to integrate.”
Mr Hermelin says he is seeing a big shift in Europe from companies using IT to cut costs to companies spending money on technology to drive growth.
All of Capgemini’s major geographic regions reported revenue growth in 2017, apart from the UK and Ireland, where revenues fell 9.6 per cent year-on-year at constant exchange rates. This reflects a decline in the public sector and “a market that looks pretty soft with the consequences of Brexit”, Mr Hermelin said.
Capgemini said on Thursday that it aims to increase revenues 6-7 per cent in 2018 at constant exchange rates.