Capgemini rises on recovery hopes

Shares in Capgemini were the biggest gainers among French blue-chip stocks on Thursday after Europe’s largest information technology services company forecast a return to growth in the second half of the year.

Paul Hermelin, chief executive, said there were “real signs of recovery” in the market for IT services, particularly among financial services customers.

“The banks are in decent condition again and are investing again in IT,” he said. “Our key financial services customers are banks like HSBC, Morgan Stanley, BNP Paribas and ING, and they have resumed investments.”

Capgemini still expects revenues to decline 2-4 per cent this year, but said it had shifted its expectations to the top end of the range. Last year revenues fell 5.5 per cent and profits declined 60 per cent as companies cut back spending on IT projects amid the economic crisis.

Mr Hermelin said that if the company had a solid second quarter, he would consider revising the guidance upwards.

“April is already looking better than the first three months, and we have a good pipeline. If we sign those bookings in the second quarter, we can update second half forecasts,” he said.

A key sign of optimism is that the company began hiring staff again in December and increased headcount 1 per cent during the first quarter. Capgemini had been forced to shed more than 5,000 jobs during the downturn.

Revenues for the first three months of 2010 came in slightly higher than expected at €2.05bn, although they were still 6.9 per cent lower than the same quarter in 2009.

Capgemini’s optimistic comments came amid other signs of improvement in the IT services sector. UK rival Logica on Wednesday said its revenues had been down just 2 per cent in the first quarter, compared with declines of about 4 per cent in the previous three quarters.

Atos Origin, Capgemini’s domestic rival, has also forecast a return to organic growth in the second half of the year.

Growth is already beginning in Capgemini’s North American business, where revenues rose 3 per cent, excluding the impact of the winding up of a big outsourcing contract with TXU, the Texas utility company. However, gains in the US were offset by declines in the rest of the world, particularly an 18 per cent drop in revenues in the Benelux region, and a 7.1 per cent fall in sales in France.

Mr Hermelin said he was continuing to look for US acquisition targets, particularly companies active in public sector IT projects or healthcare.

Shares in Cap Gemini, which have gained more than 40 per cent in value in the past year, rose 6 per cent to €38.86 in early trading.