Capgemini upbeat as revenues rise

Capgemini lifted its forecast for full-year revenues after it reported stronger third-quarter sales thanks to demand for outsourcing and further progress at its lossmaking US wing.

The IT consultancy, Europe’s biggest in terms of sales, predicted like-for-like revenue growth of “close to” 14 per cent, up from an earlier forecast of 12 per cent.

The more robust outlook followed a 10 per cent rise in like-for-like sales at constant currency rates to €1.67bn ($1.96bn) in the three weeks to September 30, slightly better than analysts’ expectations.

Paris-based Capgemini held its forecast for the full-year operating margin at 2.9 per cent, although Paul Hermelin, chief executive, said the gross margin for the group’s outsourcing business - its largest division by revenues - should recover to 4 per cent in 2006 after a negative margin in the first half of this year.

Mr Hermelin added that he was intiating a plan that aimed to see the outsourcing gross margin reach 5 per cent in the second half of 2006 with further growth in 2007.

Outsourcing showed the highest revenue growth rate, increasing 15 per cent and contributing 39 per cent of group revenues. Other divisions showed an increase of 7 per cent.

By region, third-quarter revenues grew 13 per cent in Europe compared to the same quarter in 2004, but fell 4 per cent on the second quarter of 2005 “in line with the historical negative seasonality effect”. Bookings taken in the period rose 1.3 per cent compared to the year-ago quarter - with outsourcing up 8.6 per cent.

Revenues slipped 1.3 per cent year-on-year at its troubled North American arm, although the unit continued to show improvement with sales up 1.4 per cent on the preceding quarter. Bookings in the US increased for the third consecutive quarter.

Capgemini shares fell 1.7 per cent to €31.29 in morning trade.