Cap Gemini

[Jameson]

Bom dia,

Alguém acompanha a Cap Gemini (Cac) ?

[Jameson]

Cap Gemini's Earnings Unexpectedly Rise; Stock Jumps (Update3)

Feb. 24 (Bloomberg) -- Cap Gemini SA, Europe's largest computer-services company, said second-half earnings unexpectedly rose, sending the stock as much as 5.6 percent higher.

Earnings before interest, taxes and amortization rose 5.4 percent to 78 million euros ($103 million) from 74 million euros a year earlier, Paris-based Cap Gemini said in an e-mailed statement today. Analysts had expected a drop of 11 percent to 65.7 million euros, according to median of 16 estimates.

Cap Gemini spent about 1 billion euros in four years to cut more than 12,000 jobs and shed office space, helping it return to positive Ebita from a loss in the first half. The company still reported a third annual net loss, hurt by cost overruns in the U.S. and competition from Indian companies including Wipro Ltd.

``The restructuring started to have some positive impact at the end of last year,'' said Marko Alaraatikka, a fund manager at Evli Investment Management in Helsinki, which oversees $4.2 billion. ``There's still a lot of room for their profit margins to improve, as they're starting from a low level.''

The net loss in the second half more than doubled to 224 million euros from 107 million euros a year earlier, as it spent more to cut jobs and had a tax charge. The loss included a 125- million charge for the way Cap Gemini accounts for future U.S. tax credits, Chief Executive Paul Hermelin said in an interview. The company's net loss was expected to be 99 million euros, the median estimate of 13 analysts surveyed by Bloomberg News showed.

Shares of Cap Gemini rose as much as 1.46 euros to 27.55 euros, and traded at 27.38 euros as of 10:47 a.m. in Paris.

Rising Sales

``The second half wasn't bad and better than the market expected, because there was a bit of skepticism,'' Hermelin said. ``We'll see a noticeable recovery of the margin in 2005.''

Second-half sales rose 22 percent to 3.32 billion euros, helped by the start of a computer-services contract with Dallas, Texas-based utility TXU Corp. Revenue had been expected to rise to 3.33 billion, according to the median of 16 estimates.

Cap Gemini said it expects sales to rise about 10 percent in 2005, with Ebita as a percentage of sales showing a ``marked improvement'' over the 2.35 percent margin on that basis in the second half of 2004.

The consensus from analysts for this year's Ebita margin is between 3 percent to 3.2 percent, and ``that's something we can reach,'' Hermelin said. The company's sales forecast is ``a prudent assessment,'' he said.

Global Gain

Global computer-services revenue rose 6.7 percent to $607.8 billion in 2004, market researcher Gartner Inc. said in a Feb. 8 report, with International Business Machines Corp.'s information technology services business garnering more than five times Cap Gemini's sales.

``Demand is at a high level, and competition is really tough,'' said Evli's Alaraatikka, who doesn't hold Cap Gemini shares. ``I believe prospects are better for the largest players such as IBM.''

Cap Gemini was helped by a recovery in Europe, including the company's home market, while the U.S. business was unprofitable in the second half, Chief Financial Officer Nicolas Dufourcq said in a conference call.

The 2004 net loss widened to 359 million euros from 197 million in 2003, while full-year sales rose 9.3 percent to 6.29 billion euros, Cap Gemini said.

Cap Gemini said in November it will cut as many as 1,500 jobs through March, or about 2.5 percent of the total, at least the fourth round of job cuts in as many years. The company will announce more cuts in the U.S. consultancy unit, which employs a third of Cap Gemini's about 9,000 U.S. workers, Hermelin said.

Acquisition

The French computer-services provider bought Ernst & Young LLP's consulting business for $11.1 billion in stock and cash in 2000, and has yet to profit from the acquisition, which was done to help U.S. sales.

``The recovery of the North American activities is the No. 1 priority of the group,'' Hermelin said. ``For me the U.S. problem is limited to the consultancy. The objective is clear, we have to be profitable in the U.S. from the second half.''

Hermelin in November denied a report Cap Gemini was planning to sell the North American consulting unit, saying the company was ``completely committed to the U.S. recovery.''

The company in September reported a 135-million euro first- half loss because of cost overruns on contracts in the U.S. and the U.K. and as it spent money to promote a name change from Cap Gemini Ernst & Young. Cap Gemini lowered its profitability forecast in November after paring its outlook twice in 2003.

Indian Competition

Prices charged for computer services in Europe will be under pressure this year as Indian rivals including Wipro, Infosys Technologies Ltd. and Tata Consultancy Services bid for European contracts, Hermelin said in December.

Cap Gemini said last month it would meet its target for a second-half operating margin, or operating profit as a percentage of sales, of 2 percent, from a September forecast of as much as 3 percent and following an operating loss in the first half.

Smaller competitor Atos Origin SA has said its operating margin was more than 7 percent in 2004.

The computer-services company had its credit rating cut to junk by Standard & Poor's last month on concern costs will keep profit margins below those at the likes of Atos Origin. The rating was cut one step to BB+, the highest sub-investment grade rating because of ``significant issues'' in reducing costs and improving internal controls, S&P said at the time.

The rating company expects Cap Gemini's operating margin to be at least 3 percent in 2005, excluding restructuring costs.

Hermelin has hired Dufourcq from France Telecom's Wanadoo unit and Chief Operating Officer Pierre Danon from BT Group Plc to help revive earnings.

The company last paid a dividend for 2001, and it's ``much too early'' to discuss when Cap Gemini will pay one again, Hermelin said in the conference call.



To contact the reporter on this story:
Rudy Ruitenberg in Paris at  [email protected].

To contact the editors responsible for this story:
Lars Klemming at  [email protected];
Zimri Smith at  [email protected]