Capgemini Se Ord

Ladies and gentlemen, welcome to the Capgemini 2020 full-year results conference call. I now hand over to Mr. Ayman Hezad, CEO. Sir, please go ahead.

Good evening, everyone. I'm delighted to welcome you to Capgemini's full-year results. I am joined by Carol Ferrand, our CFO. So 2020 was for sure an exceptional year for Capgemini. It faced the pandemic. carried a managerial transition and finalized the acquisition and launched the integration of Altran. In this context, I am particularly proud of Capgemini's remarkable performance and would like once again to thank our 270,000 employees and the management team that fought hard to deliver this performance and their solidarity to their community. So let's rewind to April 2020. We stated that Q2 was the trough followed by a progressive recovery. That's exactly what we delivered. We also indicated once more that the group is much more resilient than during the last crisis, and we demonstrated it. Our full-year revenues grew by 13.7% at custom currency, the upper band of the targeted range. Our organic growth saw a limited decline of minus 3.2%, a strong performance in the context of a global pandemic. And we end the year with a solid 20.8% growth at constant currency in Q4. Bookings are robust, growing by 13% at constant currency, and the book to build stood at 1.07. This growth is supported by powerful drivers, Digital and cloud now represent 65% of group activity, exaltant in Q4. They are the key component of our client's transformation. And in 2020, we also exceeded our operating margin target and our organic free cash flow target, as you can see. Earnings per share are above expectation, up 7%. Based on this performance, we are proposing a dividend of 1.95 euros per share, to be approved at the Annual General Meeting. We delivered beyond expectation and we showed our resilience this year. Now, if I look a bit at the view by geography, the trend is visible across many geographies in Europe, except France, which I will discuss later. In Asia Pacific and in Latin America, our business is growing strongly, including positive organic growth in these geographies in the fourth quarter of 2020. In Europe, growth was notably driven by a robust public sector and a TMC momentum. Operating margin was stable overall, up 30 bps in the UK and Ireland to 15.5% and down 40 bps to 11.4% in the rest of Europe. In Asia Pacific and Latin America, very dynamic market with revenues increasing by 12.2% at constant exchange rate, which is remarkable because of Altran's consolidation has limited impact here. Growth is sustained by financial services, TMT, and services. The operating margin rate increased significantly, nearly two points. And in North America, our revenues grew by 7.9% at constant exchange rate, driven by the Altron acquisition, which had a particular impact, of course, on the TMT sector there. Financial services enjoyed strong momentum at the end of the year and achieved organic growth for the full year in North America. The operating margin rate improved by nearly one point. We start to see the result of the transformation we undertook, and the rollout should be finalized by the end of Q1. With the impact of Eltran, France reported revenue growth of 14.2%, with strong contribution for the manufacturing, TMT, and energy and utilities sector. However, as you know, the environment has been challenging, as it was the hardest hit by the pandemic, driven primarily by an unfavorable mix in manufacturing, consulting, and engineering. Both revenues at constant scope and operating margin contracted visibly year on year. As we get in 2021, we expect to see a rebound starting in the second quarter. I want to talk a bit about a few deals which really exemplify the number of wins we have around data, AI, and cloud. They really showcase the value we bring to our clients, empowering them through data, AI, and cloud to face the tremendous challenges of 2020. I won't detail all of them, but if I can pick a few. For a global home furnishing retailer, we were selected to scale up a cloud platform to shift from 30 regional markets with proprietary systems to central customer data management. Business decision can now be based on the analytics from over 850 million customers, transactions and employees are empowered to make decisions throughout the value chain. For Nordic Capital, the private equity funds focus on healthcare, tech and payments and financial services with structured artificial intelligence services that cover readiness assessment strategy development, proof of concept pilot, implementation, and center of excellence creation for all their 38 portfolio companies. In front of 21 competitors, we showed the breadth and depth of our skills with assets to scale. For a U.S. telco provider, we developed a machine learning ops platform to accelerate analytics deployment and set up data standards and processes. Data, AI, cloud, these topics are hot in the market and they are definitely key growth drivers to our success. So overall, our 2020 performance ticks the box of resilience. Since the financial crisis, we have always been challenged about our ability to resist to a new crisis. 2020 really demonstrates our resilience. Five years ago at our CMD, we shared with you the positive evolution of our business and stated our confidence that in the event of a crisis, margin contraction would not exceed 100 bps. Despite the unprecedented abruptness of this crisis, our 2020 margin contraction was limited to 40 bps. It is the result of the transformation of the group. our diversified client base, our relevant offering portfolio, the talent and commitment of our people, and the agile platform we built in terms of delivery and operations. Our resilience has been tested, and we come out of 2020 stronger than ever. If I move now to the Altron integration, in 2020, we made one of the biggest acquisitions of our history with Altron. And here, not only did it not distract us from our business, but it delivered fully on its promises by creating joint value in intelligent industry, combining our complementary capabilities. I am really impressed by the enthusiasm of the teams working together with a close culture, complementary business, the health crisis which revealed the need for more digitalization of the industry. Some of our recent deals give evidence of the breadth and depth of our unique positioning. Servier, a global pharmaceutical group, partnered with us right in the middle of the first COVID-19 lockdown to accelerate clinical trials. This deal shows our focus and relevance in life sciences as exemplified by our data-driven R&D offering, which is one of the three joint intelligence industry offerings that we launched this year. For the U.S. aerospace industry, we envisioned a factory of the future concept and assisted in the design, architecture, and implementation of all digital platforms required to set up a new factory in the U.S. Our complementary capabilities were key to succeed. We also collaborated with Group PSA to develop a new concept, the Citroën AMI, by defying conventional standards to meet the environmental challenges. If I come back to the operational perspective, integration is perfectly on track. Altron is fully concentrated in the Capgemini scope from April 1st, 2020. The main integration risks are now behind us. Some of the heavy lifting with legal entity systems and processes tasks will continue in 2021. And as stated before, two-thirds of cost synergies run rate will be reached by June 2021. The group is confident it can achieve the commercial synergies announced, which represent an additional annual revenue of between 200 million and 350 million euros within three years. Now, looking forward, with this unique combination of skills and the strength of our results, I'm really confident on 2021. We expect a good acceleration as most sectors have either recovered, such as financial services, public sector or are recovering. It is true that the ongoing COVID environment is still impacting the dynamic in manufacturing and services, and that will still weigh on the group growth as we start 2021. Another indicator is the strength of our bookings. Our book-to-bill ratio of 121 for Q4 is consistent with our growth scenario.

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