Capgemini Se Ord

Ladies and gentlemen, welcome to Capgemini's half-year 2021 results conference call. I will now hand over to Mr. Ayman Izzard, CEO. Sir, please go ahead.

Yes, good morning, everyone, and thank you for joining us for this early morning call. Sorry for the 7 a.m. one. I am joined by Carol Ferrand, our CFO, and Olivier Sevilla, our Chief Operating Officer that you met at our CMD conference. So I'm happy to share with you this morning our strong H1 results. So after a good Q1, which was better than expected, the acceleration in Q2 came way ahead of initial expectation. At 12.9%, our Q2 organic growth is more than 10 points above the Q1 rate. The revenues in H1 stood at 8.7 billion euros. We had a healthy Q2. 2 billion Q2 at 1.11, and digital and cloud continue to grow at a solid double digit. Our operating margin is up 1.2 points, so we reached 12% unprecedented level for the first half, leading to a 32% increase in our normalized earning per share. And the organic free cash flow at 429 million is significantly ahead of last year. So in view of a context that has remained challenging in some regions, I first would like to thank all our teams for their mobilization and continuous engagement. It is a dynamic market with strong demand for technology driven by pressing needs for digital transformation. It is a continuous acceleration, notably in cloud and data that we have seen over the last three quarters. We do consider this as being a structural acceleration in demand for technology and not just a bump following the COVID crisis. More importantly, as laid out in the CMD, we have strategically aligned our capabilities, offerings and industry focus to fully capture the opportunities we see in the market. If you look a bit by region, You know, the performance actually has been visible across all our sectors, all our geographies and businesses. All of geographies have posted double-digit constant currency growth in H1. And the acceleration of the organic growth in Q2 is also visible across all our regions. As you know, we almost have no scope impact in Q2. France really stands out because after four negative quarters, France is reaching double-digit organic growth in Q2 and has started its margin recovery. Importantly, to see as well on the operating margin, the improvement is everywhere. Notably, we see a two-point bump in APAC and LATAM, and the UK with a tremendous 17% operating margin. The top line acceleration is also visible across all industries, especially in those that were hit hard by the health crisis. So manufacturing and consumer goods were extremely strong, but also services. The manufacturing sector even posted the strongest rebound and returned to an activity level comparable to pre-crisis level, as did the consumer goods sector in Q1. We do expect demand to remain strong in the coming quarters. It's good to look a bit historically and put these results in perspective. Be it revenues operating margin or free cash flow, we are again raising the bar and setting a new reference here. By reaching 8.7 billion euros, our H1 revenues have almost doubled in 10 years. Interestingly, this semester, revenue is now even higher than what it was in full year 2010. The same goes for our margin rate, which has doubled in 10 years, logically in absolute value. The operating margin has even more than quadrupled compared to 2010. As for our cash generation in the first half, it improved by 1 billion euros over the same period. The Capgemini group is clearly on a long-term upward trajectory. Over the past 10 years, the group has continuously created value and will continue to do so towards our 2025 ambition presented in March during our capital market space. First thing, looking a bit at some of the deals we're doing, right? One of the points that particularly supports our confidence is the relevance of the positioning that we have taken. We win the right contracts. We capture the structural shift in demand. Our portfolio is well positioned and meets the growing transformation needs of our client. And we are addressing specific client needs by industry. Let's take, for example, the example of the automotive sector. Our playing fields, you know, we have defined them, intelligent industry, customer service and enterprise management, are at the heart of what we mean. Just take one example. Have a look at this automotive supplier who trusted us to develop and validate equipment for autonomous cars. It's a concrete example of one of the three intelligent industry offerings that we presented to you last year. Digital and cloud are of course active on all levels. All clients have a strong appetite for cloud these days. For Toyota, for example, we have set up cloud native managed services, which allow Toyota to gain in agility and save money immediately. And all over the world, we are noticing a stronger and stronger interest from our clients for sustainability. In the automotive sector, we help Volvo cars in leveraging data to support their net-zero ambition with specific solutions adapted to their industry. Our growth engines are powerful and very relevant in the current market. Now we continue to invest in all areas to prepare for the future. We established a new partnership with market leaders. We partnered with Origin Microsoft in Bleu, a trusted cloud provider in France. We partnered with Zirco to take full advantage of digital manufacturing in gigafactories. We partnered with Qualcomm recently to accelerate the deployment of 5G private networks. We have raised our recruitment plan for 2021 after adding 20,000 team members to the group in the first half. while continuing to invest in reskilling, upskilling our workforce. The quality of what we do, the interest of the work that we do, is really what makes us attractive for the new talents. We're also going to accelerate our investment in H2, notably in terms of top talent acquisition and new offering development to continue to prepare for the future and to continue to fuel the growth. We remain convinced that this growth can only be responsible. In the second quarter, we launched our sustainable IT offer, in that helping our clients reduce their carbon footprint in their IT departments. This is the first of a series of offerings dedicated to sustainable development. Finally, we will be detailing our ESG policy and objectives before the end of the year. And before I conclude, I'd like to say a word about Capgemini Engineering. So engineering is back. You know, there was a big concern raised by a number of people when we made the Alphorn acquisition about the cyclicality of engineering. So less than one year since the beginning of the pandemic, engineering is back, is back strongly. 16% constant currency growth with no M&A impact in the second quarter. And even above 20% in France. As expected, this is a rise of demand in engineering fueled by connectivity and softwareization and the growth of intelligent industry. The ultra-integration has produced tangible results in terms of synergies in the first half, earlier than expected, lifting our H1 margin. Operational cost synergies reach a run rate of 69 million euros by June, driven notably by cost avoidance, real estate and procurement savings. We are above the objective of two-thirds of the target synergies by end of H1. The revenue synergies remain strong. With a healthy pipeline of these, a unique combination of our skills, relationships, enable us to win new deals, notably in the manufacturing sector. Capgemini is a global leader in the engineering services market and a pioneer in the intelligence industry. So given our strong performance and our confidence in our H2 perspective, we upgrade our outlook for the full year. We now target a constant currency growth of 12% to 13% versus 7% to 9% previously. This includes a scope impact of 5 points compared to 4.5. We expect our operating margin to land between 12.5% and 12.7% versus previously 12.2% to 12.4% and the organic free cash flow to exceed 1.5 billion euros compared to 1.3. Thank you for your attention and now I leave the floor to Carole, our CFO.

Thank you, Eman, and good morning everyone. Let me now comment the financial highlights of our healthier results. Group revenues reached 8,711,000,000 euros in H1, a reported growth of 14.9% and 17.9% at constant rate. Our operating margins stand at 1 billion and 42 million euros, or 12% of revenues, up by 120 basis points year-on-year. After the operating expenses, financial and tax expenses, which I will further comment in a moment, the net profit for H1 reached 443 million euros, up 42% year-on-year. The normalized EPS, as adjusted for transitional tax impacts, reaches €3.91, up 32% year-on-year. Finally, we delivered also a strong cash flow generation in H1, with an organic free cash flow of €429 million, up €323 million compared to H1 last year. Our quarterly revenue growth clearly reflects our acceleration over the last quarters. After a Q1 which came higher than expected, group growth accelerated strongly in the second quarter. Organic growth reached 12.9% in Q2 compared with 1.7% in Q1, with Q2 activity significantly exceeding previous crisis levels. This led to an organic growth of 7.1% in H1 overall. Changes in group scope had a significant impact in Q1, plus 22.5 points, mainly due to the acquisition of Altron consolidated since April 1, 2020. However, the scope impact was far more limited in Q2, at minus 0.5 points, due to the disposal of Odigo at the end of 2020. This means that our constant currency growth rate will be much more representative of underlying organic trends from Q2 onwards. With a total scope impact of 10.8 points, our growth at constant currency reached 17.9% in H1. Ethics had a negative impact of 2.3 points in Q2, leading to an overall negative impact of 3 points in H1. As a result, our reported growth reached 10.1% in Q2 and 14.9% for the first half of the year. For the full year, we continue to expect a negative impact for ethics, slightly above 1 point, while M&A should now contribute approximately 5 points to our growth. Let me now look at our revenues by region. Organic growth across all group regions increased significant in Q2 compared to Q1 levels. As Ayman mentions, France recorded the fastest acceleration with a solid double-digit organic growth in Q2. Almost all other regions also delivered double-digit organic growth in Q2 with North America being just below this threshold. Given the magnitude of the Q2 acceleration, These organic trends also apply to the fully fossilized period with all group regions reporting double-digit growth rates year on year at constant currency. These regional trends were fueled by global sector trends, which are highlighted on the revenues by sector slide. At constant exchange rates, growth is high double-digit in consumer goods, manufacturing, services, and the public sector. financial services and the TMT sector come next. And the momentum of the energy and utility sector fell significantly short of the rest of the group. Considering now our revenues by business lines, all business lines also reported a further acceleration of their organic growth in Q2 compared to Q1. In particular, both strategy and transformation services and application and technology services posted a solid double-digit organic growth in Q2. Last but not least, and as already highlighted by Eamon, engineering services delivered also a strong double-digit growth in Q2. This excellent performance combined with a strong organic growth in infrastructure and cloud services brought organic growth in operations and engineering services to above 10% in Q2. When looking at constant currency growth, two items have visible impact in operations and engineering. The Odigo disposal, which brings down custom currency growth below the 10% mark in Q2, and the very significant impact of the consolidation of Alphan, although this impact is limited to Q1 only, which lifts custom currency growth to 33.6% in H1. Moving now to the headcount evolution. Our total headcount reached 289,500 employees at the end of H1, at 9.2% year-on-year. We have accelerated our hiring in response to the strong demand of our services. The offshore leverage increased quite significantly to reach 56% in June, up by 3 points year-on-year, with visible progress in continental Europe. Finally, attrition stands at 15.2% in H1 on the last 12 months basis, down 2.2 points over the same period ending June 2020. However, as discussed over the past couple of quarters, the attrition is now naturally kicking up, as attrition is a byproduct of growth in this industry. Let's turn to the operating margin by regions. North America delivered a marked improvement of its operating margin, which rose by 130 basis points to 15.7%. Our operating margin in the UK and Ireland reached a record level of 17.6% compared to 14.3% a year earlier. France also improved its operating margin by 60 basis points year-on-year to stand at 7.5%. Lastly, the rest of Europe and Asia Pacific and Latin America regions delivered also strong improvements year-on-year, by 130 basis points and 200 basis points respectively. Moving on to the analysis of our operating margin. Let me first remind you that the structure of Altran's operating margin was substantially different from ours, with visible lower gross margin, higher GNA, but lower selling expenses. Consequently, the evolution presented here is noticeably distorted by the consolidation of Altran on two quarters instead of one quarter only in H1 2020. On a comparable basis, the gross margin improved by around 90 basis points in H1 2021, mainly driven by higher utilization rates. The cost synergies with Altron in annual run rate that were delivered earlier than expected in the year had positive impacts across all our cost structure. Overall, the operating margin increased by 120 basis points in H1. After this very strong achievement, and in spite of the expected return of some costs, such as travel, we have decided to accelerate in H2 our investment plan toward the priorities set in this capital markets day. We are not only convinced of the market opportunities ahead of us, but we also have good control on the margin improvement trajectories Therefore, we aim to deliver in H2 another solid operating year-on-year margin improvement. Moving on to the next slide. Our financial expenses increased to 85 million euros in H1 2021 versus 64 million euros for the same period last year. This increase is mainly due to the full impact in H1 of the new bonds issued in Q2 last year as part of the Altran acquisition. Our income tax expenses increased from 204 million euros in H1 2020 to 282 million euros in H1 2021. This amount includes exceptional tax expenses for 56 million euros compared to 26 million euros last year. These expenses relate to the transitional impact of the 2017 US tax reform, but also in 2021, the one of consequence of a recent change in local tax regulation on 2016 legal restructurings. Adjusted for these expenses, our effective tax rates stand at 31% compared to 34.6% in H1 2020 and 33% in the full year 2020. Now a quick recap of our P&L from the operating margin to the net income. The other operating income and expenses decreased to €230 million in H1 2021 compared to €241 million in H1 last year. Lower restructuring costs were partially offset by an additional quarter of Altron's intangible acquisition and by the impact of capitalized share price increase on the long-term competition expenses. As a consequence, our operating profit reached €812 million in H1 or 9.3% of our revenues, up 41% year-on-year. After deduction of financial and income tax expenses, our net profit stands at 443 million euros, up by 42% compared to H1 2020. Therefore, our reported basic EPS increases to 2 euros and 63 cents, up also 42% year-on-year. The normalized EPS is up 32% to €3.91, excluding the exceptional tax expenses previously discussed. Finally, looking now at the evolution of our organic free cash flow and net debt. We had a strong organic free cash flow generation in H1 at €429 million, up more than €300 million versus our average performance in H1 over the last two years. The net cash outflows for acquisition amounted to €70 million, relating mainly to the acquisition of RxP in Australia, which was completed in March. We also returned €329 million to shareholders in H1 with the payment of the 2020 dividend. Overall, our net debt keeps decreasing and starts at €4.8 billion at the end of H1, compared to €6 billion a year ago and €4.9 billion at the end of 2020. Okay.

Thank you, Carol. So, operator, could you please open the line for the Q&A session?

Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad now. Our first question is from Mr. Amit Harshandani from Citi Investment Research. Sir, please go ahead.

Thank you. Good morning, all. Amit Harshandani from Citi Investment Research. Two questions, if I may. Firstly, if I may, on the topic of demand acceleration, you commented about it being structural in nature. And in particular, the turnaround in engineering has really caught my attention. Could you give us a sense for how do you think the convergence pieces of IT plus OT is starting to play out for you? And to what extent do you think that positions you for an even faster acceleration? then maybe you would have anticipated maybe at the start of this year. And secondly, if I may, in terms of the organic free cash flow generation, again, a very robust performance and lifting the outlook by more than 10%, could you dive a bit deeper into some of the drivers that have enabled you to do so? At the Capital Markets Day, you talked about growing organic free cash flow well in excess of net income. How should we think about the performance for this year in the context of what's to come maybe in the coming years? Thank you.

Thank you, Amit. So listen, on the IT plus OT, I mean, definitely the convergence is there and the number of deals that some of the deals we are in the region and especially some of the ones we are currently in the pipeline clearly show the convergence and the concept of intelligent industry even used by somebody who just made the acquisition of... of ACA this morning, apparently. So the term starts to become a bit more mainstream in the industry. There's really the need there. I mean, we see it on the car industry. We see it on the aerospace industry. We see it in life sciences. We see it in telco. We see it in tech. A number of discussions I have as well with the semiconductor CEOs really shows that convergence is happening. And the deals are there. We're only at the beginning. So some of the engineering trend in terms of recovery is coming from just the year-on-year improvement because last year it went down quite a bit. But for me, in a number of areas, the recovery is quite strong. And what we see shaping up is the new deals, which are basically the more convergent deals. And one of the interesting facts, for example, in our engineering business, where typically they tended to see these which are small, they start to see basically because of that convergence, bigger deals in the pipeline, right? So definitely there, the faster acceleration, I think we already put it in the revised guidance for the full year. So I think it's already embedded there.

So I met on the organic free cash flow generation. Indeed, we had a strong cash generation. And as you know and have highlighted during the capital markets day, what we are interested and focused on at group level is our capacity to generate cash in the long term with a constant discipline along the year. So it starts with a contract structure up to the end of the cash collection processes. And indeed, we have been capable to increase significantly our free cash flow targets for the full year of 2021, and it's consistent with the increase in earnings that we have from the growth and margin upgrade. So indeed, a robust target.

Thank you, Aman and Carol.

Thank you, Mr. Ahmed. Next question, Mr. Michael Bruce. UBS Limited. Sir, please go ahead.

Yeah, thank you. Good morning and congratulations. Just, I mean, one of the numbers that jumps out, and there's many of them, is the hiring. You added 15,000 people in the quarter and are up 7% year-to-date. Can you talk a bit about the mix of lateral and sort of fresher hires and what the labour market is like and equally what's happening to salaries and bonuses, but also your pricing power, whether you're seeing any of that improve as a consequence of the competition for talent. And then, Eamonn, obviously the guidance implies 7% to 8% organic. I think previously 5% to 7% was the midterm trend. How do you feel about that now? As you said in the opening comments, you were sort of surprised at the strength of the recovery. Do you feel that this is a durable sort of post-COVID trend or just one that benefits from the easy comps for the next six months or so? Just kind of think out to the next two to three years, whether you feel we're in sort of a new era, which maybe even is better than you were expecting when you gave your capital markets day.

Okay. So first, listen, yes, we have added 20,000 people more or less in the first half, 16,000 in the in the second quarter, definitely to fuel the growth, we'll continue to hire. As you know, the market is hotter as well. A number of our large competitors have also announced pretty good growth rates, so there's quite a bit of demand in the market and, of course, competition for talent. We do believe that the action we have taken over the last two or three years, especially during the COVID period, is really playing in our favor in terms of basically talent attractiveness. And the second thing is Also, I think the quality and the interest of the work is also what attracts and help us to retain a lot of people. So it's not just about salary, but there are definitely target salary increase in some pockets, which have seen basically a bigger demand in the market. And there are some pressures there that of course we are addressing, but it's not broad based basically across bonuses. will tend to be higher this year because we are overperforming compared to initial objectives. So definitely people should be better bonuses this year than they have seen last year, which was a bit more depressed. On the pricing thing, I think it's structurally will happen in the market. You know, I think the demand remains strong, especially in some of the health areas. Salary will increase. You know, some of the talents we use is also some of the talent that our clients use. They see the same salary inflation basically when they try to hire and retain talent on their side. So that's something that will probably come over time. And finally, I think you had the question as well about the mix between laterals and young graduates. I think it's balanced. We continue to hire quite a few experienced people, but we're definitely increasing the hires of new graduates because We see some shortages in the market in some areas, and we consider we have to build more and more our own talent. And Q3, we'll probably see quite a bit of young graduates coming in because it's a season. On the growth, no, I'm not changing the capital market direction. We remain sticking with that. There is definitely an increase. the initial targets for this year, but the structural demand will support basically where we think the market is going to go in terms of growth. As you know, we already said about, I was quite positive about the potential of things like intelligence industry, and we're just confirming that there's a difference in there. Now it's a bit early to consider that basically the acceleration is even further than what we initially anticipated over the next five years. Understood. Thank you. Thank you.

Thank you, Mr. Michael Briss. Next question, Mr. Atwood. Please go ahead, sir.

Hi. Good morning. Good morning, Carol. And congratulations from me on a very strong second quarter. Maybe just, first of all, broadening out the question around engineering to broader technologies in the market. Could you talk a little bit about any of the technologies that you're seeing driving this demand and maybe especially where you're well-positioned And maybe just give us, I think this is the biggest guidance rate I can remember from Catherine in one quarter, just talk a little bit about the visibility and confidence in the pipeline that you're seeing that gives you the comfort to do that. And then maybe probably picking the only bad thing out or thing to improve maybe is the French margins. What needs to happen there? Is that just a question of organic top line growth continuing to come through and you getting the operating leverage or are there actions that you're taking to try to get that margin up more quickly than just allowing it to be driven by the top line? Thank you.

Okay, so you will have three people intervening on this one. I'll talk about the technology that's driving the growth. I'll ask Olivier to address the pipeline, and Carol will talk about the French margin. Listen, on the technologies, I think it's first, if I go into our enterprise management part, you know, Salesforce, S4, Oracle, I think the technology stacks that are basically linked to cloud on enterprise management, they're all booming. They're all growing. We have seen a very strong uptick in bookings around the SAP S4 in the first half. If I go to intelligence industry, it's gonna be, and also broadly, AI, it's gonna be, of course, all the cloud technologies, is going to be 5G and connectivity, software engineering, you know, I've talked about this term, softwareization, you know, starting at the end of Q1, we really start to see now the demand picking up significantly, and there's quite a bit of growth basically to expect in the market around that. With AI, ML as well in terms of the thing, and cybersecurity is also very big because is really how to build systems and environments which are cyber-proof, especially in the context of 5G and edge computing. So it's all of these that are basically coming, and I'm probably missing quite a few, but definitely this is where we are investing in, is to continue to build the strengths in each one of these pillars from a technology perspective to be able to provide the combined offerings. Olivier, on pipeline?

Yes, good morning, Adam. First of all, I would like to say that I'm very proud to contribute to the reporting of those results that demonstrate the relevance of our strategy and also the exceptional execution capabilities of our team in the context of the PENZLINK. So talking about the PIPE, first to say that the PIPE is fully supporting our guidance. a larger number of large and mega deals in the pipeline compared to previous years. What I see is that those very large deals, I would say, are beyond vendor consolidation. They are really about fast forwarding transformation to cloud and data. And as Ayman said, we also really see now sizable deals large yields in the context of intellectual industries. So the pipe is very uncomfortable. Okay.

So maybe moving to the question on the French margin. So first, Adam, I'm really pleased to see the recovering of the French margin, 60 basis points in H1 year on year, which is substantial. But that's true that we are two points below H1 2019, as there are still some pockets of underutilization there that wait, of course, on the margin. And we are globally confident that the margin will continue to improve, and we expect to be back by the end of next year.

Thank you very much.

Thank you, Adam. Thank you, Adam.

Thank you, Mr. Hadamoud. Our next question, Mr. Laurent Dorr from Kepler Shavuot.

Sir, please go ahead. Good morning, all, and congratulations from my side as well. I had a question also on the headcount evolution. In recent years, you tended to add headcounts more or less in line between offshore and onshore, and I can see a big jump of the offshore addition. Is it a reflection of higher attrition onshore, or is it something strategic like moving the engineering business a bit more in offshore region? And my second question is on the landscape, as you said this morning, the acquisition of ACA from ADECO. Accenture also recently added quite a number of M&A targets. You recently said that you were by far number one and well ahead of competition. Do you believe and do you plan to re-accelerate your M&A strategy in that specific field in the coming quarters? Thank you.

Okay. So on the offshore increase, offshore increase just because a lot of demand, but our onshore headcounts are also growing quite nicely, huh? But definitely we have seen an uptick in terms of demand in India. When you see the numbers of Indian pure players about basically the strength of the offshore demand. And we also had, you know, on shore we also had to recover some of the utilization. And you can see our utilization rates have increased quite a bit. In some places they are at all-time high just because of the strength of the demand. I think we'll see growth in both onshore and offshore. Currently, offshore growth is higher than onshore, right, because the demand is quite high. And I think the tightness of resources in the market in North America, for example, as well, is pushing our clients to try to move more offshore because themselves are challenged to be able to find resources onshore in that market. And there is definitely some increase in the engineering. Our offshore engineering level is starting to increase. It's not yet on the IT side, but for me, it's a journey. As you know, it takes time. But in North America, it's pretty high. In Europe, it's increasing bit by bit. On the M&A side, you know, listen, definitely the internet industry, I think, realization by a number of our competitors that it's a big play and, you know, I'd like to say that this is the biggest opportunity in the market, like we have been saying now for a couple of years. And they're definitely going to be investing there and doing M&A. I think we are well positioned. We will do complementary bolt-ons as needed to be able to complement some of our industry skills or some specific technologies which we think are required. So that's still part of what we're trying to do and we'll continue doing that. Great. Thank you.

Thank you, sir. Our next question is Ms. Stacey Pollard from JPMorgan Castle Limited. Please go ahead, ma'am.

Hi. Thank you very much. I have to admit, Michael and Adam picked up most of my questions, but perhaps sort of a nuance on the M&A. I've noticed you've been doing expanding in APAC recently. And are there any differences in that market? Is that something that you're going to be more aggressive about and try to bring that up as a percentage of the group?

Yeah. Thank you, Stacey. So, listen, M&A, you know, as I took the role here, I said that one of the things that we have to do over the coming years is to basically increase our presence in APAC. I mean, we cannot really be a global player without having a bigger presence in APAC and be able to serve our clients, our global clients, you know, including in Asia Pacific. So we have, over the last 10 years, moved from 1% to 6% or 7% of revenue at the same time as the group has increased significantly, but we still consider we are underweight I think the number of moves that we have done in Australia today have positioned us pretty well among the leaders in the Australian market. We have work to do in some other countries. We'll do it as appropriate, of course, organically, but also through some bolt-on acquisitions. And definitely over time, yes, we should see APAC become a bigger percentage of the group. But as the rest of the group as well is growing fast, so it puts a bit of challenge to be able to increase the percentage. But having APAC grow faster than the group overall through a mix of acquisition and organic growth is definitely the objective.

Would you say that's just to service your global customers or you want to target local Asian customers as well going forward?

Listen, it's both. It's both. I don't think we can service our global customers if we don't have a stronger presence in impact. So we have, for example, we service a lot of the automotive manufacturers in China. So our presence in China, we service a number of our customers now for our presence, including in financial services in Japan. Australia is the same. Southeast Asia. So we're tapping as well now in the local customers. For example, in Australia, a large part of our business is basically local Australian customers. In Southeast Asia now, we start to penetrate some of the banks, financial services, utilities, telco companies, including countries like Malaysia and so on. So we're definitely doing on those. But the global footprint is also important for our North American and European clients.

That's great. Thanks.

Stacey. Our next question is from Mr. Stefan Slowinski, XMD, and Peter Baribas.

Yes, thank you.

Sir, please go ahead.

Thank you, and good morning. I just have two questions around costs. I mean, first one on the Alton synergies. I believe you said you've delivered two-thirds of those synergies faster than expected. Can you quantify how much you've over-delivered on that And do you still have the same level of absolute cost synergies in mind? And also on revenue synergies, it certainly sounds like the demand is much better than when you gave those initial revenue synergies. So any update on the actual cost and revenue synergies? And then the second question is just around your comments around travel and wondering if anything's changed there relative to when you last discussed it in terms of expectations around travel. and also making some of the work-from-home savings more permanent and operationalizing those. Thank you.

Okay. Plenty of questions. So on the cost synergies, they came ahead because we were able to deliver on some of the real estate and some of the procurements and some of the initial cost avoidance a bit faster. So all what we're saying is basically it's impacting Q1 and basically has impact on this 12%. operating margin and the 120 bps improvement. So the message there is basically don't expect that we had almost nothing in H1 and all of this will basically now have only an impact in H2. But I don't have an exact quantification of basically of how much that is. Maybe Carol can do that during the road shows. On the revenue synergies, I did say that we provide an update by the end of the year. definitely we continue to sign a number of deals and we see the traction really of intelligence industry, which is a bit faster than anticipated, to be frank, in terms of looking at some larger deals. So revenue synergies are strong and we'll have a better view and provide the proper update when we do the full year results. On the travel, I think, again, here, there are some expenses we would have expected to come in H1 that didn't come. But we definitely expect them to see you too in H2. I definitely have a travel schedule which is quite different between H1 and H2. So I haven't moved from Paris almost in H1 and I'm almost never in Paris in H2. So if it's me, I think it also applies to a number of our executives. We definitely have done some executive meetings and the people need to meet each other and we definitely need to plan as well for next year. So I do see an uptick coming in expenses definitely in the second half that we factor when we look at our margin for the second half. The savings from work from home, we're still working from home and we're still at 85%. Even in some countries now, we are down to like 75%. Overall, it's still pretty high. So we start rolling out all things like flexible work policies and others, but I cannot say at this stage that we are basically fully capturing yet the benefits from that.

Okay, thank you very much.

Thank you, sir. Our next question, Mrs. Chandra Mouli-Shiraman from Stifel Nicholas Limited. Please go ahead, sir.

Yeah, hi. Thanks for taking my question and congrats from my side as well. So Aman, I just wanted to double check on the resilience of the margins that you've reported. Clearly things are going quite well in most geographies except maybe France. But I remember a few years ago you had some pressure in terms of margins because of some decisions taken by your competitors in terms of prices. So I'm just wondering how do you see that impacting potentially in future markets Is the model resilient enough to take that kind of pressure? Thanks.

Yeah, listen, the model is much more resilient right now, and we have proved it as well last year. As you imagine, last year, there was quite a bit of pressure on pricing in the market. And in spite of the decrease in utilization, the pressure on pricing, our erosion in terms of margin was only 40 bps. So I think we have already demonstrated last year the resilience on the margin. Right now, I can tell you, I don't think anybody is trying to do a lot of pricing discounts. I mean, you're in a market which is pretty strong with a lot of demand. So, you know, we don't see, at least in the near term, a lot of pressure on pricing. On large, you'll always have price competitiveness. I mean, let's not be fooled. It will always be there. I mean, the market remains extremely competitive A lot of our competitors are hungry for growth. So it is there. But it's nothing crazy or nothing abnormal in terms of what we see in terms of competitive pricing in the market today. The next question will be the last question. This is the last question. Okay. Thank you all very much. And we look forward to talking to you either during the coming weeks in roadshows and conferences or in our Q3 at the end of the week.

Thank you. Ladies and gentlemen this concludes the conference call. Thank you all for your participation. You may now disconnect.