Capgemini Se Ord

Good morning. Thank you for joining us for this full year 2023 results call. And today I'll be joined by our new CFO Nivy Bhagat and our CEO Olivier Sevilla. So 2023 was another record year for the group. Our results are either in line or above our guidance. The industry slowed down in 2023 after two years of record growth. This gradual deceleration was well anticipated. And despite the headwinds, we brought the group to new highs. This demonstrates our agility, the quality of our teams, and above all, the strength of our positioning. Looking at Q4, it came in line with our expectation at 5.6 billion euros. Our revenues are virtually stable year on year, and the booking remains solid with a book to bill of 1.18. For the full year, revenues reached 22.5 billion euros, up 4.4% at constant currency, in line with our target. Bookings are robust with a solid book-to-bill of 1.06 and reflects sustained commercial momentum despite lens and decision cycles. And at 13.3%, the operating margin rate improves 30 basis point. This is above the 0 to 20 basis point target we set for the year. And this is essentially a result from the ongoing shift towards more innovative offerings combined with operational efficiency. In the context of inflation and market slowdown, it's yet another demonstration of the resilience of the group and above all, the increasing value we create for our clients. Organic free cash flow reached a record level of 1.96 billion euros above the 1.8 billion target we set for 2023. Normalized EPS is up 8%. Year-on-year at 12.44 euros, in line with our dividend policies, the Board of Directors is proposing the payment of a dividend of 3.4 euros per share at the annual general meeting. Now, these results put us among the leaders in our industry. 2023 once again illustrates how the transformation of Capgemini and its positioning as a business and technology partner to its clients has redefined the resilience of the group. Our clients are holding firm on their digital and sustainable agenda. The gradual market slowdown we experienced results from lengthened decision cycle, increasing client focus on operational and cost efficiency program. This also translated in continuous demand for transformation program with shorter payback, leveraging high value added service offering, most notably in intelligent industry, as well as activities driven by cloud data and AI, where we experienced double-digit growth. There is no change in the environment at the end of the year, and Q4 came in line with our expectation. The sector geographies and business trends are a prolongation of the ones we observed since the start of the year. Public sector and manufacturing were more resilient, while telco, media, and technology and financial services experienced a marked slowdown. Europe showed a greater resilience, In the deceleration phase, conversely, the slowdown was more pronounced in North America, penalized by a less favorable mix and more aggressive cost-cutting by clients. However, we can expect North America to rebound faster than Europe in the re-acceleration phase. The trends by business are consistent with what we observed since the beginning of the year. These were highlighting the 9% growth in strategy and transformation, confirming the recognition of our positioning as a business and transformation partner by our clients. So let's just take a small time to reflect a little bit and put these 2023 results in perspective, looking at the dynamic we had over the past 10 years. The size of the group has more than doubled. Our operating margin increased by more than four points. And the normalized EPS and organic free cash flow nearly tripled. The scale of the performance improvement reflects the extent of the transformation of the group, positioned as a business and technology partner to our clients in that transition towards a digital and sustainable economy. A client-centric organization, strategic partner of CXOs, enabling us to shape transformation deals. Our ability to deliver end-to-end industry-relevant solutions leveraging technology as a transformation driver. and the fact that we are leading an intelligent industry. To study improvement in performance despite the ups and downs of the market is a testimony of relevance of our strategy, the quality of execution, and the agility which redefines our resilience profile. If there are some takeaways, it is that we have raised our growth profile through the cycle to the best in the industry. Our margin is resilient and improving, supported by our margin-accurative offering and continuous efficiency drive. Now, coming back to 2023, we continue to invest in building the capabilities and solutions to help our clients transition to a digital and sustainable economy. We keep investing in our solutions. We are leading play in the intelligent industry and customer first, as well as cloud, data, and AI. And I will come back to the Gen AI subject right after. On sustainability front, we stepped up our efforts in 2023. We continue to support our clients on their net zero strategy, on the design of sustainable product, the implementation of sustainable operation or greener IT. And we also launched our climate tech offerings around renewables and the scaling up of gigafactories. We continue to pursue our industry plays to reveal new sorts of value creation for our clients. In life science, we are deploying a clinical trial solution to accelerate time to market for drug development. Innovation remains top of mind, of course, leveraging our network of applied innovation exchanges and labs across the board to showcase technology and use cases to our clients, be it on quantum, immersive technologies, 5G, 6G, or even, of course, Gen-AI. And we significantly strengthened our expanded ecosystem of partners, which represent now more than 65% of our bookings, a significant increase in the last year, driven by our intimate relationship, notably with the hyperscalers. On talent, we demonstrated our ability to attract, retain, and upscale our people. The group provided 17.8 million hours of learning to employees, representing 53.8 hours per employee, up 5% year-on-year. We are ultimately driven by delivering value-led transformation for our clients. Now let's come back to GENE-AI. Of course, it's top of mind for all large organizations, and we continue to strengthen and upskill our teams and invest in solutions. We are positioned as a leading player, enabling our clients to explore, test, and scale solutions for tangible business impact. We delivered or are delivering around 300 projects, and we have hundreds more in our qualified pipeline. There is clearly a strong demand for generative AI and more broadly for AI services. And we start to see more clients going from proof of concept to deployments. Just highlight a couple of examples. We are supporting a US industrial conglomerate to become a major software player, leveraging GenAI. We are collaborating on a number of use cases ranging from engineering to customer, sales, technical support, in addition to finance and IT. We expect to bring numerous use cases to production in the course of 2024, setting a path for 150 million net P&L impact for the client. We're also partnering with the U.S. Telco to build GNI customer service assistant, as well as conversational bots for commerce and customer self-service. The aim is to create an immersive and personalized customer experience to address customers in a proactive and timely manner, leading to improved customer satisfaction and sales. The group is very well positioned to address the growing demand for GenAI and ready for the scale deployments. We have a strong portfolio of offering with capabilities that scale from a business, industry, and technology perspective. Our Capgemini GenAI platform RAISE is fully live now, enabling clients to experiment use cases and to industrialize our own custom GenAI projects. We continue to expand our strong ecosystem of technology partners including Microsoft, Google, AWS, Salesforce, and more recently, Mistral AI. On the ESG front, 2023 was an important year, with major progress achieved towards a more sustainable and inclusive world. Regarding environmental sustainability, the group total carbon emissions, scope 1, 2, and 3, have fallen by 30% against the 2019 baseline. Notably, the share of renewable energies reached 96% compared to 88% in 2022, and we were recognized last week by the CDP as part of the A-list. On social engagement, the group further strengthened its position as a leader committed to fostering diversity and inclusion. On gender diversity, the proportion of women in the total workforce reached 38.8%, so up one point year on year, and almost six points since 2019. The proportion of women among executive leadership position reached 26.2%, up by 1.8 points year-on-year, and more than 9 points since 2019. The scale of impact through digital inclusion initiative also expanded in 2023. Overall, CAP Gemini's various programs and partnerships with leading nonprofit organizations benefited almost 2.5 million individuals in 2023, bringing the community beneficiaries to 4.4 million since 2018. And on governance, we continue to make progress around ethics and cybersecurity. Now coming to the outlook for 2024. So we expect a soft landing scenario setting up for a strong 2025. In terms of revenue growth, we see the trough in Q1, driven by a seasonal decline in revenue versus Q4. Starting Q2, we expect a gradual improvement towards an attractive exit growth rate in Q4, setting up for a rebound of growth for 2025. This translates for the full year in a constant currency growth of 0% to 3%, including a minimal contribution of M&A at the low end and up to one point at the top end. On the operating margin, we target 0 to 30 bps improvement, leveraging our improved offering mix as well as continuous operational improvement on our way towards the 14% target for 2025. And finally, we target to maintain our strong cash conversion with an organic free cash flow around 1.9 billion euros. Thank you for your attention, and I now leave the floor to Olivier Sevilla, our CEO.

Thank you, Ayman, and good morning, everyone. So we delivered, indeed, a solid performance in 2023, despite the weakening macro and the rising geopolitical tensions. Basically, we want market share in a softer environment. We are clearly benefiting from our strong positioning as a business and technology partner of the global Fortune 500 companies to support their digital and sustainable transformation. Dealing a bit now in our revenues by sector. All sectors experienced a gradual deceleration throughout the year as anticipated. There is a visible contrast in our performance across sectors. Looking more specifically to our Q4 performance, as you can see, the public sector continued to deliver solid growth, and energy and utilities proved also quite dynamic. Conversely, telco and tech and financial services continue to contract as we anticipated. Moving to the bookings. Bookings, I'm pretty proud to report that bookings reached almost 24 billion euros last year, which represents a three-person growth at constant currency. And in Q4, with bookings of 6.6 billion euros, we delivered a solid 1.18 book-to-bill ratio leading to a 1.06 ratio for the full year. Our sales pipeline is strong. It demonstrates the underlying demands for the services we offer, hence our relevance, and support clearly our gradual revenue improvement guidance. We have a particularly good traction of intelligent industry, and the pipe is promising. It continues to perform very strongly in data and AI, and we see growing appetite for enterprise data hubs, larger programs, as GenAI picks up. On enterprise management, the SAP S4 wave continues to trigger sustained demand. Finally, as Ayman mentioned, our sustainability offers are a hit, and the pipeline growth that is really impressive. Overall, while discretionary spend remains soft, while decision cycles are stabilized, and vendor consolidation is at a place that plays favorably to us, we see a gradual growing demand for larger transformational deals. Let me now highlight a couple of transformation deals that we won in Q4. As I mentioned, the execution of our strategy is well underway. So these deals showcase the value we bring to our clients. They are aligned with the dimensions of our strategic framework at the same time, validate the relevance of our strategic framework. I would like to call out three examples and put those in context of our overall strategy. On Intelligent Industry for U.S. global automotive supplier, we've become their key partner for their driver assistance R&D activities and related embedded software. On customer first for global insurance company, We are transforming their marketing strategy and implementing scalable customer data platform for customer acquisition and cross and upsell to increase the potential revenue by up to 30% on one of our key business domains. When it comes to sustainability for NTU, a German aircraft engine manufacturer, we are supporting our clients to develop, manufacture and service the next generation of sustainable and fuel efficient aircraft engines, including revolutionary propulsion concepts such as flying fuel cells, aiming to reduce the climate impact of aviation longer term by as much as 95%. With this, I end over

Thank you, Olivier, and good morning, everyone. I'm pleased to share now with you the financial highlights of our 2023 fiscal year. As mentioned by Ayman, Capgemini delivered solid results in 2023 despite the market slowdown. Group revenues reached €22,522 million for the full year. This represents a reported growth of 2.4%. At constant rates, the growth reached 4.4% within the target range of 4% to 7% for 2023. Operating margin amounted to 2,991 million euros or 13.3% of revenues. This 30 basis points improvement exceeds the 0 to 20 basis points range that was targeted for the year. After other operating expenses, financial and tax expenses, which I will further comment on in a moment, the net profit group share reached 1,663 million euros, up 7% year-on-year. Normalized EPS reached 12 euros and 44 cents, up 8% year-on-year. Finally, we also generated a strong organic free cash flow of 1,963 million euros above our target of around 1.8 billion euros for 2023. Moving on to our quarterly revenue growth. The gradual slowdown experienced since the beginning of the year continued in Q4 at the expected level. Q4 revenues were slightly down by minus 0.2% at constant exchange rates and minus 0.9% on an organic basis. This brings the full-year organic growth to 3.9%. Taking into account a positive scope impact of 0.5 points for the year, growth at constant currency was 4.4%. FX had a negative impact of 2.2 points in Q4 and minus 2 points for the full year. As a result, Capgemini's reported growth was minus 2.4% in Q4 and plus 2.4% for the full year. Looking forward, FX should have a slightly negative impact both in Q1 and for the full year 2024. Q4 came in line with our expectations globally and by region. The breakdown of the revenues by region shows that the pace of deceleration was similar across our key operating regions. On a full year basis and at constant exchange rates, the United Kingdom and Ireland maintained a robust momentum with revenues growing plus 7.9%. This performance was driven by the public sector as well as consumer goods and retail and manufacturing sectors, while revenues in financial services and TMT was stable year on year. The rest of Europe region performed well, with revenue growth of plus 7.6% fueled by the public sector and the manufacturing sector. Growth in the energy utility sector was solid, but limited in financial services. France revenues grew plus 6.1%, mainly supported by strong growth in the manufacturing and consumer goods and retail sectors. TMT was the only sector to decline in 2023. Revenues in North America decreased slightly by minus 1.3%. The manufacturing and services sectors delivered solid growth. Revenue declined in the TMT and consumer goods and retail sectors and to a lesser extent in financial services. Finally, revenues in Asia Pacific and Latin America region grew plus 4.6%. Growth was mostly driven by Asia Pacific, where the consumer goods and retail services, manufacturing and public sectors enjoyed double-digit growth rates, whereas financial services remained stable and TMT declined. Moving on to our revenues by business line. Here again, Q4 came in line with our expectations. Strategy and consulting remained our fastest growing business, up close to 5% at constant currency. Now for the full year and at constant exchange rates. Strategy and transformation consulting services reported plus 8.6% growth in total revenues in 2023. This continued momentum reflects our strong positioning as a strategic partner to our clients for their digital and sustainable ambitions. Applications and technology services reported plus 4.5% increase in total revenues. And finally, operations and engineering services grew plus 2.8% in total revenues. Moving now to the headcount evolution. The strengthening of our operational efficiency in a decelerating market led to an increase in utilization rate, but also a decrease in total headcount, particularly offshore. Our total headcount stands just above 340,000 employees at the end of 2023, down by 5% year on year. The offshore leverage is slightly down to 57%, one point lower than at the end of 2022. Lastly, the last 12-month attrition further cooled down in Q4 compared to Q3. At 16.7%, the attrition for 2023 is down by almost nine points compared to 2022 and now stands within our nominal operating range. Let's turn to the operating margin by region. In 2023, all regions maintained or improved profitability. First of all, the 50 basis points improvement in France brings the operating margin to 12.6%, which is an all-time high. UK and Ireland also delivers another record operating margin at 18.6%, compared with 18% the year before, building on our favorable business mix in this region. Operating margin in North America is the same as last year at 15.6%. The rest of Europe margin is slightly up at 11.7%, 10 basis points above 2022. Finally, the operating margin in Latin America and Asia Pacific region improved substantially to 12.2%, up by 160 basis points year-on-year. The improvement of our operating margin is once again driven by the improvement of our gross margin. Our gross margin improved by 40 basis points in 2023. This results from the evolution of our portfolio of offerings towards more innovative and value added services combined in 2023 with the strengthening of our operational efficiency. Moving on to the next slide. Net financial expenses were visibly down at 42 million euros in 2023 versus 129 million euros in 2022. This is primarily driven by higher interest income on our cash assets. Income tax expenses decreased by 84 million euros year on year to 626 million euros. The group's effective tax rate stands at 27.2% in 2023. This compares with an underlying rate of 28.1% in 2022 after adjusting for the 73 million euros tax expense in the US. Now, a quick recap of our P&L from the operating margin to the net income. The other operating income and expenses increased to 645 million euros, up by 171 million euros year-on-year. On top of the higher restructuring charges, which increased by 97 million euros, a change in French accounting practices as set by the French National Accounting Council resulted in an additional 63 million euros non-cash expense related to the annual employee share ownership plan. Consequently, the operating profit was 2,346 million euros, or 10.4% of the group revenues. After financial expenses, taxes, minority interests, and equity affiliates, the net profit group share amounted to 1,663 million euros, up by 7% compared to 2022. Consequently, reported basic EPS was 9 euros 70 cents, up by 7% on 2022, while normalized EPS was up by 8% to 12 euros 44 cents. Finally, let's have a look at the evolution of our organic free cash flow and net debt in 2023. We generated an organic free cash flow of 1,963 million euros above our target of around 1,800 million euros. Over the past couple of years, the swing in liquidity and interest rates overshadowed the strong and regular underlying improvement in our cash generation. Indeed, before working capital variation, our free cash flow improved by almost 1 billion euros between 2021 and 2023, moving from 1.3 billion euros in 2021 to 2.3 billion euros last year. M&E cash flows amounted to €343 million, while we returned to shareholders more than €1.4 billion in dividends and share buybacks. Our 10th employee share ownership plan led to a net share capital increase of €465 million. Overall, the group's net debt further decreased to €2 billion in December 2023, compared to €2.6 billion a year ago. On that note, Ayman, over to you for your closing remarks.