Capgemini Se Ord

Good day and thank you for standing by. Welcome to Capgemini H1 2025 results webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 and 1 on your telephone. You will then hear an automatic message advising you on this race. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Ayman Azad, CEO. Sir, please go ahead.

Thank you. Good morning, and thank you for joining us for this H1 2025 results call. I'll be joined today by our CFO, Nivi Bhagat. Our performance continues to improve through the first half of the year and due to slightly exceeded expectations. In a volatile economic environment and persistent leaks of demand, we have demonstrated the strong resilience and adaptability in navigating these challenging conditions. We see the benefits of the action announced in Q3 2024. The revenue growth rate gradually improved quarter after quarter, and the group returned to positive constant currency growth in Q2 at plus 0.7% year on year. For H1 2025, revenue reached 11,107,000,000 euros, up 0.2% year-on-year. Bookings totaled 11,993,000,000 euros over the period, plus 2.1% year-on-year. The commercial momentum is solid, with a book to bid of 1.08, despite client decision cycles that remain lengthy in this environment. The operating margin amounts to €1,377,000,000, or 12.4% of revenues, so stable year-on-year. In a challenging environment, the performance in H1 demonstrates the resilience of the group's operating model and the improvement of our operational efficiency. Our organic free cash flow features a traditional seasonal pattern, as you know, so plus €60 million in H1 2025, and the normalized EPS stands So in Q2, revenue growth was stable or continued to gradually improve compared to the previous quarter across all regions, businesses, and most sectors. First, from a geographic perspective, growth rates in the UK and Ireland, North America and Asia Pacific and Latin America have accelerated. Growth rates in continental Europe, including France, more stable. From a sector perspective, financial services and T&T sectors continue to accelerate, which meet single-digit constant currency growth. Manufacturing also improved, but continues to weigh on the group growth. Finally, from a business perspective, strategy and transformation and application and technology maintain their positive growth rates. The strongest improvement came from operation and engineering, fueled by improvement across all the business lines, particularly in business services, which recorded high single-digit growth. So in the first half of the year, clients remained focused on driving efficient speeds through cost transformation program. Discretionary spend was still muted. Our positioning as a business and technology transformation partner of our clients is well-recognized, and in that context, Capgemini continues to enjoy strong traction thanks to our high-value service offering. This is particularly visible in cloud and data and AI. So to illustrate this, let me share a few examples. On cloud, Capgemini secured a multi-year framework agreement reinforcing our role as a trusted advisor and strategic partner to a key public sector client in Europe. Our solution is anchored in the integration of cutting-edge cloud technologies, including sovereign cloud capabilities, tailored for high-security environment. It outlines a clear pathway towards sovereign cloud infrastructure while driving the modernization of applications and processes to enable a next-generation digital platform for public service delivery. On the intelligence industry side, CAP generalized secure the strategic contract to support a leading global aerospace company. The objective of this engagement is to accelerate production while significantly reducing non-conformities. Our delivery model played a decisive role in securing the contract. It combined the use of generative AI to create comprehensive design solution based on historical analysis and follows a self-deployment model that ensures continuous support through globally distributed technical teams. Finally, Capgemini has been chosen as a strategic partner of a U.S. high-tech company to spearhead this global finance transformation. To that end, we redesigned Capgemini formalize and deploy a multi-year finance transformation roadmap that defines and prioritizes the portfolio of viable transformation projects within all finance capabilities. Ultimately, we will operate the client's operational finance activities and move them to best-in-class processes while optimizing them thanks to technology such as AI. Now, if you look at the underlying trends in the market now, we see continuous traction for the technologies at the core of tech-driven business transformation. There is a clear appetite for digital core. It's driven by strong demand for a giant ERP-enabled business transformation. Companies today have a cloud-first strategy. Cloud continues to be a major subject of interest and choose discussions with our client as they design their data and AI strategies. And in the realm of data and AI, we see strong demand to harness advanced analytics and artificial intelligence to generate actionable insights and fuel innovation. So thanks to our end-to-end model, our industry expertise, and strong ecosystem of partners, we are well positioned to capture this demand at scale. At the same time, we observe some fast-rising traction and accelerating momentum in some new areas. First, on defense and sovereignty, momentum is particularly high in Europe. We are very well positioned being one of the very few European skill players combining a leading position in all relevant capabilities and industries. On intelligent operation, to transform and operate horizontal and vertical business processes, leveraging GNI and JTKI. With the acquisition of WNS, we will provide the group with the scale and vertical sector expertise to capture that's rapidly emerging strategic opportunity created by the paradigm shift from traditional BPS to agentic AI-powered intelligent operation. And, of course, continue to see fast-rising demand in Gen AI and agentic AI more generally. Now, coming to the Gen AI, agentic AI, you know, the market is showing strong momentum, which together, Gen AI and Gen TKI contributed to over 7% of our Q2 bookings. We continue to invest in strategic assets to strengthen our position and accelerate, notably the launch of the Resonance AI Framework, our strategic blueprint designed to help leaders conceptualize, structure, and drive successful AI-powered transformation. The expansion of our AI first portfolio, we have structured and enriched our offering by enterprise domain to comprehensively address client needs. And the continuous enhancement of our RACE platform, now featuring a gallery of AI agents, Gen-AI assistants, and agentic systems. We have also introduced an agentic AI builder, a robust suite of tools and frameworks to design, orchestrate, and monitor multi-agent workflows. So let's highlight a couple of examples from our Q2 wins. For global media firms, we opened new frontiers with intelligent operations for finance to transform the predominantly manual operation. We developed a suite of AI agents that automate complex variable tasks and empower real-time data-driven decision-making, enhancing both efficiency and strategic insight. For U.S. energy clients, we refactor a legacy application using generative AI, energetic AI technologies to a proprietary accelerator that automates code conversion. AI enables the analysis of legacy code structures and suggests an automate, refactoring steps to improve maintainability, performance, and integration in modern systems. This makes this effort a scalable proof of concept for modernizing numerous other applications, improving operational efficiency and reducing time for market. Finally, for global life science clients, we automate the analysis of the build-up materials to accelerate the duration of environmental reports for medicines by leveraging GMAI, the time to produce ISO-compliant reports can be reduced from several weeks to minutes. This acceleration enables our clients to respond faster to tender requirements, protecting billions of annual revenues at risk. Now, coming to the outlook, as we enter Q3, we see some stability in the environment. While we update our growth outlook today, we decided to retain the cautious stance adopted at the beginning of the year. So, in order to account for the uncertainty created by geopolitical tensions and a slow economy. So, after this good H1 performance, we narrow our cost and currency growth outlook to between minus 1 and plus 1%. On the M&A contribution to growth, it is now assumed to be limited to around one point versus one to two point initial. This means that we are narrowing up the underlying target. The operating margin target of 13.3 to 13.5 and the organic free cash flow objective of around 1.9 billion euros remain unchanged. As a reminder, our act does not take into account the contemplated acquisition of WNS. Thank you for your attention, and I'll hand over to Libby.

Thank you, Ayman, and good morning, everyone. I'm pleased to share with you the highlights of our H1 2025 results. After a good start to the year, our Q2 revenues also came slightly above our expectations. Overall, group revenues reached €11,107 million in H1 2025, up plus 0.2% at constant currency and slightly down minus 0.3% on a reported basis. Operating margin amounted to 1,377 million euros or 12.4% of revenues stable year-on-year. After other operating expenses, financial and income tax expenses, the net profit group share reached 724 million euros compared with 835 million euros in H1 last year. Basic EPS stands at 4 euros and 26 cents down minus 13% year-on-year while normalized EPS is plus 2% year-on-year to 6 euros. Finally, we generated an organic free cash flow of 60 million euros in H1 2025 compared to 163 million euros in H1 last year. Moving on to our quarterly revenue growth. Our revenue growth rate gradually improved during H1 and the group returned positive constant currency growth in Q2 at plus 0.7% year-on-year. This was notably supported by the targeted actions that we'd announced at the end of Q3 2024. This represents 110 basis points improvement compared with the Q1 growth rate and brings this to plus 0.2% of our constant currency growth for H1. In line with our comments at the beginning of the year, M&E contributed around one point over the period. Turning to FX, with the depreciation of the U.S. dollar, currency movements became a headwind in Q2 with a negative impact of 170 basis points. For the first half of the year, FX had a negative impact of 50 basis points. As a result, the reported growth was minus 1% in Q2 and minus 0.3% for H1. At this point in the year, we expect the FX impact to remain a headwind in the second part of this year, leading to a negative impact from minus 1.5 to minus 2 points for the full year. Moving on to bookings. The group enjoyed a solid commercial momentum in the first half of the year. Bookings totaled 12 billion euros in H1 with 6.1 billion euros in Q2. This represents constant currency growth of plus 2.1% and plus 1.5% year-on-year respectively. Book-to-bill reached 1.10 in Q2. This brings our H1 book-to-bill ratio to a strong 1.08. Looking first to revenues by sector. Most of our sectors enjoyed a gradual improvement in their revenue growth rates through the first half of the year. Therefore, I will focus my comments first on Q2. The financial services and TMT sectors each grew plus 5.5% year-on-year in constant currency, marking their fifth consecutive quarter of improvement, while the manufacturing sector remained weak in Q2 at minus 4% year-on-year on a high basis of comparison in Q2 last year. It also improved visibly with a growth rate up by 190 basis points versus Q1. The energy and utilities and public sectors remain solid in Q2, up 2.3% and plus 1.4% respectively, although decelerating slightly versus their Q1 growth rates. Lastly, the consumer goods and retail sector and the services sector remain under pressure in Q2 with a slight contraction similar to Q1, at minus 1.3% and minus 1.7% respectively. Moving on to revenues by regions. Let's start with Q2 revenue trends and see how they compare to those reported in Q1. Growth rates continue to improve in North America, United Kingdom and Ireland, and in the Asia-Pacific and Latin America regions, all of which were already very solid in Q1. France and the rest of Europe region reported growth rates in Q2 similar to Q1. Turning now to H1, where I discuss year-on-year growth at constant currency. Revenue growth in North America was 1.6% and reached 6% in the United Kingdom and Ireland region. In both regions, growth was mainly driven by financial services, TMT, and energy and utility sectors. Asia-Pacific and Latin America region enjoyed strong growth at plus 8.7%, mainly fueled by the financial services and TMT sectors that enjoyed double-digit growth. Conversely, revenues in France and rest of Europe region declined by minus 5% and minus 2.3% respectively. In both regions, growth in resilient public and P&P sectors was more than offset by loan activity in the manufacturing and consumer goods and retail sectors. Moving on to operating margin by region. As is often the case with half-year results, we experienced more fluctuations in regional margin evolution than what we typically do on a full-year basis. So please keep in mind that H1 regional margin evolution does not necessarily provide a full representation of what the full year evolution will be. Operating margin in North America improved by 80 basis points to 16.3%. For France, you might remember that last year's operating margin was affected by one-off items. Excluding these one-offs, there has been no improvement in the underlying margins. Operating margin in the UK and Ireland region remained at high level at 18.1%, although it declined by 240 basis points compared with the record level reached in H1 last year. Lastly, operating margin in the rest of Europe and Asia-Pacific and Latin America regions was down year-on-year by 70 and 40 basis points respectively. Moving on to revenues by business. All have businesses delivered higher year-on-year revenue growth rates in Q2 2025, when compared to Q1. The strongest progress came from operations and engineering, with visible improvement across all its business lines. We are notably pleased to report that business services recorded high single-digit growth in Q2. Turning now to H1, its constant currency. Total revenues of strategy and transformation services grew by plus 1.3%. Total revenues of applications and technology services, which is Capgemini's core business, was up by plus 2.6%. Conversely, operations and engineering total revenues decreased by minus 1.5%. Now moving on to the headcount evolution. Total headcount stands at 349,400 employees at the end of June 2025, up by 4% year-on-year and by 2% since the end of March 2025. While our onshore headcount decreased slightly by 1% year-on-year, our offshore headcount increased by 7% over the period. Consequently, the offshore leverage stands at 59% in June 2025, up by two points compared with June 2024. Lastly, attrition increased slightly over the past quarter. This brings our last 12-month attrition rate to 16.1% at the end of June 2025, up by almost one point year-on-year, but still well within our nominal operating range. Moving on now to the analysis of our operating margins. The continued shift in Capgemini's mix of offerings towards more innovative and value-added services, combined with a strong focus on cost discipline, enabled the group to offset the impact of current market softness on our growth margin. A 26.4% growth margin is down 30 basis points year-on-year, but still 20 basis points above H1 2023 level. After an increase last year, Selling expenses and GMA expenses are now down by 10 and 20 basis points, respectively. Consequently, the operating margin remains stable at 12.4% of revenues in H1 2025. This demonstrates, again, the resilience of the group's operating model in a challenging environment. Moving on to the next slide, our net financial result is an income of €16 million compared to €20 million in H1 2024. The income tax expense decreased by 66 million euros year-on-year to 260 million euros. The effective tax rate stands at 26.2% in H1 2025, down to 28% for the same period last year. This is due to a positive, non-cash, one-off tax item that will not repeat in H2. Hence, our EPR will be higher for the full year, and this is known fact, on our cash tax rate that is expected to be substantially higher in 2025 than it was last year. Let's turn to the recap of our P&L from operating margin to net income. The other operating income and expenses represent a net expense of 401 million euros, up by 164 million euros year-on-year. This was notably driven by restructuring costs, which are not only higher this year as anticipated, but also more skewed to H1 in 2025. These stood at 136 million euros in H1 2025, versus 53 million euros in H1 2024. Consequently, our operating profit amounts to 976 million euros, or 8.8% of revenues, compared with 1,147 million euros at 10.3% in H1 last year. After financial and tax expenses, share of equity affiliates, and non-control of interest, the group share in net profit is down minus 13% year-on-year at 724 million euros. While the basic EPS is also down minus 13% to 4 euros and 26 cents, our normalized EPS is up plus 2% year-on-year to 6 euros. Finally, let's have a look at the evolution of our organic free cash flow and net debt. We generated an organic free cash flow of 60 million euros in H1. As you know, Our cash generation pattern is highly skewed to the second half of the year. A few final words on capital allocation. In H1 2025, the group paid dividends of 578 million euros and invested 28 million euros on vote-on acquisitions. Consequently, our net debt stands at 2.8 billion euros at the end of H1. This compares with 2.8 billion euros at the end of H1 last year and 2.1 billion euros at the end of 2024. As you saw in our press release this morning, the Board of Directors have approved a new multi-year share buyback program of €2 billion, which will essentially be funded by the group's organic free cash flow. As a reminder, in June 2025, the group redeemed in full and at maturity the €800 million bond issued in June 2020. So on that note, I hand back to Ayman for Q&A session.

Thank you, Nivi. Let's now open the Q&A and to allow a maximum number of people in the queue to ask questions, I kindly ask you to restrict yourself to one question and a single follow-up. Operator, could you please share the Q&A instructions?

Thank you. As a reminder, to ask questions, please press star 1 and 1 and wait for a name to be announced. To cancel your request, please press star 1 and 1 again. One moment for the first question. Our first question comes from Sven Merck from Barclays. Please go ahead.

Great. Good morning, and thank you for taking my questions. Just a question on the outlook. The guidance implies at the midpoint a similar performance in H2 as we have seen in H1. Can you speak a bit about the upside and downside risks to this? If macro shouldn't deteriorate, should we see an improvement in the second half given the easier cons? Thank you.

Thank you. Good question, of course. As you know, we are pretty cautious because, you know, changing the environment can be pretty brutal. We, for the moment, see some stability going into Q3, so you can expect for the moment Q3 to be similar to Q2. That's what we see. So it all depends after that of what the environment looks like going into Q4. But as I said, we see too much uncertainty to be able to really be sure about how Q4 looks like, and that's why we're going to remain cautious from that perspective.

Okay, perfect. Can I quickly follow up maybe on the margin as well? Given, you know, we have seen a flat development in the first half. The second half could see an improvement. What would drive that improvement? I've seen obviously a pickup in hiring, but the utilization improved as well in the second quarter. How does that fit into the margin outlook for the second half?

Thank you. Listen, the pickup in hiring is not true. So let's be clear here. I think it's very important to understand that right now we do continue to see a decrease of headcounts in Europe, especially in continental Europe. On the other side, we see a continuing increase in headcounts in offshore driven notably by a U.S. recovery and financial services, which, as you know, operate with a pretty high offshore leverage. On the margin, the market remains, you know, quite competitive, and, you know, we fight to be able to maintain our operating margin, and if there's a possibility to improve, we improve. But it remains a pretty challenging environment from that perspective.

Okay. Thank you very much.

Thank you for the question. One moment for the next question. Our next question comes from the line of Mohamed Mouawala from Goldman Sachs. Please go ahead.

Great. Thank you. Morning, Ayman. Morning, Nivi. Two from me. Firstly, just in terms of the organic growth development, you've kind of hit this sort of flattish level. You talked about kind of stable environment and now similar kind of growth in Q3, but how do you think about your visibility into the kind of back half of the year, particularly with some of the kind of you know, trade agreements kind of being formed, what does it sort of take for that sort of exit rate to sort of accelerate? And also by region. I know North America is inflected, but, you know, you obviously would probably need some inflection in Europe. So just curious on your visibility into kind of the year end if we get some of this kind of resolution. And then secondly, when we think about the gross margin, Nivi, how should we think about that for the rest of the year? I know it was down 30 bps. in the first half, but you see sort of scope for that to sort of improve or should it be similar to what we saw in H1? Thank you.

Yeah. I think for the moment on the visibility, you know, again, we have good visibility, but as you know, shifts can change pretty quickly. I'm not necessarily with the fact that we have a lot of stability on the ties for the moment. Yes, there's an agreement between Europe and the U.S., but I don't feel that everybody is aligned and consider that this is a positive thing for Europe, if you read between the lines. So it's a good sign that there's an agreement, that we have to see what is going to be the impact of this agreement. And there's still volatility overall. I think it's – I prefer to remain cautious at this stage. Of course, we'd love to see stability and some improvements through the end of the year, and that would be the positive scenario. But for the moment, I prefer to remain cautious. We see it in Q3, going to Q3, but I remain cautious going into Q4 for the moment. You know, and that will define the existence by region. I mean, we see, as you see, we can see improvements right now in North America, where both financial services and the rest of the business, you know, has done some recovery. But Europe and especially continental Europe, we made quite challenges for them.

So, Mo, coming to the gross margin, as I did mention, while the gross margin is down year on year, it is up, if you look at it, versus 2023 by 2026. And as I did mention, it is a tough environment, but we're very focused and we continue to be focused on the portfolio mix, which, as you know, is a very important area which we focus on in terms of that margin improvement, as much as we're focused on operational parameters, SQA, et cetera. So we're doing everything that we possibly can across the piece to try and improve it. But I think we will continue to be focused on the portfolio mix as best as we can.

Great. Thank you.

Thank you for the question. Please hold for the next question. Our next question comes from the line of Patrick Boulan from Bank of America. Please go ahead.

Hey, good morning, Iman and Yves. Just a quick question around the restructuring costs that increased substantially in the first half. And Yves, you mentioned there is some seasonality here this year and the costs are skewed to the first half. Can you talk a little bit about your, I mean, maybe recap what's going on in terms of restructuring? What is the scope for the costs this year and on a more structural basis? I mean, is this something we should assume is going to get more significant? And maybe a follow-up around the headcount side, so pretty significant increase in Q2. We have some peers, especially in India, announcing restructuring plans. So it would be great to share a little bit your outlook around the headcount site into the rest of the year and next year. Thank you.

Yeah, restructuring, you know, as you know, I mean, yeah, some of this is driven, of course, by the evolution of our headcounts in Europe, you know, and that's what has driven some of this restructuring. Listen, for me, I don't see anything structural. We have some adjustments to make to take into account an evolution in terms of demand and some structural changes in the market. But for me, it doesn't mean that we have a recurring increase in restructuring costs. But there is some adjustment to be made, and we continue making them to ensure that we have an economically sound and adapted workforce to the demand that we see in the market. On the account of evolution, Again, I insist, it is offshore growth, okay? Because this is what's supporting the drive in terms of growth in areas like financial services, largely as well APAC growth, and also all the North American growth in general. But we still have headcount reduction which are ongoing in Europe based on the evolution of demand. So, yes, there's positive discount evolution driven by offshore and driven by to make sure some of the businesses which are currently growing. Okay. But we still have some other areas where we have discount reductions. Okay. Thank you. And, you know, and as long as we see growth in North American financial services, we continue to drive, you know, discount increase in volumes, which will continue to be focused mainly in offshore. Okay.

Just to add to what Amy said, most of the restructuring was due towards H1, as I did mention. So I expect that for the full year, we'll probably be somewhat similar to what we did in 2023. So that sort of number.

Sorry, you said similar to 2023?

Yeah, at least similar to 2023.

Thank you.

Thank you for the questions. Please hold for the next question. Our next question comes from the line of Ben Castillo-Bernos from BNP Paribas. Please go ahead.

Hi, Manu. Thanks very much for having me on here. Just one on regional margin development, please. So UK and Ireland looks to be down 240 basis points in the year despite very strong growth. Just any comments there? And likewise for France, seeing some improvement on the margins. That was obviously more of a pain point last year, and that's on stable revenue decline. So just if you could expand a little bit on the moving parts in those two regions. And then just a clarification, if that's okay, just on the buyback. Have you given any indication on the timeframe for that capital to be deployed? Thank you.

Well, I think a number of questions there. So I think the first thing is that, you know, as you are aware, With our half-year results, you know, we tend to, you know, sort of experience some fluctuations which do not necessarily translate to a full-year basis. But as I specifically mentioned on France, I did mention last year that there was one-offs, and that one-offs don't come into play now, which essentially means if you look at the underlying margin, there hasn't really been any improvement. And I do believe that the U.K. and Ireland margin is one of the strongest and is very strong in terms of where we are. So that's where we are on that. On share buyback, if you could just repeat this one. Oh, it's a margin of share buyback. So, you know, it would probably be over the next two to three years in that context.

Got it. Thank you.

One moment for the next question. The next question comes from Laura from . Please go ahead.

Good morning. Thank you for taking my question. Two questions, please. The first one is on the share buyback program. Is the buyback meant to just offset the options that you showed, or is it bigger than this? And then the second question is on the growth margin evolution. I think it declined. Can you please talk about this, please, and explain why? Thank you.

On the share buyback, no, it goes beyond the denaturalization of management incentives. So, yes, it does have an intent to reduce the overall number of shares over the next two to three years.

Okay. On the gross margin, as I just mentioned earlier, the gross margin is down year on year, but versus 2023, we have improved gross margin by 20 bits. The focus is very much on improving our portfolio mix as we go ahead, and that would be, you know, a very important focus area for us. But as you can see, beyond the gross margin, we're doing a lot of work on, you know, our operational parameters, as I said earlier, SG&E, et cetera, as well. So the focus will continue to be the portfolio mix, and that's where we're focused, really.

Thank you.

Thank you.

Thank you for the question. Please hold on to the next question. We have the next question.

It comes from the line of Laurent Lorry from Kepler Chevrolet. Please go ahead.

Yes, good morning, Manon and Niamh. Two questions as well for me. First one is on pricing condition. I know it's a competitive market, but have you seen recently some clients asking for additional rebates because of the GNAI ramp-up, which could explain the slight erosion in gross margin because utilization rates have been turning pretty well, and I guess you're still doing the work on portfolio. So the pricing of conditions of the market will be useful to share. And my second question is on the cash. You did well on the first half. Confirm the full year. Some peers in the market have talked about delayed cash collection. Do you see, do you start to see the same? And are you still very comfortable with 1.9 billion by the end of the year in free cash flow? Thank you.

Okay, pricing condition. It's a competitive market. I mean, you see the slow growth rate. We have some of our Indian peers who are shrinking year on year. As you imagine, it remains a very competitive pricing environment. And do clients embed the or ask for some of the GMAI savings, of course. I mean, this is not new. I've already been in the case for several quarters where today clients do expect some savings in productivity. We don't force it in the same way in cost, as you know. It's usually less cost reduction, but there is some expectation in some of these contracts in terms of delivering some of the GMAI savings. It's part of the pressure we see on on growth margin, but it's the overall competitive market. I mean, it's hard to expect when the growth is still slow and the environment is still unstable, there is quite a bit of price competitiveness, which has not significantly increased compared to previous quarters, which I think it's important to remember that. Nidhi?

Yes. So, Laurent, on the organic free cash flow, so, yes, we clearly maintain our guidance, but having said that, it is a demanding environment. there is pressure on CSOs. And if you then mechanically take the effect of, you know, the currency headwind and, of course, the margin profile, it, you know, it adds its own level of pressure. But we continue to have very strong discipline, fiscal discipline. And, you know, and yes, we believe at this stage it is definitely challenging but feasible to be able to do it. So it takes a lot of fiscal discipline to be able to do it.

Okay, thank you.

Thank you for the questions. Our next question comes from the line of Michael Briss from UBS. Please go ahead.

Yeah, good morning. Thank you for taking the questions. Automotive and aerospace I think have been quite challenging industries for a while. I think particularly aerospace in the second half of last year sort of stepped down. Can you talk about the trends there in the first half and the outlook for the second half specifically? And then just on BPO, I think on the announcement of the deal, you talked about high single-digit growth there. What's happening in the rest of the operations portfolio? Can you talk about the sort of Sogeti Outram portfolio versus outsourcing? Thank you.

So first on the manufacturing space, automotive, not surprisingly, is still under pressure. and we still have a big impact year on year, and that's part of what's really driving manufacturing down. Aerospace is still slightly declining, but we start to see some improvement going to the second half and probably definitely going to next year. So, as I said, I've always shown a lot of confidence regarding the aerospace, you know, perspective. and it was just a little bit of a cycle in terms of evolution of demand, and I feel very confident about the recovery of the sector. Automotive, as I said before, we have some structural changes, and we have to adapt to them. As it relates to operations, you know, as you know, we don't provide really growth rates by operation, but I'm happy to share with you the perspectives is, you know, Our cloud infrastructure business has some support, of course, from all the cloud continuous demand. So it is improving. I'm not going to say it's growing a lot, but it is improving because there is, of course, some pluses and minuses there. But overall, I would say it's solid. On the engineering side, we have the impact of the manufacturing sector. So, yes, I mean, this is not a growth right now, but we see development. For example, we are in double-digit growth in areas like consumer products. You know, it's something where we are invested in. We see good perspective on life sciences, and we see the rebounding market probably going to next year on aerospace. But in the meantime, I think we have to adjust. to some of the structural changes and impact that we have here and there coming from the auto sector. That seems pretty heavily there, you know, and overall in manufacturing. But again, this new perspective in terms of evolution based on YBC growth areas and some of the winding impact that will come from not only this impact of automotive. Thank you.

Thank you for the question. Our next question comes from Charles Brennan from Jefferies. Please go ahead.

Great. Thanks for taking my question. Actually, firstly, just a clarification, and sorry to labour the point on the buyback, but I don't think I'm clever enough to go through the option vesting schedule. Can you just tell us how much of the $2 billion you've allocated to offset share option dilution versus actually reducing the share count? And then secondly, just in terms of business dynamics, I think a number of your peers are talking to demand being biased to vendor consolidation deals. Are you participating in those, and is that contributing to your gross margin development? And everyone seems to be claiming they're a beneficiary of vendor consolidation. Arithmetically, it feels like someone should be losing from that process. Who do you see as the net losers? Thank you.

Okay. Again, I don't think we're going to detail regarding, you know, how much of that is division, et cetera, because it depends on the timing of the buyback. So, of course, the faster the buyback, the more it has impact in terms of reduction of share counts. The slower the buyback, the less impact they'll have. So it depends if it's done over two years, three years. So it's difficult to say that this is allocated to this or that because depending on the timing.

What do you think the annual cost of the share option dilution is? And then we can make our own assumptions about the timing.

I mean, we issue about 1% of share capital. So the reality, it's a little less than 1% that we need on a yearly basis. So the rest will go towards net reduction of shares, right? Thank you. On the vendor consolidation, yes, we are in vendor consolidation. Listen, the vendor consolidation game is very simple. If you're small, you probably get squeezed out. If you're big, you stay in and you win, okay? So it's usually a simple exercise. Of course, you are competitive at the end of the day. But for us, we see ourselves, like some of our peers have claimed, as a net winner. as part of these consolidations. I think where you really have a positive impact is in some new deals, which are not necessarily under consolidation. It's where people are actually putting out new deals. And there's a number of new deals of people who are putting a lot more out in terms of potential outsourcing and offshoring than what they have traditionally done. And this is where you're really going to get a beneficiary from a real growth. Does this have an impact? Yes. Nothing new. You know, we have been in the business for a long time. Every time that there is a consolidation, you're basically giving upfront savings. It takes 18 to 24 months to try to recover some of these margins. The reality, yes, it does this way somewhat in the gross margin. Yes, of course, because when you win some of the consolidation at the front end, it tends to have a negative impact on the gross margin side. Thank you. And the next question will be the last question.

Thank you. Allow me to take the next questions. One moment, please. The last question comes from Harry Reid from Rothschilds and Cole Redburn. Please go ahead.

Hi, good morning. Thanks for taking the question. Just a question on France. I think at Q1 you said that the the growth trough was behind you. The growth is kind of stable at minus five or so. Just wondering if that weakness driven by the crossover in France and aerospace and automotive, just any clarity on what's driving that sluggish market would be helpful. Thank you.

Yeah. I think we have a broad weakness in France. I don't want to attribute it only to aerospace. I think aerospace has weighed a little bit. Automotive has weighed more. But, you know, overall, we had to slow down in France. Okay. As you can see from the number of players, it's not just specific. I think it's an adjustment that goes through. Overall, there's a lower level of activity and confidence. That has basically weighed quite a bit on the spend. We expect that this is stabilizing, so it will improve bit by bit. that overall we don't have perspective in the short term of a big pickup in France.

Great. Thank you very much.

Thank you for the questions. With that, I would like to hand the call back to the management for closing.

Okay. Thank you very much. As you see, you know, we start to see some improvements. Some of the actions that we started in Q3 last year started really to have an impact, and we look forward to continue to work on this and continue to progress. We look forward to interacting with all of you over the coming days and weeks. Thank you again, and we look forward to interacting with you as we reach our Q3 results. Thank you. Bye-bye.

Thank you. That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.