Capgemini upbeat on profit outlook as work-from-home boosts cloud services

FILE PHOTO: The logo of Cap Gemini is seen at the entrance of the company headquarters in Paris

(Reuters) – Capgemini on Wednesday said profitability would beat market expectations in 2021, after the group reported full-year results in line with consensus, boosted by growth in its digital and cloud services.

The COVID-19 pandemic has given IT services providers, such as Capgemini, the silver lining of an increasing number of companies expediting a move to the cloud to adapt better to a new flexible or exclusively remote working model.

Capgemini said its digital and cloud services, which represented 65% of its business in October-December period, grew around 15% in 2020.

The French consulting and IT services provider expects its operating margin to be back at pre-COVID-19 levels in 2021 to between 12.2%-12.4%, slightly above the 12.1% consensus view.

“With all the positive signs we see in our activity, we expect a progressive improvement over the first half of the year, and we hope to come back to our mid-term growth objectives at the end of the year,” Chief Executive Aiman Ezzat said in a call with reporters.

Capgemini’s full-year 2020 operating margin dropped less-than-feared to 11.9% from 12.3% the previous year.

“Regarding the result it’s slightly above expectations in terms of profitability,” ODDO BHF analyst Nicolas David said.

In a call with analysts, Ezzat said Capgemini still aimed for double-digit growth of digital and cloud services in 2021.

In December, U.S. rival Accenture raised its guidance thanks to an extended work-from-home period boosting its digital and cloud services.

Capgemini also provided guidance that 2021 revenue would increase 7%-9% in constant currency terms from the 2020 figure of 15.85 billion euros, ($19.07 billion) which was up 12.2%. This increase was helped by the consolidation of Altran, a smaller rival Capgemini bought last year, offsetting the pandemic’s impact on growth, CFO Carole Ferrand said in the analyst call.

($1 = 0.8310 euros)

(Reporting by Piotr Lipinski and Karol Badohal in Gdansk; Editing by Jan Harvey, Kirsten Donovan and Jane Merriman)

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