However, the company also admitted that the recovery of its North American business, which has been the main focus of its recent restructuring, made a widening loss. In the six months ending June 30, 2005, Paris, France-based company made a net profit of 58m euros ($72m) compared to a loss of 157m euros ($195m) in the year-ago period, on revenue that grew 17% to 3.47bn euros ($4.3bn).
Capgemini’s North American operation increased sales 8.9% to 593m euros ($736m) in the first half, but its operating loss widened to 39m euros ($48m) from 35.6m euros ($44m). Pierre Danon, the former head of BT Retail, was recruited as COO last November, with one of his main tasks being to turn around the US business.
Capgemini said the start-up costs of the $3.5bn outsourcing deal it won with Dallas-based energy company TXU Corp last May had a negative impact on profitability. The company’s operating profit margin was 1.8%, which still lags a long way behind those of its peers. Atos Origin, Cap’s closest rival in France, made an operating profit margin of 6.7% on revenue of 2.7bn euros ($3.4bn) in the first half of 2005.
Looking ahead, Capgemini said it expects full-year 2005 revenue to grow by 12%, and it now expects to exceed its earlier target of a 2.6% operating profit margin.
Capgemini took 77m euros ($96m) in restructuring charges during the first half, which was more than offset by gains of 143m euros ($178m) from disposals, including its North American healthcare business, which it sold to Accenture for $175m in cash in April.
Capgemini said its overall profitability was negatively affected by the costs of setting up some large outsourcing contracts, which was partially balanced by a significant improvement in the performance of its consulting and systems integration operations.
The company ended June with 498m euros ($618m) in cash, compared to a negative position of 125m euros ($155m) 12 months previously.
Shares in Capgemini rose 0.54% to 27.91 euros in morning trading on the Paris Stock Exchange following the announcement of the results. The company’s share price has risen almost 60% from 17.53 euros last November.
