The two Paris-based companies suffered significant declines in profitability on the back of restructuring programs, and GFI stated that its expansion strategy had been put on hold until the economic environment improves.

In the 12 months to December 31, 2002, GFI’s net profit fell 96% to 1m euros ($1.1m) on revenue that fell 8.7% to 554.2m euros ($586m). The company was hit by a 1.3m euro ($1.4m) charge from its failed acquisition of Thales IS, as well as 4.2m euros ($4.4m) from reductions in headcount and production capacity. Operating profit fell 29% to 43.2m euros ($45.7m).

Sopra’s net profit fell 2.4% to 18.2m euros ($19.2m) during full-year 2002 on revenue that increased 3% to 531.4m euros ($561.8m). The company’s non-French systems integration and solutions business made an operating loss of 2.1m euros ($2.2m) on revenue of 80.2m euros ($84.5m). Its domestic systems integration business made an operating profit of 39.6m euros ($41.9m) on revenue of 344m euros ($364m).

2003 was supposed to be the year that GFI emerged as one of the real forces of the European IT services sector. Chief executive Jacques Tordjman set out a three-stage plan in the late 1990s that would see his company, which specializes in ERP and e-commerce integration, become the third largest IT services provider in its $27bn domestic market by the end of this year.

But the company has had a tough time over recent months following its failure to close a planned 340m euro ($359m) takeover of rival French services firm Thales Information Systems in September, and its shares have lost 30% of their value since the start of 2003. GFI had hoped the deal would enable it to compete against rivals such as Groupe Steria and Atos Origin, which have both emerged from the French mid-tier through major acquisitions in the last two years.

That deal would have created one of the 10 largest IT services firms based in Europe, with 12,000 staff and combined revenue in excess of 1bn euros ($1.1bn). This would be particularly important in the outsourcing sector – an area that GFI again earmarked as a priority growth area this week. There are signs that France’s top companies are losing their historical aversion to outsourcing, but GFI needs to gain extra muscle if it is to compete against its larger domestic and international rivals.

Source: Computerwire