UPDATED 16:22 EDT / JULY 29 2011

Capgemini Sees Profit Hike, Stops Acquisition Spree

One of Europe’s largest computer consultancy firms, Capgemini, reported a more than 25 percent gain in net profit in the first half of 2011, but cash in hand drops significantly after a series of acquisitions over the past two years.

For the first six months of the year, Capgemini reported a net profit of 127 million euros ($181 million), a 25.7 percent increase from the same period last year.  Sales rose to 4.7 billion euros in the same period, a 12.9 percent increase from last year.  Their first operating margin rose to 289 million euros, an 18 percent increase from last year.  The company said net cash and cash equivalents dropped to 169 million euros ($242.7 million) at the end of June, down from 809 million euros a year ago. Liquid assets as of June 30 had dropped by 640 million euros in a year, largely due to its acquisitions.

“The good growth in revenues during the first half of the year is the fruit of solid organic growth combined with a specifically targeted acquisition strategy, which strengthens the Group both in the short and mid-term. In this context, we stepped up our recruitment of young employees and increased our headcount by nearly 5,600 employees,” said Paul Hermelin, Chief Executive Officer of Capgemini Group.

Capgemini acquired Brazilian firm CPM Braxis in late 2010 and in a series of 17 acquisitions over the past two years, it has spent more than 840 million euros ($1.2 billion). Paul expects the company will soon join the top 10 of North American service providers after all these acquisitions. However, he went on to say they are not currently looking for any other acquisitions in the large and mid-sized segment.

“Our cash spending appeared rather suddenly, but it is mainly due to acquisitions and financing our growth,” Paul said in a conference call.

Due to the ongoing global economic crisis, most IT companies are looking for cost reduction on various IT projects and/are expanding to other sectors to generate new revenue streams.  Capgemini is expanding its services to enter into the energy and social sectors. The company this month offered a managed social monitoring service in partnership with Attensity, provider of text analysis tool. This service will provide smart text analysis and language processing technology which will analyze social media activity for clients.


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