Capgemini updates on sustainability and acquisitions

Capgemini’s leadership team provided an update to analysts on its progress after one of its strongest trading periods in some time. 

The company clocked up sales of €8.7bn in the first half of the year, which was up 18% at constant currency, and an impressive 7.1% at an organic level. The bottom line is also heading in the right direction, with operating margin up 1.2 percentage points to 12%. 

CEO Aiman Ezzat highlighted big-ticket wins on both sides of the Atlantic with the Met Police, Airbus and McDonald’s, indicative of strong growth from the company’s top 200 accounts. The company now makes more than half its sales from outside of Europe. Its Asia Pacific operation is a stand-out performer, having been reinforced through a couple of recent acquisitions (Empired and RXP). We picked up two key takeaways from the event:

The acquisitions are bedding in. Capgemini has become an increasingly effective acquirer over the last decade. There were plenty of eyebrows raised when it first announced plans to acquire engineering group Altran in 2019. Was it too big a step out of its comfort zone? Would the two cultures work in harmony?

It is still too early to call the move a success, but there are some promising early signs. Altran now forms the core of the 50,000-strong Capgemini Engineering division, and it is has helped to extend the breadth of the group’s portfolio at a time when more clients are looking for external support in accelerating the design-to-build of new products and services. Ezzat discussed one recent win where Capgemini is deploying digital twin technology in the production environment of one client in the aerospace sector, as an example of a deal where the vendor was the only supplier in the running due to its service coverage.

What was particularly interesting to see was how Capgemini has managed to join the dots between different acquisitions. We heard from the leadership team at Frog, the design agency that it bought earlier this year, who gave some interesting insight into the attraction of becoming part of a much larger group. For Frog, the move into Capgemini has enabled them to bid for projects that go well beyond the initial design phase to actually build and scale the ideas that it brings to the table, helping it to compete on a more even footing with the likes of Accenture.   

Green is proving good for business. We’ve been tracking the progress of many of Capgemini’s peers on decarbonization and sustainability this year, and it was interesting to hear about Capgemini’s own credentials in this area. 

The vendor has the twin-pronged ambition of achieving carbon neutral status by 2025 and becoming net-zero by 2030, and to help its clients save 10 million tons of CO2 by 2030. There’s a lot of work to be done on this second point. A recent survey found that 70% of Capgemini’s customers have now set a carbon neutrality target, but a small proportion has taken steps to reduce the carbon footprint of their computing hardware.

The company recently launched its Net Zero Strategy offering, building on an impressive number of decarbonization-related project wins in the last 12 months. One client is German energy group GASAG, which is working with Capgemini to craft a strategy to reduce annual CO2 emissions by 2.5 million tonnes while improving transparency across the organization to pinpoint hotspots that need to be prioritized. There is a perception that decarbonization is more of a boardroom priority in Europe than in North America, but Capgemini’s new Americas chief Jim Bailey said that it is “always” part of client discussions on his side of the pond. 

PAC’s View: Capgemini has had a strong run, and it is easy to overlook the progress it has made over the course of the last decade. Former CEO Paul Hermelin used to talk about his ambition of getting the company to reach the level of the “Champions League,” and with sales set to near the €20bn mark this year, it is fair to say that this goal has been achieved. 

The company talked us through a broad range of client examples that showed that is has made real progress in breaking down the silos across the organization to improve the customer experience (while acknowledging there is still some room for improvement), as well as doubling-down on its core industry sectors. 

It is encouraging to see that decarbonization is a genuine commercial driver for Capgemini – which suggests that promises are being backed up with investment. There remains a lot of scope for the company to develop its capabilities in this area, from advisory to data analytics through to smart asset management. The company’s leadership is already mapping out an “upskilling” exercise across its workforce to improve awareness and expertise, and it will be a key area for future recruitment. 

Ezzat believes that the company’s ability to remain a “talent magnet” will be critical to its future fortunes. The group’s headcount is closing in on 300,000, with around half of its skills-based in India. Future acquisitions will fill this number out, but the way that the company continues to build on the recent evolution of its leadership model and broader talent management strategy will be vital to maintaining its current momentum.