H1 2023 revenues of EUR11,426 million, up +6.9%.
Growth at constant exchange rates* of +7.9% in H1 and +5.2% in Q2
Operating margin rate* up +20 basis points to 12.4%
Organic free cash flow* of -EUR53 million
EUR2 billion to be invested over 3 years in Artificial Intelligence
The Board of Directors of Capgemini SE, chaired by Paul Hermelin, convened yesterday in Paris to review and adopt the accounts[1] of Capgemini Group for the first half of 2023.
Aiman Ezzat, Chief Executive Officer of the Capgemini Group, said: 'The Group delivered another solid performance in the first half. In a softer economic environment, as expected, we achieved 7.9% revenue growth at constant exchange rates and operating margin improvement. These results put us among the leaders in our industry.
Thanks to a strong strategic positioning, we continue to gain market share as we accompany our clients in their transition towards a digital and sustainable economy.
I am convinced that generative AI will play a major role in this transition. The Group will invest EUR2 billion in Artificial Intelligence to build its leadership in this breakthrough technology, that must be deployed responsibly, reliably, and sustainably. We are developing a portfolio of industry-specific offers and signing strategic partnerships, notably with Google Cloud and Microsoft, while training most of our workforce through our Data & AI Campus to fully leverage the power of generative AI in our operations. We have many client projects underway, a strong pipeline, and plan to double Data & AI teams to 60,000 in the next three years.
We confirm all our 2023 objectives announced at the beginning of the year for revenue growth, operating margin improvement and free cash flow.'
1ST HALF KEY FIGURES
Capgemini generated revenues of EUR11,426 million in H1 2023, up +6.9% on a reported basis and +7.9% at constant exchange rates. Organic growth* (i.e., excluding the impacts of currency fluctuations and changes in Group scope) is +7.3%.
After two years of record growth, the more challenging macro-economic environment led to a slowdown in line with Group expectations. Capgemini growth in the second quarter was therefore lower than in the first, reaching +5.2% at constant exchange rates and +4.7% on an organic basis, despite a particularly demanding comparison base (growth at constant exchange rates of +19.3% in Q2 2022).
This performance is driven by good momentum in Capgemini's high added-value services, particularly in the area of Intelligent Industry, as well as in activities driven by Cloud, Data & Artificial Intelligence, which are the foundation of Group clients' major digital transformation projects.
Bookings totaled EUR11,968 million in the first half of 2023. Given the particularly demanding comparison base, with growth of +22% in H1 2022, this represents an increase of +4% at constant exchange rates. The book-to-bill ratio is 1.05 for H1, reflecting ongoing robust commercial momentum.
The operating margin* is EUR1,413 million, or 12.4% of revenues, an increase of +9% or +20 basis points year-on-year. In line with Group expectations, the shift in the project mix, towards more innovative and value creating offers, more than offset the higher operating cost base.
Other operating income and expenses represent a net expense of EUR262 million, up EUR29 million year-on-year.
Capgemini's operating profit is therefore up +8% at EUR1,151 million, or 10.1% of revenues.
The net financial expense is EUR22 million, down EUR49 million on H1 2022.
The income tax expense is EUR313 million. The effective tax rate is 27.8% in H1 2023, compared with 29.9% in H1 2022 (excluding tax expenses related to the impact of the US tax reform[2]).
Taking into account the share of profits of associates and non-controlling interests for -EUR7 million, the Group share in net profit is up +21% year-on-year at EUR809 million for the first six months of 2023. Basic earnings per share also rose by +20% year-on-year to EUR4.70. Normalized earnings per share* reached EUR5.80, compared with EUR4.87 in H1 2022 and EUR5.03 excluding tax expenses related to the impact of the US tax reform.
Finally, as anticipated, organic free cash flow* generation was negative for the first half of 2023, at -EUR53 million.
OPERATIONS BY REGION
The United Kingdom and Ireland region (12% of Group revenues in H1 2023) reported robust growth of +12.0% at constant exchange rates. This performance was mainly driven by Public Sector and Manufacturing,
Consumer Goods & Retail and Financial Services sectors. Operating margin remains at the same high level as in H1 2022, at 18.4%.
The Rest of Europe region (30% of Group revenues) remained very dynamic, with growth of +11.4% at constant exchange rates. This was mainly driven by Manufacturing and Public Sector, while Financial Services, TMT (Telecoms, Media and Technology) and Energy & Utilities continued to perform well. Operating margin was up 70 basis points to reach 10.5%.
France (20% of Group revenues) reported revenue growth of +9.2% at constant exchange rates driven primarily by strong growth in Manufacturing, in addition to continued growth in Financial Services, Consumer Goods & Retail and Public Sector. Operating margin improved by 40 basis points year-on-year, to reach 11.1%.
Revenues in North America (29% of Group revenues) reported a moderate growth of +3.0% at constant exchange rates. The Manufacturing and Services sectors remained buoyant. By contrast, the Financial Services sector reported limited growth, while TMT and Consumer Goods & Retail sectors contracted slightly. Operating margin was 15.2%, compared to 15.5% in the first half of 2022.
Finally, revenues in Asia-Pacific and Latin America region (9% of Group revenues) increased by +4.8% at constant exchange rates. This growth was driven exclusively by Asia-Pacific region's momentum - now essentially organic - which was fueled by the Manufacturing, Consumer Goods & Retail and Financial Services sectors. The region reported an operating margin of 10.2%, up from 9.7% in H1 2022.
OPERATIONS BY BUSINESS
Strategy & Transformation services (8% of Group total revenues* in H1 2023) posted growth in total revenues of +12.2% at constant exchange rates compared to H1 2022. This ongoing sustained momentum reflects the importance placed by Group clients on the most strategic and value-creating projects.
Applications & Technology services (63% of Group revenues and Capgemini's core business) recorded solid growth in total revenues of +8.1% at constant exchange rates.
Finally, Operations & Engineering total revenues (29% of Group revenues) grew +6.1% at constant exchange rates.
OPERATIONS IN Q2 2023
Capgemini's performance in Q2 2023 was a prolongation of the trends observed since the beginning of the year, extending as expected the gradual slowdown that began in the previous quarter. Group revenues totaled EUR5,697 million, up +5.2% at constant exchange rates and +4.7% adjusted for Group scope and exchange rate impacts.
Momentum remained robust in the United Kingdom and Ireland and Rest of Europe regions in Q2, with constant currency revenue growth of +10.2% and +9.0%, respectively, underpinned by strong growth in Manufacturing and Public Sector. Activity remained buoyant in France, with revenues up +6.2% also supported by the dynamic Manufacturing sector. As in the previous quarter, the deceleration in North America was stronger than at Group level. Revenues in the region were stable at constant exchange rates on Q2 2022, penalized by the contraction recorded in Consumer Goods & Retail and TMT sectors, as well as a marked slowdown in Financial Services. Finally, revenues in the Asia-Pacific and Latin America region increased moderately by +1.4%.
Bookings reached EUR6,101 million in the second quarter. Given the particularly demanding comparison base, this represents an increase of +1% at constant exchange rates. The book-to-bill ratio of 1.07 is above last years' average for a Q2.
HEADCOUNT
At June 30, 2023, the Group's total headcount stood at 349,500, down slightly by -1% year-on-year. The 'onshore' workforce nonetheless grew by +3% to 148,300 employees, while the 'offshore' workforce contracted by -3% to 201,200 employees, i.e., 58% of the total headcount.
BALANCE SHEET
Capgemini's balance sheet structure was relatively unchanged in H1 2023.
At June 30, 2023, the Group had cash and cash equivalents and cash management assets of EUR3.8 billion. After accounting for borrowings of EUR7.0 billion, Capgemini net debt* stands at EUR3.2 billion at June 30, 2023, compared with EUR4.1 billion at June 30, 2022 and EUR2.6 billion at December 31, 2022.
On the back of its solid cash position, the Group redeemed in full and at maturity its EUR1.0 billion bond issued in July 2015 after the H1 closing, on July 3, 2023.
OUTLOOK
The Group's financial targets for 2023 are:
Revenue growth of +4% to +7% at constant currency;
Operating margin of 13.0% to 13.2%;
Organic free cash flow of around EUR1.8 billion.
The inorganic contribution to growth should be 0.5 points at the lower end of the target range and 1.0 point at the upper end.
CONFERENCE CALL
Aiman Ezzat, Chief Executive Officer, accompanied by Carole Ferrand, Chief Financial Officer, and Olivier Sevillia, Chief Operating Officer, will present this press release during a conference call in English to be held today at 8.00 a.m. Paris time (CET). You can follow this conference call live via webcast at the following link. A replay will also be available for a period of one year.
All documents relating to this publication will be posted on the Capgemini investor website at https://investors.capgemini.com/en/.
PROVISIONAL CALENDAR
November 7, 2023 - Q3 2023 revenues
February 14, 2024 - FY 2023 results
April 30, 2024 - Q1 2024 revenues
May 16, 2024 Shareholders' Meeting
CAPGEMINI SE 
