Services company Cap Gemini (CGS) doubled its net profits last year, on the back of new business strategies and millennium or Euro projects.
Demand for system upgrades in preparation for the Euro and Year 2000 system conversions helped drive net profits up from FFr282 million ($46.3 million) to FFr760 million in the year ended 31 December 1997. But FFr200 million was made on the sale to Germany?s Daimler-Benz of Cap?s 20 per cent stake in fellow integrator debis systemhaus GmbH in August. Revenue rose 36 per cent to FFr20.16 billion.
?These excellent results are partly due to the incredible buoyancy of the market at the moment but other factors like the FFr4 billion deal with British Steel in November have also contributed,? said industry analyst Richard Holway.
But Holway added that the results are not as stunning as they first appear, when put in the context of the generally booming market place for software and services. ?If you look at the figures, organic growth is about 17 per cent, roughly equal to the mean market growth.?
?The Year 2000 problem is really starting to drive business in the US. It is less important in UK where outsourcing contracts and package based solutions are dominating business, but we have high hopes for Ecu conversion business," said CGS.
Another factor in its growth, CGS said, is its convergence strategy, launched last year, which allows management consulting and systems integration services to be offered together as a package. ?This has been particularly successful in the telecomms and travel and transport fields in the UK,? said a company spokesperson
The recently acquired Bossard, a French consultancy group, has also been consolidated into the accounts, further boosting growth. The company expects to maintain its momentum and anticipates revenues of slightly under FFr24 billion and improvements in its operating income.
But Holway anticipates trouble for the whole industry if wages continue to increase. ?Contractors' wages have risen by 20 per cent and internal wages by 30 per cent. All the major companies are suffering from a lack of skilled staff and those they have got are demanding more and more. It could be a major problem in the future.?
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