MCN Direct Newswire

Vol. 3 No. 9, 1 March 2004

This issue is sponsored by:

Cedar Software, Sage, OpenAccounts and Annual Consultants' Forum - 27 April 2004

This issue news

1. CGEY bumps along the bottom
2. Hewlett-Packard buys Triaton
3. Capita powers ahead
4. LogicaCMG flies offshore with £7m deal
5. BearingPoint savaged by European economy
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. CGEY BUMPS ALONG THE BOTTOM

Cap Gemini Ernst & Young (CGEY) has reported a financial loss for 2003 - reflecting the bad call it made early in the year when it predicted a second-half upturn in IT markets.

CGEY made a loss of 197 million euros (£132 million), on revenues down 18% at 5.8 billion euros.

The company issued three profit warnings last year, and now says it must "keep expectations within reach" with the priority of growing revenues during 2004. The company also hopes to improve margins after it closed 2003 with an operating margin of 2.7% - well adrift of the 5% it forecast early last year.

CGEY said: "The business at the beginning of this year is still feeling the effect of the low level at the end of 2003. This is why savings generated in 2004 will be reinvested into sales development. The improvement in operating margin will thus be dependent on the pace at which the group succeeds in delivering organic top-line growth."

Half of CGEY's 2003 order intake - 11.7 billion euros including the Inland Revenue Aspire contract - related to outsourcing. Its 2003 outsourcing revenue represented 30% of total, up from 27% in 2002.

The company described outsourcing as a "key growth driver" going forward, but warned that it would not improve profitability in the short term because of the cost of setting up outsourcing contracts.

Its UK business returned to profitability in 2003, despite a 17% fall in revenue, while performance in France and the US deteriorated, and the Nordic countries and Asia-Pacific operations stabilised.

2. HEWLETT-PACKARD BUYS TRIATON

HP has emerged as the surprise winner in the bidding battle for Triaton, the IT services and outsourcing subsidiary of German industrial giant ThyssenKrupp (MDN Direct 3-2).

HP is reported to have paid 340 million euros (£227 million) for the business, which showed 2003 revenues of 370 million euros and has 2,200 employees. HP also scooped a seven-year preferred supplier deal with ThyssenKrupp as part of the deal.

Losers were CSC, IBM, Deutsche Telekom's T-Systems and Cap Gemini Ernst & Young. CGEY in particular has been seeking a greater foothold in Germany since its partnership talks with T-Systems broke down early last year.

HP's win is believed to be its largest pure services acquisition to date and will expand HP's existing German staff of 7,500 - some 3,200 of whom work in services.

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3. CAPITA POWERS AHEAD

Capita has reported a 15th consecutive year of record financial results, with a 23% leap in pre-tax profits and turnover up 20% to £1.1 billion.

Company chairman Rod Aldridge commented: "Capita continues to deliver strong growth in turnover, profits and cashflow and is well positioned to maintain this performance. The group occupies a leading position in markets which are highly active, with high barriers to entry and which support long-term growth. We already have significant visibility of revenues and profits for 2004, and prospects for further growth remain excellent."

While Capita operates only in the UK and Ireland, its strength in the UK BPO market is formidable, with a number one ranking and a 24.3% share of the total value of contracts let in 2003 - up from a 23.7% share in 2002.

Capita is the largest BPO supplier by market share in the local government and insurance markets, and second largest in central government and finance.

Among its highest profile contracts, Capita's £230 million deal to run the congestion charge scheme for Transport for London made a small contribution to 2003 profits, but has not proved as profitable as the company anticipated.

Capita chief executive Paul Pindar said profitability on the contract is expected to improve this year as start-up costs tail off.

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4. LOGICACMG FLIES OFFSHORE WITH £7M DEAL

LogicaCMG has added an offshore element to its ongoing relationship with Britannia Airways - sealing a £7 million, five-year contract to deliver applications management, enhancement and IT support from its base in India.

The contract extends a UK deal with Britannia whereby LogicaCMG manages the support and enhancement of the airline's applications, including finance, HR, engineering, flight scheduling, crew allocation, sales, data warehouse, e-commerce, document management and desktop software.

Neil Boulton, head of IT at Britannia Airways, said: "We decided to modify and extend our contract with LogicaCMG to adopt its hybrid approach, giving us the ability to have the service delivered across the UK and India." LogicaCMG described the arrangement as a way of delivering "best value" to clients.

* Separately, LogicaCMG has appointed Pascal van den Bosch as managing director of its international energy and utilities business group. Van den Bosch joined LogicaCMG in 1998 and has spent the past three years in the energy and utilities unit as a director of business development. He replaces Jim Yeats who is retreating from the international line of business to head up the company's UK energy and utilities practice.

Sponsor

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5. BEARINGPOINT SAVAGED BY EUROPEAN ECONOMY

BearingPoint has reported a net loss of $117 million for the quarter to 31 December 2003, mainly resulting from a 'goodwill impairment' charge of $120 million against its European business.

The company said the charge was made because "the challenging economic environment in Europe had caused it to lower growth expectations in the region and re-evaluate the recorded goodwill for its EMEA business".

The loss reversed a net profit of $14.5 million in the comparable 2002 quarter, and was made on revenues down 2% at $792 million.

Sequential quarterly growth from the September to December quarter was 7%, however, with BearingPoint noting solid bookings across the business, especially in North America.

Commenting on the December quarter, BearingPoint chairman and CEO Rand Blazer said: "In what is traditionally a seasonally slow quarter for our industry, our preliminary results indicate quarter-over-quarter increases in revenue in our three international regions and in two of our four North America industry segments. We continue to focus on improving utilisation and expanding our billable workforce in targeted areas to improve operating efficiency."

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