Capgemini defers 2020 guidance despite strong Q1 revenue; CEO takes 25% pay cut

Following information technology (IT) services majors Infosys, Cognizant, IBM and Wipro, Paris-based technology major Capgemini has said that it is not in a position to commit to an outlook for 2020 at this stage, despite a strong first quarter.

“Considering the level of uncertainty, specifically the speed of demand recovery exiting the lockdown, Capgemini is not in position to commit to an outlook for 2020 at this stage,” it said.

The company has reported a 3.1% increase in consolidated revenue at €3.55 billion in the first quarter of 2020, compared to €3.44 billion last year. Its revenue grew 2.3% year-on-year at constant exchange rates, the company said.

Recently, technology giant IBM withdrew its full-year earnings guidance due to the Covid-19 pandemic. The company posted a better-than-expected net income, owing to the strong cloud revenue growth of 19% during the first quarter. Some of the other Indian IT services firms that have put earnings guidance on hold due to the pandemic include Infosys, Cognizant and Wipro.

Capgemini said that its digital and cloud revenues continue to grow rapidly, approximately 20% at constant exchange rates. It accounts for over 50% of group revenues, it said.

The firm’s strategy and transformation consulting services, which account for 7% of group revenues, recorded a sustained growth of 9.6% at constant exchange rates in total revenues, compared to the same period last year, the company said.

The firm reported a total revenue growth of 2.1% at constant exchange rates for applications and technology services, which accounts for 71% of the group’s revenue.

The company said the Q1 growth is in line with expectations despite the Covid-19 pandemic. However, it expects the second quarter to be challenging.

“In the unprecedented situation that we are currently navigating, the group’s priority is the health and safety of our employees and the continuity of the services Capgemini provides to its clients,” Paul Hermelin, chairman and CEO of Capgemini Group, and Aiman Ezzat, who is set to take over from Hermelin as CEO, said in a joint statement.

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Its board of directors have decided to reduce the dividend by 29%, from €1.90 to €1.35 per share, proposed for approval at the next shareholder meeting, the company said.

Additionally, Hermelin and Ezzat will forgo 25% of their total compensation in 2020 as executive directors to help fight Covid-19, the company said.

“Their unpaid compensation as executive directors will be transferred to the Institut Pasteur to finance research initiatives on Covid-19. These measures were approved by the Capgemini board of directors. Significant efforts have also been requested from all the group’s senior executives with respect to their variable compensation,” the company said.

Read: Online shopping in India to grow post Covid-19 pandemic: Capgemini

As of March 31, the company’s total headcount stood at 2,19,100, up 2.9% year-on-year. It also saw a 2.4% increase in employees at offshore centres to 1,24,900.

Meanwhile, the company has bucked the trend in the sector by going ahead with hikes and promotions for its employees. India, incidentally, is home to nearly half of the 2,20,000 people that Capgemini employs globally.