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Structural shift to tech takes Capgemini to 20-year highs

07/28/2021 | 05:23am EDT

(Reuters) -French consulting and IT services provider Capgemini hiked its 2021 guidance, sending its shares to a 20-year high, after a "structural acceleration" in global demand.

The company raised its revenue growth, profit margin and cash flow forecasts for the year following a first-half boost from growth in its digital and cloud services.

"We consider this a structural acceleration in demand for technology and not just a bump following the COVID crisis," Chief Executive Aiman Ezzat told analysts in a call.

The company is seeking to recruit as it expands, and expects an influx of young graduate engineers in the current quarter.

At the end of June, Capgemini employed 289,500 people, up 9% from a year ago, with 163,200 of these - more than half - working in offshore centres.

"Clients themselves are pushing for offshore because they struggle to find the resources onshore," Ezzat told reporters, adding the company planned to keep recruiting there.

The company confirmed plans to find more local clients in the Asia-Pacific region, whose revenues, together with those of Latin America, jumped 25% in the second quarter.

Ezzat predicted Asia-Pacific growth would stay "well ahead" of the rest of the group in coming years.

Capgemini expects 2021 revenues to be up between 12% and 13%, an operating margin of 12.5% to 12.7% and an organic free cash flow above 1.5 billion euros ($1.77 billion).

It previously forecast 2021 revenue growth of 7% to 9%, an operating margin of 12.2% to 12.4%, and an organic free cash flow above 1.3 billion euros.

French peer Dassault Systemes and U.S. rival Accenture also raised their forecasts, betting on strong digital demand from businesses aiming to strengthen their operations as they work remotely.

Europe's tech index has climbed about 20% in the first half of 2021, hitting all-time highs, while Capgemini's stock was up 3% in morning trading and has risen nearly 40% this year.

($1=0.8460 euros)

(Reporting by Kate Entringer and Sarah Morland in Gdansk; Editing by Jacqueline Wong, Subhranshu Sahu and Barbara Lewis)

By Kate Entringer and Sarah Morland

© Reuters 2021
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