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of Cap Gemini Ernst & Young’s Preliminary 2000 Results
Solid Growth after Merger
LJUBLJANA, Slovenia, Mar. 16 - Just over a year ago (on Feb. 29, 2000), Cap Gemini announced that it was planning to acquire Ernst & Young Consulting, whereby boosting its U.S. market share (see Annex Bulletin 2000-08, Mar. 10, 2000). The Paris Bourse investors cheered the news and rewarded the company with an all-time high market capitalization - about $35 billion, a 23-fold increased since 1995. The Cap Gemini stock price jumped by 686% during the same period - for an 89% compound annual growth.
The stockmarket and the CGEY stock have both cooled off quite a bit since then (market cap is down 48% this year), but some financial benefits of the E&Y acquisition are beginning to show in the company’s business fundamentals. The merged firm (Cap Gemini Ernst & Young - CGEY) has just reported its preliminary 2000 results. And the news was good. Both revenues and profits were up in double digits. Revenues in U.S. dollars were up 49% (up 61% in euros/FFr), while the dollar-denominated earnings surged by 50% (up 62% in euros/FFr).
About five-sixths of the revenue growth, and over half of the profit increase, was attributable to the E&Y acquisition that was completed in late May 2000. Adjusted for the full year’s E&Y results, the CGEY growth was more moderate, but still in double digits. Revenues were up 10% (in euros/FFr), while net profit jumped by 26% (in euros/FFr).
The fact that CGEY has gone from losses in 1992-1994, to a meager profit ($11 million) in 1995, to $775 million in net earnings five years later, makes this Paris-based services company arguably the IT industry’s most successful turnaround story.
Happy bargain hunting!
Volume XVII, No. 2001-06
Editor: Bob Djurdjevic
P.O. Box 97100, Phoenix, Arizona
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