CONTENTS BOARD OF DIRECTORS Serge KAMPF CHAIRMAN Daniel BERNARD Yann DELABRIÈRE 02 Financial highlights Jean-René FOURTOU 03 The Capgemini Group Paul HERMELIN CHIEF EXECUTIVE OFFICER 37 Management report Michel JALABERT presented by the Board of Directors to Phil LASKAWY the Shareholders’ Meeting of April 26, 2007 (April 10, 2007 on first call) Thierry de MONTBRIAL 50 Report of the Chairman Ruud van OMMEREN of the Board of Directors Terry OZAN 61 Group Consolidated Financial Statements Bruno ROGER 116 Cap Gemini S.A. Summarized Financial Statements NON-VOTING DIRECTORS “CENSEURS” 123 Text of the draft resolutions presented by the Board of Directors to Pierre HESSLER the Shareholders’ Meeting of April 26, 2007 Marcel ROULET (April 10, 2007 on first call) Geoff UNWIN 126 Specific information STATUTORY AUDITORS 143 Cross-reference table PRICEWATERHOUSECOOPERS AUDIT repesented by Bernard RASCLE KPMG S.A. represented by Frédéric QUÉLIN The English language version of this report is a free translation from the original, which was prepared in French. All possible care has been taken to ensure that the translation is an accurate presentation of the original. However, in all matters of interpretation, views or opinions expressed in the original language version of the document in French take precedence over the translation. ANNUAL REPORT 2006 Capgemini 1 FINANCIAL HIGHLIGHTS CONSOLIDATED FINANCIAL STATEMENTS in millions of euros 2004 (1) 2005 2006 REVENUES 6,235 6,954 7,700 OPERATING EXPENSES 6,259 6,729 7,253 OPERATING MARGIN Amount (24) 225 447 % (0.4%) 3.2% 5.8% OPERATING PROFIT/(LOSS) Amount (281) 214 334 % (4.5%) 3.1% 4.3% PROFIT/(LOSS) FOR THE YEAR (534) 141 293 NET MARGIN (%) (8.6%) 2% 3.8% EARNINGS PER SHARE Weighted average number of ordinary shares 131,292,801 131,391,243 132,782,723 Basic earnings/(loss) per share (in euros) (4.07) 1.07 2.21 Number of shares at December 31 131,383,178 131,581,978 144,081,808 Earnings/(loss) per share at December 31 (in euros) (4.07) 1.07 2.03 Weighted average number of ordinary shares (diluted) 132,789,755 138,472,266 147,241,326 Diluted earnings/(loss) per share (in euros) (4.02) 1.06 2.07 NET CASH AND CASH EQUIVALENTS AT DECEMBER 31 285 904 1,632 AVERAGE NUMBER OF EMPLOYEES 57,387 59,734 64,013 TOTAL NUMBER OF EMPLOYEES AT DECEMBER 31 59,324 61,036 67,889 (1) Restated in accordance with IFRS. 2 ANNUAL REPORT 2006 Capgemini THE CAPGEMINI GROUP I – COMPANY HISTORY sector expertise. This year it posted net income of 293 million euros and revenues of 7.7 billion euros. Capgemini has regained Founded by Serge Kampf in Grenoble in 1967, Capgemini has its fighting spirit as demonstrated by the acquisitions of Kan- grown to become one of the world’s leading consulting and bay, FuE and Indigo. In addition, due to the deep changes in information technology service companies by driving a strategy of the market, the Group has decided to launch an ambitious and development and diversification that has combined both internal demanding program of development and conquest. and external growth. The Group has progressively extended its activities in Europe, II – THE CAPGEMINI DISCIPLINES in particular with the acquisition of Programator in Scandinavia, Hoskyns in the United Kingdom (1990), and Volmac in the A - One mission, four disciplines Netherlands (1992). The Capgemini mission: is to help its clients to transform in order to improve their performance. For this purpose, an inte- At the same time, Capgemini has developed its management grated service offering, comprised of sector expertise and specific consulting activities with the acquisition of two American com- disciplines, is proposed to them accordingly. panies, United Research and Mac Group, in the early 90s, the German company, Gruber Titze & Partners, in 1993, followed The four Capgemini disciplines are: by the French firm Bossard in 1997. • Consulting Services (CS): helping our clients to identify, structure and execute their transformation projects, for a long- More recently, the acquisition of Ernst & Young Consulting lasting impact on their growth and competitive edge. (2000) strengthened the Group’s global profile, significantly • Technology Services (TS or Integration): formulating, deve- increasing its presence in North America and in a certain number loping and implementing all kinds of technical projects, from of European countries. the very smallest to the very largest. • Outsourcing Services (OS): assisting our clients in complete The years 2001, 2002, 2003 and 2004 proved to be particularly difficult or partial outsourcing of their information technology systems for the IT service sector and it became necessary to rebalance Capge- and other closely-related activities. mini’s portfolio of activities in favor of two of its disciplines - local IT • Local Professional Services (Sogeti or LPS): offering a range services and outsourcing – and around the RightshoreTM concept. of information technology services adapted to local needs in terms of infrastructure, applications and engineering. The acquisition of Transiciel, at the end of 2003, enabled Capgemini to double the size of Sogeti, an entity formed in Present in thirty-two countries and with a workforce of 68,000, 2001 in the local professional services domain, and which generating revenues of 7,7 billion euros in 2006, the Group offers contributed 16% to Group revenues in 2005. In the area of a wide range of integrated services, organized around its four dis- outsourcing, from 2004/2005 onwards, the Group reaped the ciplines and sector expertise. Services range from strategy-making rewards from the efforts undertaken to establish its presence to the maintenance of IT systems. both in Europe and in North America by winning a number of major contracts (HMRC, TXU, Schneider Electric). Each of the four business lines, comprising the Group’s service offe- ring, exists as an autonomous unit with its own objectives, business In addition, Capgemini became the first European company to models and recruitment processes. By combining the expertise of take the offshore route. Capgemini chose to set itself apart from these units, integrated transformation services can be offered to our its major rivals by proposing an “à la carte” system for the pro- clients. Hence, the Group’s key strength lies in knowing how to vision of its services. The system is modulated according to the interlink its multiple skills in order to respond to projects requiring requirements, the project envisaged and the specific culture of the a crosswise approach, thereby satisfying the needs of clients seeking particular client. This is the idea behind RightshoreTM. commitment to the achievement of measurable, sustainable results. The Group’s profile has therefore changed significantly in a few Capgemini is independent from any software publisher or years, demonstrating an ability to respond to the new challenges hardware manufacturer. In an effort to provide our clients arising in the IT services and consulting industries. The 2005 with the best products and know-how, the Group has formed results evidenced this firm recovery. 2006 was a financial period a network of strategic alliances and partnerships. This enables of strong growth and increased profitability for the Group as us to freely and knowingly select and deliver reliable solutions, shown by the dynamism of its disciplines, strengthened by its precisely tailored to each and every client’s needs. Capgemini ANNUAL REPORT 2006 Capgemini 3 THE GROUP Capgemini is also able to deliver services in the location which best serves the assignment. This initiative has the ambition to regain global the interests of its clients – in terms of quality, cost and access to leadership in the transformation market “We have defined a similar the best expertise. Dubbed Rightshore™, this approach improves approach in Process Consulting by embedding business methodologies productivity and gives added value to services. Lastly, Capgemini and other methods and tools”, adds Antonio Schnieder. relationships are built on solid foundations of collaboration. The Collaborative Business Experience (CBE) is the Group trademark. Prospects for 2007. The Consulting market should maintain And the way in which results are achieved count just as much as its positive trend throughout 2007. The most beneficial way the results themselves, because client satisfaction is the number ahead for Capgemini Consulting is to focus on specific sectors one criteria in measuring success. and to reinforce its fields of expertise. The idea is to promote the integration process by including other Group disciplines and Mission and vision of the Capgemini Group to intensify the use of our new and innovative Transformation • Our mission: Enabling Transformation Consulting approach. Capgemini enables its clients to transform and perform through technologies. C - Technology Services • Our vision: Enabling Freedom 2006 was a year of sustained growth with, in particular, a number of Capgemini will lead by providing its clients with insights and major projects in a variety of sectors. The industrialization that accom- capabilities that boost their freedom to achieve superior results. panies innovation should enable the Group, in 2007, to meet the needs of an ever more global, ever more demanding client base. B - Consulting Services In 2006, growth and profitability were the order of the day for Background to 2006. Against the background of a more this discipline. Stimulated by economic globalization and the favorable economic climate, the Group’s clients have redis- large merger-acquisition projects underway, demand should be covered their desire for innovation. They are now making sustained in 2007. long-term investments in major projects, while striving to bring their costs down. Whereas, in the past, they tended to choose Background to 2006. The globalization of economic activity between one or other of these two paths, corporate clients are now opting pursued its course, drawing strong demand for strategy and for innovation and development while making substantial savings by management consulting in its wake.