Good morning, everyone, and thank you for joining us for this quarter 1 call. I'm joined this morning by Karl Ferrant, our Group CFO. CFO. First, I would like to say a word about the start of the year and the COVID-nineteen situation. We have a strong start of the year.
The world economies are recovering fast and some countries are quickly getting back to normalcy. But as recent events remind us, notably in India and Brazil, which are home to almost 50% of our team members, COVID-nineteen is still there and has dramatic impacts. Our priority is and will remain the health and safety of our colleagues and their families. We continue to operate at over 97% work from home in India and Brazil. We as a company are fully committed to providing timely medical, financial and emotional support to all our team members and their dependents globally.
And I would like to thank all our teams for all their support, continuous engagement and outstanding performance. Let us now turn to our Q1 publication. In the context, we all know these Q1 results show an excellent Foreman, stronger than we anticipated. At constant currency, our revenue grew by 24.3% year on year, of course supported by the Assurant acquisition. We are in fact accelerating compared to Q4.
Importantly, we are back to organic growth of 1.7 Ant, year on year versus the minus 2.4 that we achieved in Q4. This means that at constant scope, group revenues are now above pre crisis levels. Bookings totaled €4,200,000,000 up 27.3% in constant currency year on year. The book to bill is 98%, so it's higher than last year and our funnel is healthy. Digital and cloud growth continues on double digit pace and represents now 2 third of the group activity.
The recruitment activities are very high to address upcoming demand notably in India. Now this reflects the speed, of course, of the economic recovery and the increased demand for technology, but with as expected limited impact from the recent lockdowns in Europe. It furthermore demonstrates the pertinence of our strategy and its accelerated deployment. Now this organic growth acceleration is across every sector, geography and business. What is remarkable is that all the sectors and all geographies rating compared to Q4, with most of them back to organic growth.
In yellow on the chart is the one that are still A bit shrinking in Q1. They are still in recovery, but they're on their way to organic growth and definitely will be back to organic growth in Q2. France and 3 sectors, so Manufacturing Services and Engineering and Utilities are still in that category. In all these areas, we however see a strong momentum improvement compared to Q4. Notably, in manufacturing, when you see you have 3 arrows is basically because the recovery is very strong compared to Q4.
We see a strong improvement. Manufacturing notably recorded a Q1 leap forward. More globally, engineering accelerates its recovery and contributes to the improvement of organic growth. CFO. Our engineering as well improved a lot compared to Q4.
We're still slightly negative, but we'll be back to organic growth now in Q2, strong organic growth. And Services is the one that's still a little bit behind, but even there, I have good hope that we'll be back to organic growth in Q1. In light green is basically is all what has moved now to positive organic growth. It includes Financial Services, which was already there, Telco, Media and Tech and the regions of Rest of Europe and North America, where we see a strong acceleration. And finally, dark green is really the areas that are extremely dynamic, fueled by very strong investment of our clients to accelerate their digital transformation.
CFO, which has been extremely strong, Asia Pacific and Latin America, but also the public sector that remains very strong and consumer goods and retail that saw a marked improvement to join this group. All in all, we see improvements everywhere, decision cycle are really back to normal and the pipeline is promising all across the board. From a portfolio perspective, when we look at the momentum, we see in our pipeline, our booking was fueled by our offering Portfolio Dynamism, which is driving innovative and large deals. This is notably true in cloud and data, which are the main drivers of technology and business transformation for the coming years. To give a few examples of some interesting recent deal, we signed a great project with Singapore Airlines to leverage cloud for their customer first strategy.
We were retained by a National Rail Service to enable intelligent industry in their operation via smart scheduling through a data platform. We were engaged for a large multiyear deal with Met Police in the U. K. To build a hybrid cloud infrastructure. And to further seize the opportunities brought by innovation, we continue to invest in our offering portfolio.
In the Q2, we will launch new offering in sustainability, which will be the first ones, but also will continue with our intelligent industry offering portfolio, We continue to focus on addressing the specific CXO challenges by industry. Turning to Capgemini Engineering. As you may know, Altrane is now fully integrated in the group since January 1. The new organization fully operational. Teams are working well together with new horizons and prospects within the group.
We closed 200 joint deals now in the last 12 months and the pipeline keeps expanding. The deal shows a strong complementarity of our offerings, our unique and innovative positioning and the tremendous opportunities brought by joint go to market. Our new brand there Capgemini Engineering aims to capture our unique set Market Leading Capabilities in Engineering and R and D. It will support our leadership position in Intelligent Industry as digital and physical words converge. To summarize, Capgemini Engineering is now fully live and delivering results.
Synergies achievements are well on track and we'll provide you an update with our H1 results. All in all, this is a very good start of the year. We are optimistic for the Q2 and comfortable with the objective set for 2021. The constant currency top line is expected to increase between 7% 9% including scope evolution of 4.5 points. We anticipate the margin to be back to 2019 level between 12.2 €12.4 and we expect organic free cash flow to exceed €1,300,000,000 And based on this Q1 trend, we should exceed the midpoint of the targeted growth range.
Thank you for your attention. I now leave the floor to Carole, our CFO.
Thank you, Eman, and let's start with the key trends of this first quarter of 2021. We are pleased to report such a strong start to the year with a strengthening momentum across All our regions, sectors and business lines. Our revenues for the Q1 of 2021 reached EUR 4,200,000,002 €71,000,000 The group is back to organic growth at +1.7 percent. As our Q1 last year was not materially affected by the pandemic with an organic growth of 2%, this means that we are above pre COVID levels with revenues above Q1 2019 at constant scope and exchange rates. With the contribution of Altran, our constant currency growth stands at 24.2%, which is another sequential improvement compared to the last quarter of 2020.
Taking into account a negative FX impact of 3.8 points, Our reported growth stands at 20.4% for this Q1. For the full year, I remind you that we expect that the net Scope impact will contribute to an estimated 4.5 points to group growth, while FX should represent around 1.5 points of headwinds. Let's now look at our revenues by regions. Each of the group's regions reported another visible improvement of their constant currency and CFO. We are pleased to report that we have a strong mainly driven by a strong business momentum on a like for like basis.
1st and foremost, the North America And rest of Europe regions, which account in total for almost 60% of group revenues, returned to organic growth in Q1 with pretty broad based sectorial improvements. Building on its already solid momentum at the end of 2020, Our activity in the United Kingdom and Ireland further accelerated in Q1. This region even achieved double digit organic growth with very dynamic financial services and public sectors. Our business in France is continuing in its gradual recovery. Q1 is still down versus the same period last year on a like for like basis, mainly due to an improving but still negative manufacturing sector.
Finally, the Asia Pacific and Latin America region remained very dynamic With a robust organic growth in Q1 2021, Financial Services and TMT were the main contributors to this performance. Let's now have a quick look at our revenues by sectors. There is still a lot of contrast in our performance by sector, but All of them achieved a sequential improvement over the last quarter of 2020. The manufacturing sector has shown the most Sizable improvement, primarily in Rest of Europe, France and North America with only limited organic decline in Q1. The public sector maintained a strong dynamic with another quarter of double digit growth on a like for like basis, while Financial Services and TMT continued to improve with their organic growth firming up in Q1.
The consumer goods sector also made a good start to the year, returning to a high single digit organic growth fueled by the acceleration in North America. Finally, the Energy and Utilities and Services sectors are gradually recovering with a smaller organic contraction than in Q4 2020. On top of these underlying organic trends, the manufacturing and TMT sectors benefited the most from the contribution of Altran with a constant currency growth of 43.6% 84.2%, respectively. Now let's have a look at our revenues by business lines. All our business lines reported in Q1, the further improvements of their annual growth rates compared to those experienced in Q4 2020.
Firstly, Our strategy and transformation consulting services returned to positive organic growth in Q1 with the contribution of the high value services from Cambridge Consultants and It reported a 25.2% growth at constant currency. The growth acceleration was very visible in our core business line, Application and Technology Services, which also returned to positive growth on a like for like basis. Lastly, The Operations and Engineering Services reporting only a modest organic contraction in Q1. While still down on a like for like basis, Our engineering activity is recording another meaningful improvement. The strengthening momentum in Cloud Infrastructure Services Also contributed to the acceleration in this business line with the consolidation of Altranche, constant currency growth reached plus 77.6 percent.
A quick look at our bookings now. Bookings amounted to €4,201,000,000 in Q1, up 27.3% at constant currency. The book to bill ratio stands at 98%, 2 points above last year levels. Overall, we see a Pretty good investment momentum among our clients. And finally, a few comments on the headcount evolution.
The total headcount reached 274,500 employees at the end of March, up 25.3% year on year. The onshore leverage stands at 55%, which is a noticeable increase of 1 point compared to the end of 2020. Lastly, the last 12 months attrition stand at 12.8%, down 6.5 points versus March last year unstable compared to the end of 2020. We still expect attrition to increase throughout the year, but nothing that would be manageable not manageable. With this, I hand over back to Eiman to open the Q and A session.
Okay. Thank you. So operator, we're now ready to start the Q and A.
CFO. The first question comes from Adam Wood from Morgan Stanley.
Hi, good morning and congratulations on the strong start to the year. I've got a couple of questions, please. The first one is maybe just on the French market. Could you just talk a little bit in more detail around that? That's obviously lagging a little bit the rest of the business.
Do you think that's just a timing issue in terms of Some of the sectors you're exposed to and maybe confinement having some impact on demand. Are there any structural concerns we should be worried about there around competition or the industries or CFO. You're exposed to that would prevent France performing as the rest of the group is over the next few quarters. And then secondly, I hear the comments on attrition kind of being manageable. A lot of particularly Indian based peers have talked about the market actually becoming quite hot CFO.
From a hiring and attrition point of view. Maybe if you could just talk a little bit about that and normally that's actually a good thing because we end up with a lot more pricing power in the sector. Do you see any signs of that, yes? Or is it just that the competitors are being quite price disciplined rather than actually seeing your pricing power start to improve?
Thank you.
Okay. So first on the French market. French market, I think, is the basic impact. I think the dynamic in France is very good. But as you know, in France, we are more affected than some other geographies, notably because as well of the business mix heavily towards manufacturing and notably sectors like aero and automotive, but as well in terms of the business line with engineering and consulting.
These are still in like engineering is still in recovery. For example, it will weigh on the French growth. So but overall, I don't see anything negative. Starting in Q2. We'll see a strong dynamic in France because we'll not have any more the base effect that we'll have in Q1.
So I'm fully confident about the French recovery and all the signs are quite positive in the market today. On the attrition, no, there is an increase in attrition. I mean, at this stage, we are not concerned about the attrition, but definitely the demand in the market is very high, okay? So we are we have I think everybody in India is experiencing some shortage of resources. The demand is pretty high and the talent market is tight.
So if you bring that to pricing, the pricing discipline is high. I've seen number of surveys in addition to what our team say. Usually, we have people coming and complaining about how difficult it is and how demanding it is. Now during let's not fool ourselves on large deals. The market is very competitive, but the pricing discipline is pretty high.
We don't see people discounting to try to get deals because we start to see basically scarcity of resources in a number of areas.
Perfect. Thank you very much.
The next question comes from Mohammed Moawala from Goldman Sachs. Sure. Please go ahead.
Great. Thank you. Good morning, Eim and good morning, Karl. Congratulations on the strong quarter. 2 from me.
First of all, given your comments, Simon, around the improving kind of market backdrop, sales cycles returning to normal, Larger deals coming back. You've sort of obviously revised your outlook to the kind of above the midpoint. But as we look at the shape of the rest of the year, What is causing you not to be more optimistic, especially given the easing comps, but also The expectation you have around kind of individual kind of geographic and end market improvement. And secondly, you've talked about sort of Wallet share or share gains both in as we've gone into a crisis, but coming out. What have you baked in, in terms of sort of share gains in your medium term expectations?
And more specifically, when we look at your performance There's a lot of your European peers. There's now a very significant difference even off of the Q1. So are there any particular regions where these share gains are expected to be more pronounced over others? Thank you.
Okay. Listen, so on the first one, we are optimistic. Again, As we said, we already tightened a bit the fact that we're above the midpoint in terms of the growth range. We are in Q1. We're not we're a cautious company, as you know, in terms of our perspective.
And I think it's a bit early for what people would have expected, which will be an upgrade of the guidance. I think we will see that as we look at our Q2 results. At this stage, it's a bit early to basically look at the full year from that perspective. But definitely, this dynamic starting in Q1 is pretty good. And hence we feel comfortable in terms of our guidance to be above the midpoint at this stage.
CFO. On the wallet share gains, listen, I think European market, we continue to be quite strong and I think we are doing extremely well. We are well positioned in some markets and I see our growth being very strong, for example, in markets like the UK. Our dynamic in Germany remains to be very good, but it remains competitive. So you look at compared to some of our European peers, you have to look as well compared to some of our Indian peers that to have pretty strong growth rate in Europe.
So it's a very competitive market. But it's true that in terms of competition, we end up on the number of deals now facing much more with some of the global players and some of the European ones in terms of some of the large deals, but the competition even from European players is still there. So we expect to continue to have share gains in Europe to try to grow above the market and accelerate basically our growth notably North American and Asia Pacific market. And North American market now also looks our return to growth looks pretty good.
And I may have missed it at the start. What was the digital cloud growth rate? I know you said double digit in the release, but have you quantified it?
I mean, it's again, it's double digits in It means basically it's above 10% in terms of growth rate. So it continues to remain pretty strong. As you know, now we'll start giving basically more the trends as we go. And in terms of way, it's about 2 thirds of our revenues now.
Great. Thank you.
The next question comes from Laurent Dorff from Kepler Cheuvreux. Sir, please go ahead.
Yes. Thank you. Good morning, Emmanuel, and congratulations on my side as well. Just two points for me this morning. The first If you could give us a little bit more granularity on the improvements you've seen in the engineering space, if it's coming from the Tough sectors like auto and manufacturing or the other sectors?
And what kind of Outlook do you see for the rest of the year given that one of your peers is looking for very strong rebound in this CFO field in the Q2. And my second question is on I know it's not a quarterly margin, but Given that you start the year with better sales and you probably still have a very much cost control strategy in the 1st part of the year, Would it make sense to expect this year the margin to be a bit more front uploaded than in recent years? Thank you.
Okay. CFO. I will leave the nice margin question to Karl. Listen, for the outlook for Engineering, definitely, I mean, I think we continue to outperform some of our peers in that field and I think it was the same thing in Q1 in terms of growth. If you think about the sectors, I think, I mean, all sectors are improving.
I mean, we have seen some of the comments. I confirmed that Life Sciences is very strong, for example, that all what is around Internet CFO and software is quite strong. Aerotic is still quite negative, but it's better than what we expected, right? So the trends are positive there. And yes, we do expect with the base effect of Q2, basically a strong rebound starting in Q2 in in Engineering and R and D.
Margin question for Carole.
So Laurent, indeed we have a good start to the year. We have a good target to return to 2019 margin levels, if not above, with the 12.4% at the high end of the targeted range. So We feel comfortable about this guidance indeed.
And the phasing?
Too early to comment and we don't comment On the phasing and stage, of course.
Okay. Thank you.
The next question comes from Stefan Slowinski from Exane BNP Paribas. Sir, please go ahead.
Yes. Good morning, Ayman. Good morning, Carole. Thanks for taking my question. Just to follow-up on Laurent's question actually on the margin.
Just wondering now that we're 1 quarter into the year, if we could think about the moving parts there again and CFO. With revenues running faster than expected, hiring accelerating, potential for wage inflation, How should we think about the range in margin this year? Can we assume that if you get to the high end of your revenue range, you can also get to the high end of your margin range? Or could we not extrapolate that?
Do you have another question? Is that the only one?
We'll just leave it at that one. Thank you.
Okay. Listen, again, Frank, we don't comment on Q1 on margin. We think early in the year, but the dynamic is quite positive. So to be frank, it's an H1 discussion, but the trends are positive.
Okay. So this I mean, in terms of some of those changing dynamics around hiring and whatnot, that would not necessarily impact the CFO. Yes.
Although the attrition is still reasonable on 12 months month trailing month rating, we have started the year. We know of course the extension on compensation in some areas where the areas are hot. But again, it's manageable and as the pricing are firm in the market, we feel quite comfortable about the trends currently.
Great. Okay. Thank you very much.
The next question comes from Nicolas David CFO. From OTHF. Sir, please go ahead.
Yes. Hi, good morning, Eiman. Good morning, Karl. Two quick ones from my side and congrats for the CFO. And most regards to the cemetery situation.
First one is, yes, given the situation not only In India, is it potentially affecting your productivity there? And maybe could you share Gross percentage of your headcount, which is currently affected by the COVID and hopes are well. And the second one is, again, regarding the situation. I guess, at the beginning of the year, you had some plan regarding timing for travel resumption. Do you believe that end marketing event also?
Do you maybe think that it could Resume later than expected or do you think that the plan is still on track? And if It happens to start later, those travels and marketing event. Will you invest again or the savings or do you CFO.
Okay. On the India situation, We have always been very high in terms of work from home. So We don't have a major shift. I mean, we I think we had at one moment up to 2,000 people back in our offices. As you see, it's like 98.5 percent work from home.
And now we have maybe 200 or 300 people in offices at client sites. So almost nobody compared to the 125,000 people plus we have in India. So operationally, we don't have any disruption. We are able to address any needs. Of course, we have more cases now than we had 3 months ago, but we don't have any operational disruptions.
And I have a twice a week call with our CEO of India to assess the situation. And right now, we know we're monitoring things very closely. We don't see any operational risk for the coming weeks, okay? Now we have to recognize that the health situation is dramatic in India, right? So there's a lot of efforts deployed by our team, by our leadership to support our teams in India.
We have things like telemedicine, we have opened our campuses for vaccinations. We have agreements with hospitals and with to be able to do testing. We have agreements with hotels to be able to provide quarantine facilities for our staff. So we have even have oxygen in a number of sites to be able to address some urgent needs for some of our team members. So we are doing everything we can both for our teams and socially.
So as I say, dramatic health situation. We're doing all our utmost to be able to support our teams. Operationally. We don't see any issues for the coming weeks. And we do expect that now some of the lockdown measures back into cities like Bangalore and Delhi are going to basically have a positive impact over the next 2 to 3 weeks on the propagation of the disease.
On the travel resumption, just for you to know and then let Carole comment on things. I mean, we are still in the travel ban until the end of Q2. I mean, so it's by exception that people are still traveling. Some countries will start opening up like the U. K.
And North America, but that will be local country board that will make some of these decisions based on the situation. But international travel CFO is still almost none and country based travel is limited with probably some resumption in to expect before the end of Q2 in both North America and UK. Carol, on Paxil?
On the impact on margins, you need to have in mind that Most of our travels are billable travels. So it's both revenues and costs. And When we set up the guidance, of course, we knew the situation. So we were not aiming at returning back to our 2019 level of travels anyway, not only for cost reasons, but also for sustainable reasons. And the maximum Travel was 50% of 29 levels anyway.
Okay. That's clear. Thank you very much.
CFO.
The next question comes from Stacy Pollard from JPMorgan. Madam, please go ahead.
Thanks very much. A couple for me. Just wanted to sort of zoom in on North America. How should we think about modeling seasonality of revenue growth Throughout this year and into next year. And secondly, I think you said that Financial Services was seeing good momentum.
Which other industries are you strong in? And how should we think about mid term goals in the U. S? I guess it's like just an ongoing question here. And could we expect more M and A now that Altran is integrated?
CFO. 3 in 1.
Sure, sure. And the M and A and sectors. Okay. So Listen, on North America, there's 2 things, of course. Last year, we were also impacted like everybody by COVID and the slowdown coming from COVID.
So we have economic recovery. So definitely the momentum on technology investment is good everywhere, including North America. We have the fact that we have now at the end of our transformation plan, CFO. We also have a new leader across the Americas. And I see we have seen very good momentum in terms of the bookings.
We are already back to positive organic growth in Q1 in North America, and I expect acceleration now through the rest of the year. Starting Q2, we should start to see very strong momentum in North America, so I'm quite positive. In addition, Based on all the expectation of the American economy booming, I can only see something positive in North America for the coming years, if you want. So I think we are well positioned. We have done what we need to do in terms of transformation and focus and the dynamic is good.
On the sectors. We talked about Financial Services, Life Sciences. Again, I do I mean, auto is really a geographic. It's a bit floor in France, for example, but expected to accelerate, but it's very dynamic in Germany. So it's a bit here you have some geographies that will play around that.
Aeromotix, we don't expect a big recovery. Telco, Media and Technology, we do expect a strong acceleration there. In Manufacturing, overall, it will turn to positive, but I think some segments of Manufacturing will continue to weigh. In Consumer Products, Retail and Distribution, that was one of the big surprises of Q1. The momentum is very strong in terms of acceleration compared to what we would have expected and even what we see from some of our other place in the market in terms of results.
So we have a very good dynamic there. Energy and Utilities is the one that's a bit slow and it's more the energy side. But again, here, we do expect with some of the digital investments in utilities, notably in areas like smart grid or even all the front end in terms of services and new offering to customer, digital offerings that we'll see an acceleration there. So I mean, it's difficult to see a sector where you'd be negative about in the coming quarters with exception, as I say, as the Aeronautics sectors and some areas of the services, which will still be affected like cruise lines, transportation, some entertainment that I think will still be impacted because it will take a bit more time for them before they resume. M and A.
I mean, we still have small deals, etcetera, so but we don't have any expectation to do anything large. CFO, but we have a continuous pipeline of smaller deals in M and A that we look at, which were focused around some of the priorities we have set even at the CMD.
Great. Thank you.
The next question comes from Michael Briet from UBS. CFO. Sure. Please go ahead.
Thanks. Good morning and welcome to a good start to the year. 2 from me. So Eiman, if I look at the slides on Altran, it looks like you've signed 200 joint deals. On the Q4 slide, it was 44 And the pipeline has gone from 410 to 700.
That's a remarkable performance for calendar Q1, which is normally not that important. Could you talk through the dynamics and whether you think the synergy targets perhaps have upside there? And then Carole, maybe just in terms of seasonality, obviously, Q2 last year with the weakest from an organic growth point of view. Should we still be thinking that year on year organic peaks in Q2 Or at least the sequential improvement should be strongest then.
Thank you.
Okay. Listen, on Altran, 200 deals in the last 12 months. So listen, the dynamic is good. The deals are good. The pipeline is strong.
Again, I think there's a lot of deals, but also a lot of small deals in there. I think it's too early to say are we going to exceed CFO, the synergies. As I said, we'll provide an update this year in terms of overall how much of revenue synergies we consider we have achieved now in terms of or continuous base. But as you imagine, with intelligent industry pickup, I'm quite optimistic about what we can achieve there. So overall, I think that if you look at the synergies, we look from the cost perspective and operational perspective, we look from the top line perspective, Now I'm extremely comfortable with the decision we have made around the Altra acquisition and the expectation in terms of basically value creation for our shareholders.
On the organic groups, As last year was minus 7.7 percent, even indeed, Michael, the basis of comparison CFO. He's enabled a rebound, and we see Q2 as the most the peak in terms of Growth for 2021 indeed.
Thank you.
Your next question comes from Neil Steer from Redburn. Sir, please go ahead.
Hi, morning and thanks for taking my question and congratulations on a solid start Yes. You mentioned, I believe, the figures were additional in cloud, roughly 2 thirds of revenues and growing at double digit rates. That necessarily implies that the 1 third of the business that is obviously not digital and cloud is contracting at CFO. Are you actively managing down exposure in that part of the portfolio or whether that's just a reflection of the volume and the pricing dynamics within the marketplace overall? Thank you.
I think this is just a reflection of the dynamic. We're not trying to shrink the portfolio, but we're trying to shift Quickley. I mean, you have to consider that some of what we're doing, for example, a lot of what we do in our customer application development, we don't do anything that's not native cloud anymore. So by definition that portfolio, which would have been traditional in terms of growth will basically is shrinking at the speed of sound, because now CFO. All the growth is now shifting to providing native cloud development.
With people moving to cloud, most of the businesses move to cloud. So at the end of the day, by definition, that implies that the rest of the portfolio is shrinking. If client tax rating move to cloud, that all non cloud related activities almost shrinking very quickly. And whatever you had as traditional, I don't know, ADM, application development Management. As you shift the client to the cloud, but this activity disappears in a certain way, because now it becomes a part of cloud and digital.
So it's quite natural. Okay? Thank you very much. This was our last question. So Thank you again and look forward to seeing you and talking to you in the coming weeks.
Bye bye. Have a great day.