Capgemini: CFO Nicolas Dufourcq to leave Capgemini: management must reassure

Fair Value EUR39 (+24%)       BUY
News published on October Thursday 18, 2012
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Yesterday, the French government announced the appointment of Capgemini’s CFO Nicolas Dufourcq as CEO of the future BPI (State investment bank). Capgemini’s share price fell 4% on this news as well as IBM’s disappointing Q3 2012 revenues. However, we believe this is a good opportunity for a rebound, as: 1). The transition period is likely to be short and should not impact Capgemini’s strategy and execution; 2). We are convinced the next CFO, whether he/she is recruited internally or externally, could be of great quality. However, the cards are now in the hands of management, who must reassure…

ANALYSIS

  • An offer you can't refuse… The French government has appointed Nicolas Dufourcq, Capgemini’s CFO for the past eight years, CEO of the future “Banque publique d’investissement” (BPI), a stateowned financial institution aimed at housing all public financing and subsidising tools for French SMBs, while Areva’s former CEO, Anne Lauvergeon, was considered the favourite for the job. In a first stage, Nicolas Dufourcq is to head up the BPI’s strategic goals. Capgemini took note of his resignation, which was reportedly carried out on good terms and in agreement with the Management Board. Since Nicolas Dufourcq has been a senior official (Inspecteur des finances) and a high-profile corporate executive (Wanadoo, Capgemini) while also starting his carreer as Head of Cabinet under Pierre Bérégovoy’s government (1992-93), we can easily understand this appointment which he was unlikely to turn down in our view.
  • Transition period likely to be short. As for any top executive resignation within a company, this news opens a period of uncertainty for Capgemini, pending the appointment of a new CFO. At this stage there is no visibility on whether an interim CFO is to be appointed. In our view, an external appointment for Nicolas Dufourcq’s successor is more likely than an internal one and the ideal profile for us would be a CEO or CFO from a large division of a French CAC40 group or the CFO/former CFO of such a group. That said, we believe this transitional period should only last a couple of weeks at worst, and should not impact Capgemini’s strategy and execution. As such, we see no reason to change our estimates in view of this news.
  • Worries to be dissipated in the coming weeks. Whatever the name of its future CFO, we are confident the Board will find a new CFO of high quality. Nicolas Dufourcq’s departure should in no way undermine everything he helped to build during his 8-year tenure in terms of reporting, forecasting, controlling, and cost management, as well as his contribution to strategy. The cards are now in the hands of management, who must reassure on Q3 2012 sales and find a successor as soon as possible.
VALUATION
  • Capgemini’s shares are trading on EV/EBIT multiples of 5.5x 2012e and 4.9x 2013e.
  • The net cash position on 30th June 2012 was EUR27m (net gearing: -1%).
NEXT CATALYSTS
Q3 2012 sales on 8th November after markets close.


Analyst : Gregory Ramirez / 33(0) 1 56 68 75 91 / gramirez@bryangarnier.com

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