Consultancy giant hit by global slump

Consultancy giant Cap Gemini Ernst and Young (CGE&Y) has failed to insulate itself from the global economic slump, posting disappointing full-year results.

Operating profits were down 40 per cent from E703m (£428.8) in 2000 to E423m (£258m) in 2001. More worryingly, its profit margins also suffered, down from 10.1 per cent in the last fiscal year to five per cent this despite some cost-cutting exercises.

However, the group remains profitable. Net profit for 2001 stood at E152m (£92.7m).

While the company remains confident that the situation will improve, it has warned that any rebound will be deferred due to the low level of bookings in the second half of 2001. According to the company, 11 September wiped around E19m (£11.5m) off its profits.

CGE&Y has been driving through a restructure in the last year. It is in the process of cutting 5,400 jobs worldwide, and since January, four of the 11 heads of its business units have been changed.

No further job losses are planned however. In an interview with the FT, chief executive Paul Hermelin said: "Our job is not to become an expert in dismissals."

Hermelin added that he wants to reduce the reliance on consultancy projects for multinational clients and is looking to improve its outsourcing offering to challenge those of EDS and IBM.
He is also considering dropping the Ernst and Young brand from the name, now that the accountancy business has been separated from the consultancy operation.

Hermelin also expects a more aggressive approach this year, saying that his company has "somewhat lost the instincts of the hunter".