CGE&Y Issues Profit Warning.

Europe's largest IT services company Cap Gemini Ernst & Young yesterday issued a profit warning admitting that sales and operating profits would be below its guidance figures for the second half of 2003.

Paris-based CGE&Y had already revised its operating margin downwards to 4% from 5% in September, but yesterday admitted that its operating margin for the six months to the end of December could be as low as 2%. The company said that revenue for the fourth quarter would be below guidance given in October but slightly higher sequentially than the third quarter's 1.3bn euros ($1.5bn).

CGE&Y had expected the second half of the year to be a time of "stabilization", according to predictions made by the company's management. Its poor performance in the third quarter was due to delays in signing several large deals, which typically have long bidding periods, and the same problem seems to have hounded it in the fourth quarter.

Ironically, the profit warning comes only a week after it ousted rival EDS from a major UK government contract, winning a 10-year deal worth $5.1bn to provide IT services to the Inland Revenue. The share price gains made last week were lost in early trading yesterday when shares plummeted almost 12% on the Paris Bourse.