CGI SIGNIFICANTLY IMPROVES ITS PERFORMANCE IN Q3

To access the financial results – click here (PDF)

To access the MD&A - click here (PDF)

CGI Group Inc. (CGI) reported third quarter net earnings from continuing operations before restructuring costs today of $46.4 million or 14 cents per share on revenue of $866.5 million. This compares with $34.8 million or 10 cents per share in the previous quarter. In the quarter's results were pre-tax restructuring costs related to specific items of $15.0 million. Including these costs, CGI net earnings were $35.9 million, or 11 cents per share compared with
14.1 million or 4 cents per share in the previous quarter.

Quarterly Financial Highlights

“In the third quarter we successfully executed against our previously announced improvement plan,” said Michael E. Roach, President and Chief Executive Officer. “We significantly improved margins and earnings per share and we were able to maintain revenue, despite continuing currency pressures.”

Third Quarter 2006 Results
Revenue in the third quarter of 2006 was lower compared with the third quarter of 2005 due to the negative impact of currency and a decrease in revenue from the company’s largest customer, BCE. The impact of currency compared with Q3 2005 was $38.2 million while BCE spending was $40.1 million lower than Q3 2005. On a sequential basis, the negative impact of currency was $7.9 million. BCE revenue, sequentially, increased by $5.3 million.

Net earnings from continuing operations before restructuring costs related to specific items in the third quarter of 2006 were $46.4 million, compared with $34.8 million in Q2 2006 and
$56.6 million in the third quarter of 2005.

Net earnings from continuing operations in the third quarter of 2006 were $35.9 million, compared with $14.1 million in the previous quarter and $56.6 million in the third quarter of 2005.

On a basic and fully diluted earnings per share basis, before restructuring costs related to specific items, the Company earned 14 cents per share, compared with 10 cents per share in the previous quarter and 13 cents per share compared with the third quarter of 2005.

On a basic and fully diluted earnings per share basis, the Company earned 11 cents per share in the third quarter, compared with 4 cents per share in the second quarter of 2006 and
13 cents per share compared with the third quarter of 2005.

Operationally, the third quarter of CGI’s fiscal 2006 was focused on maintaining revenue while improving profitability as outlined in the action plan announced on March 29, 2006. Accordingly, a pre-tax charge for severance and other related benefits, totaling $15.0 million was taken in the third quarter bringing the total charge of the program thus far to $46.3 million. The Company expects to incur the remaining charge of approximately $44 million over the course of this calendar year and continues to anticipate a one-year payback.

The Company continues to generate significant cash from operating activities, totaling
$108.3 million during its third quarter compared with $82.0 million in the second quarter of 2006. In addition, the Company’s long-term debt was reduced from $962.2 million at the end of March 2006 to $810.7 million at the end of June, 2006. The Company ended the third quarter with $154.5 million in cash and cash equivalents on hand for a net long-term debt of
$656.2 million.

“I am pleased with the cash generation, significant reduction in debt and overall profitability improvements experienced in the quarter,” added Roach. “With the level of current activity in the marketplace and the growing awareness of CGI as a global leader, we remain confident in our ability to profitably grow our business over time.”

Bookings and Renewals
The Company earned several new contracts and renewals during the quarter totaling
$787 million. Below are certain contracts awarded to CGI during its fiscal third quarter:

• More than US$100 million in AMS Advantage® contracts with City of New York; Wake County, North Carolina as well as the city and county of Honolulu, Hawaii.
• $130 million, IT outsourcing contract with Cirque du Soleil
• US$45 - US $75 million, BPS contract with Universal Insurance
• $50 million, renewal with Caisse de dépôt et placement du Québec

Quarterly Conference Call
Investors and the media are invited to a conference call to discuss quarterly results this morning, July 26, 2006, at 10:00 am (ET). Participants may access the call by dialing (866) 542‑4236 or through the Internet at www.cgi.com. Supporting slides for the call will also be available at www.cgi.com. For those unable to participate on the live call, a webcast and copy of the slides will be archived at www.cgi.com

Use of Non-GAAP Financial Information
CGI reports its financial results in accordance with GAAP. However, management believes that certain non-GAAP measures provide useful information to investors regarding the Company’s financial condition and results of operations as they provide additional measures of its performance. Explanations as well as a reconciliation of these non-GAAP measures with GAAP financial statements are provided in the MD&A which is posted on CGI’s website at www.cgi.com, and filed with SEDAR and EDGAR.

About CGI
Founded in 1976, CGI Group Inc. is one of the largest independent information technology and business process services firms in the world. CGI and its affiliated companies employ approximately 24,500 professionals. CGI provides end-to-end IT and business process services to clients worldwide from offices in Canada, the U.S., Europe, Asia Pacific as well as from centers of excellence in Canada and the U.S., Europe and India. CGI's annualized revenue run rate is currently $3.5 billion (US$3.1 billion) and at June 30, 2006, CGI's order backlog was $13.3 billion (US$11.9 billion). CGI's shares are listed on the TSX (GIB.A) and the NYSE (GIB) and are included in the S&P/TSX Composite Index as well as the S&P/TSX Capped Information Technology and MidCap Indices.

Forward-Looking Statements
All statements in this MD&A that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of that term in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and are “forward-looking information” within the meaning of sections 138.3 and following of the Ontario Securities Act. These statements and this information represent CGI Group Inc.’s (“CGI”) intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, of which many are beyond the control of the Company. These factors could cause actual results to differ materially from such forward-looking statements or forward-looking information. These factors include and are not restricted to the timing and size of new contracts, acquisitions and other corporate developments; the ability to attract and retain qualified members; market competition in the rapidly-evolving information technology industry; general economic and business conditions, foreign exchange and other risks identified in the MD&A, in CGI’s Annual Report or Form 40-F filed with the U.S. Securities and Exchange Commission (filed on EDGAR at www.sec.gov), the Company’s Annual Information Form filed with the Canadian securities authorities (filed on SEDAR at www.sedar.com), as well as assumptions regarding the foregoing. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan,” and similar expressions and variations thereof, identify certain of such forward-looking statements or forward-looking information, which speak only as of the date on which they are made. In particular, statements relating to future performance are forward-looking statements and forward-looking information. CGI disclaims any intention or obligation to publicly update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements or on this forward-looking information. You will find more information about the risks that could cause our actual results to significantly differ from our current expectations in the Risks and Uncertainties section.

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For more information:

Investors
Lorne Gorber
Vice-President, Corporate Communications and Investor Relations
(514) 841-3355

Media
Philippe Beauregard
Director, Public Affairs
(514) 841-3218