Read more about our F2004 financial results (XLS)
Read more about our F2004 MD&A (PDF)
CGI Group Inc. (NYSE: GIB; TSX: GIB.A), a leading provider of end-to-end information technology and business processing services, today reported audited results for the year ended September 30, 2004. All figures are in Canadian dollars unless otherwise indicated.
Fiscal Year 2004 Highlights
- Revenue of $3,243.6 million was 20.8% higher than in fiscal 2003.
- Net earnings from continuing operations increased 20.7% to $210.8 million compared with fiscal 2003.
- Net earnings increased 23.8% to $219.6 million, compared with the prior year.
- Basic and diluted earnings per share from continuing operations amounted to $0.50 for fiscal 2004, compared with basic and diluted earnings per share from continuing operations of $0.44 reported for fiscal 2003.
- Basic and diluted earnings per share were $0.52 in fiscal 2004, compared with basic and diluted earnings per share of $0.45 one year ago.
- The foreign exchange rate had a negative impact of $60.1 million on revenue.
- The net earnings margin from continuing operations was 6.5%, the same as one year ago, and the net earnings margin was 6.8%, up from 6.6% in 2003.
- Cash provided by operating activities was $394.1 million excluding a one-time tax payment and costs related to acquisition transactions.
- The backlog of signed contracts at September 30, 2004 was $13.0 billion with a weighted average remaining contract term of 7.2 years.
- The current pipeline of bids for large outsourcing contracts being reviewed by potential clients increased to $7 billion, from $5 billion previously.
- At year end, CGI was well within plan to achieve a 15-20% accretion rate on an annualized basis for the integration of AMS.
Fourth Quarter Highlights
- Revenue increased 39.9% year-over-year to $959.2 million and was up 10.6% sequentially.
- Net earnings from continuing operations increased 22.1% to $58.5 million from a year ago and 12.6% from the third quarter.
- Basic and diluted earnings per share from continuing operations were $0.13, compared with $0.12 a year ago and in the third quarter.
- Cash provided by operating activities was $100.7 million excluding one-time items.
- New contract wins, extensions and renewals totaled $707.5 million.
- Organic growth was 3.4%, compared with the previous quarter.
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* The amount would have been $100.7 million in the fourth quarter and $394.1 million in fiscal 2004 if not for one time tax payments to the US tax authorities following the sale of AMS' Defense and Intelligence Group and the payment of integration costs related to acquisitions.
"We are pleased with the solid performance we delivered in fiscal 2004," said Serge Godin, Chairman and CEO. "Our continued double digit growth and good profit margins result from the disciplined execution of our business plan. During 2004, we made our largest US acquisition yet, doubling our footprint in the US and Europe; won large outsourcing contracts in each of our three main markets - Canada, the US and Europe; and further demonstrated our core competency in the integration of acquisitions and outsourcing contracts."
"The increase in our sales funnel, which we observed over the past few quarters, is now materializing into solid contracts, as evidenced by the 3.4% sequential organic growth we achieved. We see growing demand for our services in all our markets. We will continue to apply our four pillars of growth strategy with discipline, as this approach has proven that it delivers results," Mr. Godin added.
Fiscal 2004 results
Fiscal 2004 revenue increased 20.8% to $3,243.6 million, from $2,684.8 million in 2003. The currency exchange rate, mainly between the Canadian and US dollars, had a negative impact of $60.1 million or 2.2% on revenue. External growth was 21.0% compared with last year, reflecting the acquisition of AMS effective May 3, 2004. On a constant dollar basis, organic growth was 2.0%, resulting from new and expanded outsourcing contracts, and business solutions sales.
Earnings before interest, income taxes, entity subject to significant influence and discontinued operations ("EBIT") for the year were $335.4 million, up 12.9% from last year's EBIT of $297.1 million. The EBIT margin was 10.3%, down from 11.1% a year ago as a result of the lower profitability of AMS during the transition period.
Net earnings from continuing operations totaled $210.8 million, up 20.7% from last year's comparable net earnings of $174.7 million. Basic and diluted earnings per share from continuing operations were $0.50, compared with $0.44 in the previous year. Including gains from the sale of certain assets, net earnings for the year were $219.6 million, amounting to basic and diluted earnings per share of $0.52. The tax rate, which was 35.0% compared with 39.4% a year ago, resulted from a more balanced distribution of our earnings across our major geographic markets and a reduction in the Canadian federal and provincial statutory tax rate. The tax rate is expected to be 35% in 2005, including the expensing of stock options to begin in the first quarter of 2005.
In fiscal 2004, CGI made one large acquisition, American Management Systems (AMS), as well as two niche acquisitions, Apex Consulting Group Inc. ("Apex") on October 28, 2003 and GDS & Associates Systems Ltd, on January 14, 2004. CGI booked $3.0 billion in contract wins, renewals and extensions. During the year, CGI and its affiliated companies integrated more than 5,000 new members and now employ 25,000 people around the world.
Fourth Quarter Results (See also: Q4 MD&A filed with Sedar & Edgar and available at www.cgi.com)
Revenue for the fourth quarter ended September 30, 2004 increased 39.9% to $959.2 million, from $685.7 million in the same quarter last year, and was up 10.6% sequentially over third quarter revenue of $867.1 million. The increase reflects the acquisition of AMS and new business. External growth was 36.2% compared with last year, and 8.8% compared with the third quarter. Organic growth was 5.8% compared with a year ago, and 3.4% sequentially. Compared with the fourth quarter of last year, the currency exchange rate, mainly between the Canadian and US dollars, had a negative impact of approximately $14.7 million on revenue in the quarter.
In the fourth quarter, revenue from long-term outsourcing contracts represented 52% of the Company's total revenue, including 12% from business processing services, while project oriented SI&C work represented 48%. Geographically, revenue from clients in Canada represented 55% of total revenue; the US represented 36%, and all other regions, 9%. Revenue from clients in the financial services sector represented 35% of revenue; government and healthcare represented 28%; telecommunications and utilities, 23%; retail and distribution, 9%; and manufacturing, 5%.
EBIT was $89.5 million in the fourth quarter, up 10.6% over last year's fourth quarter EBIT of $80.9 million, and up 5.9% over third quarter EBIT of $84.5 million. The EBIT margin was 9.3%, compared with 11.8% in last year's fourth quarter and 9.7% in the third quarter. The reduction in the EBIT margin in the fourth quarter reflects the lower margin of AMS during the integration period and lower business solutions sales.
Net earnings from continuing operations in the fourth quarter increased 22.1% to $58.5 million, compared with net earnings from continuing operations of $47.9 million in the same period of 2003, and increased 12.6% from comparable net earnings of $51.9 million in the third quarter. The net earnings margin from continuing operations was 6.1% in the fourth quarter, below the 7.0% margin of last year but above the 6.0% margin in the third quarter. The net margin increased sequentially despite a $3.6 million impact due to seasonal factors, largely reflecting the cost synergies derived to date from the integration of AMS.
Net earnings also reflect a reduction in the tax rate, mainly resulting from a more balanced distribution of our earnings across our major geographic markets and a year-over-year reduction in the Canadian federal and provincial statutory tax rates.
Basic and diluted earnings per share from continuing operations were $0.13 in the fourth quarter, compared with basic and diluted earnings per share from continuing operations of $0.12 in last year's fourth quarter and in the fiscal 2004 third quarter.
Cash provided by operating activities amounted to negative $3.6 million, but would have totaled $100.7 million had it not been for one time tax payments made to the US tax authorities following the sale of AMS' Defense and Intelligence Group, as part of the AMS transaction, and the payment of integration costs related to the AMS acquisition. In the same quarter last year, cash provided by operating activities was $106.3 million.
CGI maintains a strong balance sheet. At September 30, 2004, cash and cash equivalents were $200.6 million and the total credit facility available amounted to $313.2 million.
During the fourth quarter, CGI signed $707.5 million of new contract wins, extensions and renewals. The backlog, adjusted to include the net increase in signed contracts, was $13.0 billion at September 30, 2004.
Fourth Quarter Operating Highlights
During and subsequent to the fourth quarter, CGI made a number of contract announcements, including:
- In Canada, confirmed, on September 15, the signing of a $108-million, seven-year information technology outsourcing contract with Foresters, a financial services organization. As part of this contract, CGI will manage the data center, help desk, desktop, network, voice and data services serving over 1,600 employees in 60 offices North America-wide.
- Announced the signing of a six-year, $125 million contract with Manulife Financial to create a new information technology development centre in Halifax. The centre of expertise will provide systems development, maintenance and integration services to Manulife and other CGI clients worldwide.
- On October 4, or after the end of the quarter, CGI announced the signing of a five-year contract renewal with Co-operators General, part of The Co-operators group of financial services companies. This contract is valued at $85 million.
- In the US, on September 29, announced the award, by the Tampa Housing Authority, of a business process services contract to serve the U.S. Department of Housing and Urban Development (HUD) in the State of Florida. The estimated value of the award to CGI is US$30 million over five years.
Guidance
Based on current market conditions and the opportunities we see in our markets, we provide the following guidance for fiscal 2005. We expect to achieve growth in revenue of 20% to 28% and growth in net earnings of 25% to 35%, after giving retroactive effect to the expensing of stock options. This will represent revenue between $3.90 billion and $4.15 billion and earnings per share between $0.52 and $0.56, after the expensing of stock options. Beginning in the first quarter of fiscal 2005, in accordance with Canadian generally accepted accounting principles (GAAP), CGI will begin expensing stock options. For comparison purposes with US peers, and since they are not yet required to expense stock options under US GAAP, CGI discloses the expected effect of stock options expensing on its earnings per share, which is expected to be $0.05 in fiscal 2005.
Mr. Godin added, "We are confident about CGI's outlook, as we see excellent growth opportunities within our markets. With the integration of AMS essentially behind us, we are able to leverage our increased critical mass and expanded client relationships in the US and Europe into new business. We also continue to see robust potential in our metro markets in Canada. We have increased our pipeline of bids for large outsourcing contracts to $7 billion, and will continue to closely monitor all operations to ensure that they are consistent with targeted profitability levels, so that we remain one of the industry's top performing companies."
Quarterly Conference Call
A conference call for the investment community will be held today, November 9, at 9:00 am (Eastern Time). Participants may access the call by dialing (800) 387-6216 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.
About CGI
Founded in 1976, CGI is among the largest independent information technology and business process services firms in North America. CGI and its affiliated companies employ approximately 25,000 professionals. CGI provides end-to-end IT and business process services to clients worldwide from offices in Canada, the United States, Europe, Asia Pacific as well as from centers of excellence in India and Canada. CGI's annualized revenue run rate is currently CDN$3.8 billion (US$2.9 billion) and at September 30, 2004, CGI's order backlog was CDN$13.0 billion (US$10.3 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.
Website: www.cgi.com.
Forward-Looking Statements
All statements in this press release 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. These statements represent CGI Group Inc.'s 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.
These factors include and are not restricted to the timing and size of contracts, acquisitions and other corporate developments; the ability to attract and retain qualified employees; market competition in the rapidly-evolving information technology industry; general economic and business conditions, foreign exchange and other risks identified in the Management's Discussion and Analysis (MD&A) in CGI Group Inc.'s Annual Report or Form 40-F filed with the SEC, the Company's Annual Information Form filed with the Canadian securities authorities, 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, which speak only as of the date on which they are made. In particular, statements relating to future growth are forward-looking statements. CGI disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.
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CGI:
Investor Relations
Jane Watson
Vice-President, Investor Relations
(416) 945-3616 or (514) 841-3238
Ronald White
Director, Investor Relations
(514) 841-3230
Media Relations
Eileen Murphy
Director, Media Relations
(514) 841-3430
