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CGI Group Inc. reported second quarter net earnings today of $14.1 million, or 4 cents a share on revenues of $866.8 million. Included in the quarter's results were pre-tax restructuring costs related to specific items of $31.3 million, or 6 cents a share. Before these costs, CGI net earnings would have been $34.7 million or 10 cents per share. Contract bookings during the second quarter totaled $1.75 billion.
Quarterly Financial Highlights
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Prior to Restructuring Costs Related to Specific Items
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“This quarter was a repositioning of our Company for the next wave of profitable growth,” said Michael E. Roach, President and Chief Executive Officer. “Given the impact of a sharper than expected sequential decline in business from BCE, the restructuring program related to specific items announced last month was a necessary action to ensure that our business remains solid as we continue aggressively pursuing a robust funnel of opportunities in each of our selected verticals.”
“Our financial situation remains healthy, with the balance sheet and cash flows to support our Buy and Build growth strategy,” added Roach. “In the quarter, we successfully signed a series of strategic bookings and completed both the previously announced buyback of 100 million shares and the niche acquisition of Pangaea. In addition, we made a $30 million debt payment and we ended the quarter with almost $200 million in cash.”
Second Quarter 2006 Operational Review
During the quarter, as part of the Company’s announced program to strengthen its competitive position, each business unit and global function, including corporate, was re-examined at granular levels. In connection with this initiative, a pre-tax provision, for severance and other related benefits as well as real estate consolidation, totaling $31.3 million, was taken in the second quarter. The Company expects to incur approximately $60 million in remaining provisions over the course of this calendar year and anticipates a one-year payback on its total program investment.
During the second quarter, the Company earned $1.75 billion in new bookings. Below are certain contract wins announced by CGI since the end of its first fiscal quarter:
- US$30-40 million business process services contract with Medco Health Solutions Inc. to provide payment, reconciliation and enrollment form processing services.
- $1.1 billion in extensions of BCE outsourcing agreements, until June 2016.
- $90 million, seven-year infrastructure management contract with Royal & Sun Alliance Insurance Company of Canada.
- Multi-million dollar six-year business process services contract with Boston-based, OneBeacon Insurance Group. Services will include policy administration and front-end agent solutions.
- US$100 million AMS Advantage contracts with the City of New York and Wake County, North Carolina to support budget control systems.
Outlook
While the sales cycle for outsourcing deals has extended to between 12 and 24 months, demand for these services remains strong and is expected to continue to grow. This being said, the Company continues to win strategic contracts.
For example, following the end of the quarter, the Company announced a 10-year $130 million outsourcing contract with the international entertainment company, Cirque du Soleil.
Prospects in both the commercial and public sectors of the US look especially strong over the coming quarters. In particular, in the public sector, CGI’s Advantage and Momentum ERP solutions continue gaining traction with new and existing clients. As part of its strategy, following the acquisition of AMS, the Company continues to leverage its ERP solutions into longer-term recurring business.
Also in the US, and subsequent to the end of the quarter, the Company signed a seven-year business process services deal with Universal Insurance valued at between US$45-US$75 million to process Universal’s book of business.
The Company expects growth in the US to further accelerate and as a result, is actively recruiting 500 new employees across the US.
CGI’s 2006-2008 business plan reaffirms its successful four pillar growth strategy, with CGI a consolidator in its industry through a balance of organic and external growth. While CGI already has critical mass in its main geographies, it will continue to increase its presence through acquisitions in selected metropolitan markets where it sees the greatest potential to drive organic growth.
Quarterly Conference Call
Investors and the media are invited to a conference call to discuss quarterly results tomorrow morning, April 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. (“CGI”) is the eighth largest independent information technology and business process services firms in the world. 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 of America (“US”), Europe, Asia Pacific as well as from centers of excellence in Canada, the US, Europe and India. CGI's annualized revenue run rate is currently $3.5 billion (US$3.0 billion) and at March 31, 2006, CGI's order backlog was $13.7 billion (US$11.7 billion). CGI's shares are listed on the TSX (GIB.SV.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 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, and may be “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. 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 or 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, Investor Relations
(514) 841-3355
Media
Eileen Murphy, Director, Media Relations
(514) 841-3430
