AGM speaking notes - Part 4
Serge Godin
Thanks, Andre.
Last year at this time, we set what we considered to be ambitious but realistic financial and operating objectives for 1999. Opportunities since then have very significantly exceeded our expectations, and by capitalizing on them we have already surpassed those objectives by a wide margin.
We set a revenue target for 1999 of $300 million. Yet by late October 1997, we already had a revenue run rate of $550 million, and the merger of Bell Sygma into CGI will increase our run rate at mid-year to $1 billion - more than triple that objective.
A year ago, we set a target for international business of $50 million per year. The Bell Sygma International transaction plus TIS will provide international revenue, including the U.S., of close to $250 million. [i.e. 5 times the objective]
Last year, we said that we would increase our presence in each of our targeted industry sectors. Well, this past year in financial services we completed two acquisitions making us a leading player in Canada and a significant one in the U.S. We also made significant inroads in the telecommunications sector, with the Bell Sygma transaction. With Bell Sygma, telecommunications will represent 39% of revenue and financial services, 37%.
We are now in the process of revising our strategic plan to reflect these major developments. What I can say is that we expect our organic growth to at least match the 15 to 20% annual growth of the IT services industry worldwide, with gradually increasing margins. Large scale systems integration and outsourcing contracts and acquisitions will mean higher growth. We foresee rapid consolidation and plan to continue to be one of the prime beneficiaries.
Our performance and outlook, together with our increased market capitalization, are attracting a broader investor audience. We are committed to carrying out a professional investor relations program not only in Canada but also the U.S., to achieve a higher valuation in line with our U.S. peers.
The recent agreement with BCE and Bell Canada which will be completed by the end of June is very significant to CGI. Shareholders will be asked to vote on certain aspects of the agreement at a special shareholders meeting to be held in the spring.
We have agreed to merge Bell Sygma and Bell Sygma International into CGI in return for 8.6 million Series 6 preferred shares, convertible into Class A shares, for a total of $197.6 million.
As an important part of this transaction, Bell and CGI have agreed to strengthen our business partnership first entered into in November 1995 and extend it for an additional 10 years.
There are three main components to this agreement.
ú First, CGI will manage Bell's IT systems development and maintenance, worth more than $3 billion over 10 years at commercial rates.
ú Second, CGI will continue to partner with Bell in IT contracts for their respective clientele .
ú And third, CGI will acquire Bell Sygma International, with worldwide systems integration and outsourcing revenue of$100 million.
Additionally, BCE has completed purchase of6 million issued and outstanding CGI Class A shares from Teleglobe Inc. When the Bell Sygma merger is completed, the combined holding of BCE and Bell Canada will be 43% and Bell's voting interest will remain at 17.9%, vs 66% for the holders of CGI Class B multiple voting shares.
BCE has indicated its interest in raising its interest at 56% in six years, consistent with the terms of the agreement. BCE will realize this when the Class B shares become single voting and when the shares of the majority shareholders are converted into BCE shares.
As part of the agreement, BCE at that time will have the opportunity to gain a 56% voting interest in the company, derived from these shares, but this will not take place before the end of the sixth year, or in 2004.
The acquisition of Bell Sygma and the strengthened relationship with BCE and Bell provide CGI with the expertise, critical mass and resources to become a world class IT player in international telecommunications markets.
In general terms, our strategy going forward is to continue to strengthen our position in each of our targeted industry sectors, with emphasis on large scale systems integration and outsourcing contracts.
Our focus will be on Canada, the U.S. and beginning this year, in Europe as well. We will build on our niche markets by cross selling business solutions to leverage our outsourcing and large scale systems integration practices.
Since we founded CGI 21 years ago, we've had the dream of developing a total quality IT services company, a benchmark for quality in the industry. We have been convinced that quality is the cornerstone for growth, and as we've grown we have broadened our horizons beyond Canada to set our sites on being the benchmark for quality in North America - and beyond.
The combination of quality, size, blue chip partnerships and contracts have enabled CGI to mature into among the most solid and stable companies in our industry. We intend to deliver superior performance, and so continue to reward you our shareholders. I would like to thank each of you for your confidence in CGI.
In closing, I would like to pay tribute to CGI's team of talented and dedicated professionals who set the standard of excellence in our industry through a process of continuous improvement. This record of achievement has ensured CGI's success in winning an increasing share of contracts, and in retaining and attracting top quality people who will ensure the company's ongoing high performance.
I would also like to thank our client partners for their continuing confidence and support, and our trusted suppliers. We are committed to providing high quality IT services that help maintain our clients' competitive advantage in a fast evolving business environment.
Our clients are responsible for our success, and in closing I would like to give them the last word. You will recognize their testimonials from the annual report.
Robert Chevrier, Chairman, President and CEO, Westburne Inc.
"Westburne was seeking a long-term partner capable of realizing its business vision and one with the ability to service its five product groups across North America. Since CGI is a full service provider, it was capable of delivering end to end business solutions to meet our needs."
Jean-Pierre Leger, President and CEO, St-Hubert Bar-B-Q Limited.
"CGI specialists maintain St Hubert Bar-B-Q restaurants' home delivery system, which ensures that our customers benefit from an efficient service. We are pleased to do business with a company whose total dedication to quality is recognized by international ISO standards."
Joanne De Laurentis, President, Interac Association :
"Interac Association need an IT partner to manage its mission-critical Central Network Management Facility operations that enable member transactions. We wanted to associate ourselves with leaders in the Canadian financial services market and suppliers committed to high service and reliability levels. We chose CGI."
Thanks to our clients, after all, it is because of them that we exist.
Thank you ladies and gentlemen. We would now be pleased to answer any questions. I would ask you to please use one of the microphones and identify yourself and say whether you are a shareholder or if you represent a shareholder before asking a question.
[I'll try to add some personal notes on Q&As when I have more time] |
