CGI Group Q3 - Rev +123%, earnings +218%, cash flow +156%
AUGUST 5, 1998
CGI Reports Continued Strong Growth In The Third Quarter
MONTREAL, QUEBEC--
Revenue increased by 123 percent, net earnings by 218 percent and
cash flow by 156 percent
CGI today announced continuing strong growth for the third quarter
and nine months ended June 30, 1998 compared with the same periods
of fiscal 1997.
In the third quarter of fiscal 1998, revenue increased by 123
percent to $157.8 million, net earnings by 218 percent to $7.7
million and cash flow by 156 percent to $16.7 million, compared
with the same period a year ago. The net profit margin increased
to 4.9 percent, from 3.4 percent a year ago. On a per share basis,
reflecting a 47 percent increase in shares outstanding on a
weighted average basis to 114.9 million, net earnings per share
were 7 cents, compared with 3 cents the previous year. Cash flow
was 14.5 cents per share vs 8 cents in the same period a year ago.
The increase in revenue, earnings and cash flow reflects a balance
of external and internal growth. Since March 1997, CGI has
completed the acquisition of two major information technology (IT)
services companies and has been awarded a number of major systems
integration and outsourcing contracts. During the period, CGI
further strengthened its position in its six target markets, in
particular in financial services and retail and distribution.
For the nine months ended June 30, 1998, revenue increased by 161
percent to $416.4 million, net earnings by 281 percent to $18.7
million, and cash flow by 259 percent to $45.8 million. The net
profit margin for the first nine months of fiscal 1998 was 4.5
percent compared with 3.1 percent in the same period of fiscal
1997. On a per share basis, reflecting a 48 percent increase in
shares outstanding on a weighted average basis to 112.0 million,
net earnings were 17 cents compared with 6 cents a year ago, and
cash flow was 41 cents per share compared with 17 cents a year
ago.
Shareholders' equity increased 286 percent to $259.4 million from
a year ago, reflecting higher retained earnings, and shares issued
as part payment for acquisitions. The company has practically no
debt and $20.3 million cash.
"We continue to strengthen our position in our target markets and
to further increase profitability," said Serge Godin, Chairman and
CEO. "Effective July 1, 1998, we doubled our revenue run rate to
$1.2 billion and tripled our order backlog to $6 billion with the
completion of the multi-faceted transaction with BCE Inc. and Bell
Canada. We are currently focused on successfully integrating the
acquired operations while continuing to grow our business
organically and through acquisitions."
Third Quarter Highlights
Bell Sygma Transaction Completed and Integration Underway On June
29, 1998, CGI shareholders approved changes enabling CGI's
acquisition of Bell Sygma Telecom Solutions and Bell Sygma
International operations from Bell Canada in exchange for 17.2
million Series 6 preferred shares of CGI at $11.49 per share,
converted one-for-one into Class A subordinate shares.
Concluded as of July 1, 1998, the transaction includes a 10-year
outsourcing contract valued at more than $4.5 billion for CGI to
develop and maintain Bell Canada's internal information systems.
This is the largest outsourcing contract ever in Canada, and one
of the largest in North America. CGI also acquired Bell Sygma
International, with $80 million annual revenue. Additionally,
CGI's partnership with Bell Canada to bid jointly on contracts was
extended 10 years to 2008.
The integration of Bell Sygma's operations is well underway and is
proceeding smoothly. Over the course of numerous acquisitions in
recent years, the company has developed business processes which
represent best practices in integrating the members and facilities
that come with outsourcing contracts and corporate acquisitions.
CGI has experienced a 100 percent renewal rate of contracts of
acquired companies and a high retention rate of new members.
Backlog Evolution
The order backlog has increased from $1.3 billion in October 1997
to $1.5 billion at June 30, 1998 to more than $6 billion
currently.
New Contracts
In June 1998, CGI entered into a five year partnership with ING
Canada valued at $15 to $20 million, to provide consulting
services to support their competitive position in the Canadian
insurance market.
In July 1998, CGI announced the renewal of its contract with
Industrial-Alliance Group valued at $20 million over five years to
operate and manage their IT environment. CGI announced a $20
million contract with the National Research Council (NRC) to
implement and support the day to day operations of NRC's
enterprise resource planning system. CGI also announced a
five-year agreement to provide electronic commerce and electronic
funds transfer services to the Laurentian Bank of Canada,
estimated at $20 million.
Corporate profile
CGI is the largest independent information technology consulting
firm in Canada and the sixth largest in North America. It provides
end-to-end IT services and business solutions to some 2,000
clients in Canada, the United States and 20 countries around the
world. CGI has more than 7,500 professionals, an annualized
revenue-run rate of more than $1.2 billion and an order backlog
totalling approximately $6 billion. CGI's shares (GIB.A) are
included in The Toronto Stock Exchange's TSE 300 Composite and TSE
200 indexes. Website address: www.cgi.ca.
/T/
CGI GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except earnings per share) (unaudited)
Three months ended Nine months ended
June 30 June 30
1998 1997 1998 1997
---------------------------------------------------------------
$ $ $ $
Revenue 157,757 70,815 416,434 159,497
---------------------------------------------------------------
Operating expenses
Direct costs,
selling and
administration
expenses 132,688 61,705 353,711 140,880
Research and
development 1,624 917 4,200 2,142
Depreciation and
amortization of
fixed assets 3,556 1,395 9,846 2,061
Amortization of
costs related to
outsourcing
contracts 2,974 1,220 8,286 2,617
Amortization of
software and
development costs 649 107 1,287 320
Amortization of
goodwill 1,672 624 4,763 1,033
Interest on
long-term debt 202 259 566 320
Other interest
expenses 305 107 614
---------------------------------------------------------------
143,365 66,532 382,766 149,987
---------------------------------------------------------------
Earnings before
following items 14,392 4,283 33,668 9,510
Income taxes 6,735 1,869 15,221 4,328
---------------------------------------------------------------
Earnings before share
in the results of
an entity
subject to
significant
influence and
share
of non-controlling
interest 7,657 2,414 18,447 5,182
Share in the results
of an entity subject
to significant
influence - (37) - (310)
Share of non-controlling
interest - 30 253 30
---------------------------------------------------------------
Net earnings 7,657 2,407 18,700 4,902
---------------------------------------------------------------
Weighted average number
of outstanding Class A
subordinate shares,
Class B shares and
first preferred
shares 114,884,330 78,118,896 111,979,285 75,867,800
---------------------------------------------------------------
Earnings per Class A
subordinate share,
Class B and first
preferred share 0.07 0.03 0.17 0.06
---------------------------------------------------------------
CGI GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars) (unaudited)
As at June 30 1998 1997
---------------------------------------------------------------
$ $
Assets
---------------------------------------------------------------
Current assets
Cash and short-term investments 20,255 -
Accounts receivable 125,159 53,719
Work in progress 10,435 11,877
Prepaid expenses 6,210 2,425
--------------------------------------------------------------
162,059 68,021
Investment in an entity subject
to significant influence 579 -
Fixed assets 33,870 14,783
Costs related to outsourcing
contracts 33,026 13,279
Software and development costs 2,692 4,247
Deferred income taxes 11,734 2,055
Goodwill 124,876 42,121
--------------------------------------------------------------
368,836 144,506
--------------------------------------------------------------
CGI GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars) (unaudited)
As at June 30 1998 1997
---------------------------------------------------------------
$ $
Liabilities
--------------------------------------------------------------
Current liabilities
Bank indebtedness - 13,777
Accounts payable and accrued
liabilities 81,568 30,049
Deferred revenue - 817
Income taxes 9,664 279
Deferred income taxes 7,190 3,111
Current portion of long-term
debt 4,908 4,039
--------------------------------------------------------------
103,330 52,072
Long-term debt 6,062 24,820
Share of non-controlling interest - 456
--------------------------------------------------------------
109,392 77,348
--------------------------------------------------------------
Shareholders'equity
Capital stock 220,097 49,374
Contributed surplus 211 211
Retained earnings 39,136 17,573
--------------------------------------------------------------
259,444 67,158
--------------------------------------------------------------
368,836 144,506
--------------------------------------------------------------
CGI GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
---------------------------------------------------------------
for the nine-month periods ended June 30
(in thousands of dollars) (unaudited)
1998 1997
--------------------------------------------------------------
$ $
Operating activities
Net earnings 18,700 4,902
Items not affecting cash
Depreciation and amortization
of fixed assets 9,846 2,061
Amortization of costs related
to outsourcing contracts 8,286 2,617
Amortization of software and
development costs 1,287 320
Amortization of goodwill 4,763 1,033
Deferred income taxes 3,164 1,547
Share in the results of an
entity subject to significant
influence - 310
Share of non-controlling
interest (253) (30)
---------------------------------------------------------------
45,793 12,760
Changes in non-cash working
capital items 1,082 (10,984)
---------------------------------------------------------------
46,875 1,776
---------------------------------------------------------------
Financing activities
Issue of shares 168,473 21,467
Increase in long-term debt 6,103 21,478
Repayment of long-term debt (24,174) (1,491)
---------------------------------------------------------------
150,402 41,454
---------------------------------------------------------------
Investing activities
Business acquisitions
(net of cash acquired) (129,043) (40,995)
Investment in an entity subject
to significant influence (577) (44)
Acquisitions of fixed assets (15,140) (3,029)
Proceeds on disposal of fixed
assets - 21
Costs related to outsourcing
contracts (17,440) (4,302)
---------------------------------------------------------------
(162,200) (48,349)
---------------------------------------------------------------
Increase(decrease)in cash
position 35,077 (5,119)
Cash position at beginning (14,822) (8,658)
---------------------------------------------------------------
Cash position at end 20,255 (13,777)
---------------------------------------------------------------
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