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IT services | CGI starts the year strong



Multinational IT services company CGI is starting 2023 strong despite rumors of a recession growing in the global economy.

In its first quarter results announced Wednesday, CGI posted revenues up sharply by 11.6% to 3.45 billion, while its net profit increased by 4.1% to 382.4 million.

Excluding special items, adjusted net profit was up significantly by 7.8%, at 398.2 million.

In the same breath, CGI was able to continue to increase its order book to a record value of 25 billion, almost twice its annual turnover.

Additionally, CGI managed to generate a record $605 million in cash flow in its first quarter of 2023, $121 million more than a year ago.

“We are very happy to have achieved such an amount of cash generation, especially since it is largely due to a reduction in payment terms among our customers. In fact, our satisfied customers pay faster,” commented Steve Perron, CGI’s Chief Financial Officer, in an interview with The Press.

On the stock market, these better-than-expected quarterly results turned out to be a nice gift for CGI shareholders, on the very day of their annual meeting held in virtual mode.

CGI’s market value jumped 6% in early trading on the Toronto Stock Exchange to a new high of $121 per share. It ended moderately up 4% at $118 per share, which is $28.1 billion in total market value for CGI.

“Solid Performance”

“CGI’s first quarter results exceeded expectations, both financially and in terms of the order backlog,” said analyst Jérôme Dubreuil, at Desjardins Capital Markets, in a note to investors.

“Despite the threat of recession, new contract additions during the quarter remained strong at $4 billion, with new customers accounting for one-third of that total,” he said in his memo. The good performance of this leading indicator of business prospects at CGI is encouraging in the current economic climate, which is weakening. »

“The strong performance in the first quarter reinforces our confidence in our plans for 2023 to pursue profitable growth at or above the level of the markets in which we operate, while continuing to generate a double-digit earnings per share increase. figures [de 10 % ou plus] President and CEO George D. Schindler said in an update on CGI’s business outlook during the analyst conference call.

In the meantime, CGI maintains good financial means to pursue its growth ambitions by merger or acquisition (M&A) in certain target markets.

“Fragmentation in the IT services market remains high, providing us with plenty of M&A opportunities,” Schindler said.

“CGI’s strong balance sheet would allow us to act quickly on our acquisition strategy, which remains one of the drivers of earnings growth. In 2023, we plan to allocate $1 billion in capital to our M&A growth strategy.”

In interview with The Pressthe chief operating officer at CGI, François Boulanger, specified that the search for M&A opportunities remains centered in the major economic regions where the company is already well established, in Europe and North America.

Also, CGI’s senior management is paying particular attention to M&A opportunities in the United States, particularly in the enterprise IT services market, in order to offset its strong presence in the government market.

CGI’s first quarter of 2023

(in Canadian dollars)

• Revenues: 3.45 billion (+11.6% over one year)
• Cash flow: 605.3 million (+ 121 million)
• Net profit: 382.4 million (+ 4.1%)
• Net earnings per share (diluted): 1.60% (+7.4%)
• Order book: 25 billion (+ 1.43 billion)

Source: CGI

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