CGI Group Inc. is running into some difficulties in its move to become a major global IT services player via the acquisition of Logica PLC.
The Montreal-based company swung to a loss in the fourth quarter as it booked acquisition and integration charges related to the $2.7-billion purchase of Anglo-Dutch IT group Logica, which closed in August.
CGI said Wednesday it posted a net loss of $168-million or 58 cents per share in the fourth quarter, compared with a profit of $69.6-million or 26 cents in the year-earlier period.
Revenue – including six weeks of Logica financial results – rose to $1.61-billion from $1-billion.
The Logica acquisition and integration charges reached $248.3-million, the company said.
Excluding one-time items, the company booked a net profit of $100-million or 37 cents per share, compared with 39 cents in the year-earlier period.
Desjardins Securities analyst Maher Yaghi said in a research note Wednesday that fourth-quarter results came in below expectations, while Logica-related costs were higher than anticipated.
“Over all, results this quarter were very messy due to significant integration costs at Logica,” he said.
“Management indicated that while six weeks of revenue was recorded from Logica, the company was not able to reduce costs enough during that period, accounting for the lower revenue run rate of that period. In addition, redundancy and synergy costs could not be optimized quickly enough.”
CGI president and chief executive officer Michael Roach said on a conference call for analysts that the company is nonetheless on track to achieve an accretion rate of 25 per cent to 30 per cent in 2013 from the Logica acquisition.
Mr. Yaghi said in his note that CGI’s base business was mostly in line with expectations.
The Logica deal, the biggest acquisition in CGI’s history, opens up new markets in Europe and Asia for a company whose business has been concentrated in Canada and the United States.
Logica offers business consulting, systems integration and IT outsourcing to governments and companies. CGI provides everything from IT outsourcing to cloud computing. It relies heavily on government contracts as well as business from the health care sector and from financial services companies.