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CGI founder and Executive Chairman of the board Serge Godin arrives at the CGI Group Inc. annual meeting in Montreal on Tuesday, Jan. 30, 2007. (Ian Barrett/Ian Barrett/CP)
CGI founder and Executive Chairman of the board Serge Godin arrives at the CGI Group Inc. annual meeting in Montreal on Tuesday, Jan. 30, 2007. (Ian Barrett/Ian Barrett/CP)

CGI profit falls on lower margins Add to ...

CGI Group Inc. reported solid bookings in the first quarter as U.S. government agencies kept spending, pushing its shares higher despite a fall in profit, margins and revenue.

Canada’s largest technology outsourcing and consulting company, which gets a solid base of its recurring revenue from long-term outsourcing contracts with governments and banks, said on Wednesday it signed new contracts worth $1.39-billion in the quarter.

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“The bookings were very impressive, and that’s typically an indicator of future revenue,” Cormark Securities analyst Richard Tse said. He said bookings over $800-million would have been solid.

The Montreal-based company’s shares gained 2 per cent Wednesday morning, despite a 16 per cent fall in first-quarter profit on thinner margins and weaker revenue.

CGI said it had won almost $100-million worth of deals to supply cloud computing services to U.S. government departments including the Department of Homeland Security and the military.

“Government is a good place to be in good times and bad times because they continue to invest,” CEO Michael Roach told analysts on a conference call.

Investors had been concerned that U.S. government budget cuts would limit CGI’s growth in that sector, but a focus on cybersecurity and other core government interests seemed to mark CGI out in relation to larger Indian peers such as Infosys.

“Without question, it definitely gives them a major advantage,” Cormark’s Tse said. “The fact that they’ve been getting such momentum in that business suggests they’re taking some market share.”

Net earnings fell to $106.5-million, or 40 cents a share, from $126.7-million, or 45 cents a share, a year ago, the company said in a statement on Wednesday.

Revenue for the quarter fell 5.5 per cent to $1.03-billion.

“Overall, these results confirm our prediction of the persistence of weak organic revenue and profitability growth trends,” Desjardins analyst Maher Yaghi wrote in a note to investors.

Analysts had, on average, expected CGI to earn 40 cents a share on revenue of $1.08-billion, according to Thomson Reuters I/B/E/S.

Net margin fell to 10.3 per cent from 11.6 per cent.

CGI, which has spent more than $300-million on share buybacks in the last year, is facing rising pressure to switch at least some of that return to investors as a dividend.

The company said it will buy up to 22.1 million shares of its common stock during the next year.

Shares of the company, which have lost almost 15 per cent in value in the last seven months, were up 50 cents at $20.75 on the Toronto Stock Exchange.

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