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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 says government contracts picking up steam Add to ...

CGI Group says its U.S. commercial business remains challenging but contracts with the federal, state and local governments are picking up steam, especially in the last couple of months.

“The U.S. looks to me a little more favourably than it did last quarter,” CEO Michael Roach said Thursday during a conference call.

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The Montreal-based information technology company said its fourth quarter profits decreased to $73.1-million, or 27 cents per share, from $84.1-million or 30 cents a year ago.

The decrease reflects a pre-tax charge of $45.4-million related to the advancement of real estate consolidation plans, workforce adjustments and a non-cash impairment charge related to an underperforming part of its business.

Revenue increased to $1.03-billion from $1.01-billion.

CGI continues to win new government contracts at all levels, including adding the Department of Labor as a new client, which was announced Thursday.

Despite concerns about the U.S. budget impasse, Mr. Roach said he's confident that IT solutions offered by his company will increasingly be called upon.

“I still believe the U.S. government business — state, local and federal — is a very good spot to be, especially if we start to see a more broad-based recession in the U.S. market,” he told analysts.

As a result, CGI continues to bid aggressively for contracts in the U.S., which accounts for more than 45 per cent of its overall revenues.

“Our strategy is to bid more to win more.”

In Canada, which now accounts for just 30 per cent of revenues, CGI's strategic is to protect is base but also go after new business in defence and intelligence as well as fraud detection.

CGI's earnings were expected to surge 27 per cent to 38 cents per share in the fourth quarter on $1.11-billion of revenues, according to analysts surveyed by Thomson Reuters.

Excluding the charge, net earnings were $104.8-million, or 39 cents per share, compared to $101.1-million or 36 cents a year earlier.

For the full year, its net earnings increased nearly 20 per cent to $435.1-million, or $1.58 per share.

Revenues grew to $4.32-billion, compared to $3.73-billion in 2010.

CGI was forecasted to earn $1.56 per share, up from $1.15 last year. Revenues were expected to reach nearly $4.4-billion.

Foreign exchange fluctuations reduced revenues by $116-million. Excluding this impact, revenues would have been 3.1 per cent higher.

CGI's order backlog stood at $13.5-billion, up $140-million year over year.

Maher Yaghi of Desjardins Capital Markets said CGI had strong bookings in the fourth quarter but muted revenues, as he expected.

Bookings in the quarter were strong at $1.47-billion, ahead of his $1.2-billion estimate.

Global Infrastructure Services revenue of $172-million was down nearly 21 per cent.

Canadian revenue of $312-million decreased 0.6 per cent but operating income of $75-million excluding charges grew 16.5 per cent.

U.S. revenue of $493-million increased 15 per cent due to last year's acquisition of Stanley. Operating profits excluding charges was $52-million, roughly flat from a year ago.

Revenues in Europe were weaker than expected but the division had a $4-million operating profit excluding charges.

“CGI is a well managed company, but due to its geographical market presence in the U.S., Canada and Western Europe, it should continue to witness low single-digit revenue growth, below that of its major competitors,” he wrote in a report.

Founded in 1976, CGI Group is one of the largest independent IT and business process services firms in the world with about $4.5-billion (Canadian) in annual revenues.

It has some 31,000 employees in Canada, the United States, Europe and Asia Pacific.

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