CGI Group Inc., the Canadian computer services provider, said on Wednesday its quarterly profit more than doubled, driven by a 7 per cent rise in revenue and strong European bookings.
Solid overseas demand, coupled with favorable currency gains, more than offset weakness in the U.S. market. CGI Group lost a deal to manage the online rollout of the U.S. health exchange program after a botched launch last year that created a political crisis for U.S. President Barack Obama.
The company has seen more growth in Europe than North America recently on the back of a 2012 purchase of Logica, a former British competitor.
“If you look at the bookings for the U.S., it was weak,” said Steven Li, an analyst at Raymond James. “The weakness was actually concentrated in U.S. federal, which is where all the healthcare exchanges contracts are.”
Li said fewer federal contracts were on offer in general, but for CGI Group specifically, “what happened with Obamacare didn’t help.”
The company generated C$350-million in cash flow from operations, excluding integration costs, rebounding from a disappointing result in the prior quarter.
“The improvement in cash flow generation should go a long way to allay investor concerns regarding the cash production ability of Logica,” Canaccord Genuity analyst Maher Yaghi wrote in a note.
Net profit in the second fiscal quarter rose to C$230.9-million ($210.6-million), or 73 Canadian cents per share, from C$114.2-million, or 36 Canadian cents.
The company, which reports in Canadian dollars but receives revenue in a range of other currencies, has also been buoyed by a slip in the relative value of the Canadian currency.
The company booked $2.9-billion in contract awards, with 40 per cent reported as new business. Bookings are an indicator of future sales.
Revenue rose 7 per cent to $2.7-billion.
The company said it booked C$2.9-billion worth of contracts in the quarter, for a book-to-bill ratio of 105.4 per cent.
Book-to-bill refers to the ratio of orders added to the company’s backlog versus finished work that can be billed to a client. Investors are keen to see the company get orders for more work than it finishes each quarter, reflecting growth.
CGI Group’s North American book-to-bill over the last twelve months was 98.8 per cent, and 110.2 per cent in Europe.
Just under 13 per cent of CGI Group’s revenue stemmed from work it did for the U.S. federal government in the quarter, down from 13.9 per cent a year ago.
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