For CGI Group Inc. chief Michael Roach, Barack Obama's State of the Union call for more efficient U.S. government programs hit the right note.
Mr. Roach, president and chief executive officer of Canada's largest technology outsourcing and consulting firm, says he's encouraged by the U.S. President's speech on Tuesday night that included promises to streamline government agencies and cut back on waste in the delivery of services.
Montreal-based CGI is well positioned to capitalize on cost-cutting and efficiency commitments by the U.S. and other governments because it means an increased emphasis on high-technology solutions, Mr. Roach said in an interview on Wednesday.
"Governments everywhere have to invest more in technology," he said after the company handily beat analyst estimates with first-quarter profit of $126.6-million or 45 cents a share, up 14 per cent from $111.2-million or 37 cents in the year-earlier period. Revenue rose 23 per cent to $1.12-billion.
Mr. Roach noted that CGI now does most of its business - 53 per cent of total revenue - outside Canada, concentrated in the United States, for the first time in its history.
Last year's acquisition of U.S. mid-size firm Stanley Inc. helped boost first-quarter profit while at the same time raising CGI's exposure to U.S. federal government business.
Jason Kupferberg, an analyst with UBS Securities Canada Inc., said in a research note that the Stanley deal is a welcome geographic diversification for CGI. "However, we are mindful of the potential budget/procurement headwinds facing the U.S. federal market."
Mr. Roach is confident there is still plenty of room for growth in the $100-billion (U.S.) government services market, of which CGI now has about 1 per cent. An aging American population coupled with U.S. health-care reform is one area that offers particularly promising growth opportunities, he said.
CGI offers services such as technology integration, consulting and outsourcing. Its five key sectors are government, financial services, telecom, manufacturing and retail distribution.
Maher Yaghi, an analyst with Desjardins Securities, said in a research note Wednesday that CGI's bookings of $1.2-billion (Canadian) in the first quarter were in line with expectations.
U.S. subsidiary CGI Federal said recently it had won about $500-million (U.S.) in government bookings in the quarter.
Among prominent private-sector CGI customers in Canada are aerospace leader Bombardier Inc., entertainment giant Cirque du Soleil, and insurance and investment firm Industrial Alliance Insurance and Financial Services Inc. The company has 31,000 employees at about 125 offices around the world.
CGI also announced Wednesday it intends to buy back up to 23 million, or about 10 per cent, of outstanding common shares over the course of the fiscal year.
Bertrand Marotte