CGI shares surge on strong Q4 results and customer support despite Obamacare woes

MONTREAL – CGI Group’s customers haven’t been spooked by media reports linking it to the troubled launch of the Obamacare website last month, the Canadian technology company’s chief executive said Thursday.

CGI chief executive Michael Roach told analysts that clients “clearly understand” the complexity and uniqueness of the project, which is a key part of President Barack Obama’s health insurance strategy.

“This is not a simple website but rather a very complex integrated technology platform that, for the first time, combines the process of selecting, enrolling in insurance, and determining insurance eligibility for government subsidies all in one place and in real time,” he said.

Roach urged investors to focus on the testimony and documents made public through Congressional hearings in which a CGI Federal executive testified, rather than relying on media reports that some observers believe have hurt CGI’s reputation in the short-term.

He also the company’s overall performance was strong in the fourth quarter and full year, which ended Sept. 30 — shortly before the Obamacare website launched and media reports began to circulate.

“Fiscal 2013 was clearly a transformational year for CGI. Our merger with Logica has provided us with a global platform we required to better serve clients at home and abroad,” Roach said.

He said the company has exceeded key elements of its two-year integration plan for Logica that is scheduled to deliver $375 million in annual cost savings.

CGI Inc. (TSX:GIB.A) earned $141 million in its fourth quarter, after deducting acquisition- and tax-related items that reduced the total by about $76.2 million.

On an adjusted basis, the Montreal-based IT services company reported $213.6 million or 67 cents per share, up from $100 million or 37 cents per share, excluding items in both years.

It shares set an all-time high in early Thursday trading on the Toronto Stock Exchange. They later slipped a bit but were up five per cent, gaining $1.88 at $39.50 at midday.

CGI’s revenue for the three months ended Sept. 30 was $2.45 billion — up from $1.6 billion in the fiscal fourth quarter of 2012, when CGI extended its presence in Western Europe by acquiring Logica PLC.

Analysts had estimated CGI’s adjusted earnings for the fourth quarter would be 62 cents per share and revenue would be $2.52 billion, according to figures compiled by Thomson Reuters.

For the full year ended Sept. 30, CGI earned $455.8 million, up from $131.5 million. Excluding about $350 million in costs related to Logica and an unfavourable tax adjustment, it earned $72.7.7 million or $2.30 per diluted share, five cents per share better than analyst forecasts. Revenues more than doubled to $10.1 billion from $4.8 billion in the prior year.

CGI’s profit margin in Europe and Asia was eight per cent for the year after reaching 10.9 per cent in the fourth quarter despite seasonality in Europe.

Its order backlog was $18.7 billion as bookings in the quarter increased 64 per cent to $2.5 billion despite U.S. contract cuts known as sequestration and the 17-day federal government shutdown.

Roach said the European economy appears to be improving while it expects North American demand will continue to grow.

The company has submitted about $1.7 billion of bids as of the end of the quarter.

Maher Yaghi of Desjardins Capital Markets said CGI closed its fiscal year with continued strong improvement in Logica margins which overshadowed some weakness in bookings.

“Overall, results this quarter were solid, with improvements to margins in Europe due to the restructuring activities the company is undertaking in that region, and the US and Canadian businesses reported results that were consistent and in line with expectations,” he wrote in a report.