* Adjusted EPS of C$0.65 misses expectation of C$0.70
* Revenue in line at C$2.64 billion; bookings up
* CGI says no ill-effect from healthcare.gov problems
(Adds comments from analyst and CGI executive, details, share
By Alastair Sharp
TORONTO, Jan 29 Canadian computer services
provider CGI Group Inc, the contractor behind the
troubled Obamacare enrollment website, reported
weaker-than-expected quarterly results on Wednesday, sending its
shares to a four-month low.
The Montreal-based company said revenue and bookings - an
indicator of future sales - were both strong in its first
quarter despite losing the contract to manage the U.S. federal
healthcare enrollment website it helped build.
But it also reported U.S. margin pressure and said cash from
operations slipped to C$66 million ($59.19 million), down from
C$224.5 million a year earlier. It blamed delays in collecting
payments on some contracts as well as a hit from payments
related to the integration of former British competitor Logica,
which it bought more than a year ago to expand its European
The company said it expects both of those problems to be
temporary and predicted cash generation of around C$300 million
per quarter in coming quarters. CGI said it generated more than
C$800 million in cash from operations over the previous 12
months, excluding Logica integration costs.
It also said that revenue - which would have shrunk if not
for advantageous currency rates - was pressured by a deliberate
move away from low-margin business, and that costs in the United
States rose as it pushed to hit year-end targets.
The stock was down 4 percent at C$33.81 on the Toronto Stock
Exchange at midmorning on Wednesday after falling as low as
C$32.71, its lowest point since early September.
"All things considered I see this is a buying opportunity
and I'm still positive on the stock," said Thanos Moschopoulos,
an analyst at BMO Capital Markets.
"But I'd say the quarter was mixed because I liked the
bookings, I liked the revenue performance, I liked management's
tone on the call, but it does seem that EPS (earnings per share)
estimates for the Street are likely to come down a little."
CGI has attracted the attention of short-seller Jim Chanos,
who warned last month the company's high-profile troubles could
hurt its ability to win government contracts and said the Logica
acquisition hid deteriorating fundamentals.
PLAGUED BY ERROR MESSAGES
The U.S. healthcare.gov site was plagued by error messages
and slow speeds for weeks after its launch, creating a political
headache for the White House.
The U.S. government said earlier this month that Accenture
had been chosen to replace CGI Federal as lead
contractor for the Obamacare enrollment website.
"(We) have not seen any impact on our ability to conduct or
grow our business" from the website's problems, CGI CEO Michael
Roach told investors and analysts on a conference call.
He said the company is still involved in managing six
state-based health exchanges, with some performing better than
CGI still managed to increase its backlog of orders in the
quarter and announced a plan that gives it the option to buy
back up to 10 percent of its shares in the next year.
The company said it booked C$2.8 billion worth of contracts
in the quarter, almost half of it new business, for a
book-to-bill ratio of 107 percent.
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, as this points to
CGI's backlog of signed orders rose by C$972 million to
stand at C$19.3 billion at the end of December.
One-third of the bookings were for government customers,
with almost a quarter for manufacturers, retailers and
distributors, the company said. More than a quarter came from
the United States, but a broad range of geographies were
The company had a net profit of C$189.8 million, or 60
Canadian cents a share. It said revenue rose 4.4 percent to
Excluding Logica integration costs, CGI said it made C$207.9
million, or 65 Canadian cents a share, compared with C$137.8
million, or 44 cents a share, a year earlier.
Analysts had on average had expected CGI to earn 70 Canadian
cents a share on revenue of C$2.64 billion, according to Thomson
(Editing by Jeffrey Benkoe, Chizu Nomiyama, Jeffrey Hodgson and