Logica deal powers CGI results, shares rise

(Reuters) - Canadian IT services company CGI Group Inc GIBa.TOGIB.N reported better-than-expected quarterly results as sales were boosted by contracts from Logica Plc, an Anglo-Dutch rival CGI acquired last year.

CGI shares rose 9 percent to a life-high of C$36.36 on the Toronto Stock Exchange on Wednesday. The company completed its acquisition of Logica last August, making it the fifth-largest independent IT services firm in the world.

The Montreal-based company, founded in 1976, provides services such as business and IT consulting, application development and maintenance, and infrastructure management.

The company’s net income in the second quarter rose to C$178.2 million ($173.2 million), or 56 Canadian cents per share, from C$87.2 million, or 33 Canadian cents per share, a year earlier.

Excluding integration costs related to the Logica acquisition, it earned 63 Canadian cents per share, topping analysts’ average expectation of 58 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Revenue more than doubled to C$2.57 billion. It beat analysts’ average expectation of C$2.53 billion.

Revenue at its U.S. business, the company’s largest, rose 18 percent in the quarter, driven mainly by higher-margin contracts in government and health sectors.

The Logica acquisition has given CGI access to markets in Sweden, Finland, Denmark, Norway, Portugal, Spain and Brazil.

The company said bookings in the quarter jumped 86 percent to C$2.75 billion.

“A lot of the discussion so far has been on cost improvement but now I think the company is in a position to start generating revenue synergies,” said analyst Maher Yaghi of Desjardins Securities.

Yaghi said CGI can land additional contracts in Europe based on the intellectual property it can cross-sell to clients in Europe.

CGI's clients include Royal Bank of Scotland RBS.L, Canadian insurer RSA Canada, National Bank of Canada NA.TO, UK Department of Health, and John Hancock, a unit of Manulife Financial Corp MFC.TO.

The company’s Toronto-listed shares were up 9 percent at C$35.35 on Wednesday, while its New York-listed shares were up by about the same measure at $34.36. The stock has risen about 33 percent as of Wednesday close since CGI completed the Logica acquisition.

($1 = 1.0291 Canadian dollars)

Reporting by Bhaswati Mukhopadhyay and Krithika Krishnamurthy in Bangalore; Editing by Saumyadeb Chakrabarty