CGI’s Godin eyes $4 billion opportunity

MONTREAL — CGI Group Inc. wants to become a $4 billion company through organic growth and acquisitions by 2005, shareholders were told at its annual meeting on Thursday.

About $1 billion is expected to be generated in the U.S., which currently

accounts for some $435 million in sales, $300 million in Europe, up from $47 million today and the balance from the company’s principle market in Canada.

“The mission of CGI is to become one of the top five IT companies in the world,” chairman and CEO Serge Godin told the meeting.

Despite a challenging market, CGI was able to grow net earnings by 51 per cent to $135.8 million on revenue of $2.16 billion for its fiscal year ended Sept. 30. That trend continued in the first quarter of the current year ended Dec. 31, with a 21 per cent increase in earnings to $37 million on revenue of $589 million, up 15 per cent from a year ago.

“We will continue to seek revenue growth in North America and international markets,” said Godin, noting CGI snarled $723 million worth of new business in the first quarter. On Wednesday, it announced the signing of a 10-year, $170 million outsourcing contract with Alcan Inc. to manage the aluminum giant’s help desk operations. It will also provide user support, data centre management services and electronic messaging systems for the company’s operations in Quebec, British Columbia and parts of the United States.

CGI also announced Thursday the acquisition of Cornerstone management Group Inc., a Halifax-based provider of project management and consulting services to the government, heath care and financial services sector. CGI already employs 200 people in Atlantic Canada.

Godin said the recent acquisitions of Cognicase and the Underwriters Adjustment Bureau are starting to pay dividends and real synergy gains will be realized within the next three months.

The company is optimistic about the outsourcing market, which Godin said is the strongest it has been in his 27 years in IT, as managers continue to look for greater efficiencies and economies of scale.

CGI’s priority is to continue to build critical mass in the U.S. and European markets, especially in the U.K. where CGI has about 400 employees.

Godin doesn’t expect significant growth in overall IT spending to return before the second quarter of 2004, making it imperative for CGI to seek out other acquisitions at the low end of the market.

“When (price/earnings) multiples are lower, it’s cheaper to buy,” he said after the annual meeting.

Godin also took the opportunity to clear up CGI’s relationship with BCE, its major shareholder. BCE had previously announced its intention to dispose of its controlling block of shares in the company, but has since reconsidered.

Instead, BCE has decided the best course of action is to leave the current management team in place and it must give CGI one year’s notice if it decides to sell all or a portion of the company. And by April 15, BCE’s option to take over the company will effectively be eliminated through a new agreement with CGI management, according to Godin.

“We have a very good relationship with BCE and several outsourcing contracts with them which represent about $400 million. And we give back to them about $200 million in network servicing contracts,”” he said. “”BCE would do nothing to jeopardize their value in CGI.”

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