TORONTO (Reuters) - CGI Group Inc (GIBa.TO) reported solid bookings in the first quarter as U.S. government agencies kept spending, pushing its shares higher despite a fall in profit, margins and revenue.
Canada’s largest technology outsourcing and consulting company, which gets a solid base of its recurring revenue from long-term outsourcing contracts with governments and banks, said on Wednesday it signed new contracts worth C$1.39 billion ($1.39 billion) in the quarter.
“The bookings were very impressive, and that’s typically an indicator of future revenue,” Cormark Securities analyst Richard Tse said. He said bookings over C$800 million would have been solid.
The Montreal-based company’s shares gained 2 percent Wednesday morning, despite a 16 percent fall in first-quarter profit on thinner margins and weaker revenue.
CGI said it had won almost $100 million worth of deals to supply cloud computing services to U.S. government departments including the Department of Homeland Security and the military.
“Government is a good place to be in good times and bad times because they continue to invest,” CEO Michael Roach told analysts on a conference call.
Investors had been concerned that U.S. government budget cuts would limit CGI’s growth in that sector, but a focus on cybersecurity and other core government interests seemed to mark CGI out in relation to larger Indian peers such as Infosys.
“Without question, it definitely gives them a major advantage,” Cormark’s Tse said. “The fact that they’ve been getting such momentum in that business suggests they’re taking some market share.”
Net earnings fell to C$106.5 million, or 40 Canadian cents a share, from C$126.7 million, or 45 Canadian cents a share, a year ago, the company said in a statement on Wednesday.
Revenue for the quarter fell 5.5 percent to C$1.03 billion.
“Overall, these results confirm our prediction of the persistence of weak organic revenue and profitability growth trends,” Desjardins analyst Maher Yaghi wrote in a note to investors.
Analysts had, on average, expected CGI to earn 40 Canadian cents a share on revenue of C$1.08 billion, according to Thomson Reuters I/B/E/S.
Net margin fell to 10.3 percent from 11.6 percent.
CGI, which has spent more than C$300 million on share buybacks in the last year, is facing rising pressure to switch at least some of that return to investors as a dividend.
The company said it will buy up to 22.1 million shares of its common stock during the next year.
Shares of the company, which have lost almost 15 percent in value in the last seven months, were up 50 Canadian cents at C$20.75 on the Toronto Stock Exchange.
Additional reporting by Arnav Das Sharma in Bangalore