January 27, 2016 / 1:51 PM / a year ago

UPDATE 3-Higher U.S., UK sales help Canada's CGI beat profit estimates

3 Min Read

(Adds interview with CEO, closing share price)

By Allison Lampert

Jan 27 (Reuters) - Canadian information technology and outsourcing services company CGI Group Inc reported a higher-than-expected quarterly profit, helped by increased sales in the United States and United Kingdom.

The Montreal-based company estimated double-digit growth in earnings per share this fiscal year, following a 13 percent rise in 2015.

Chief Executive Michael Roach said in an interview on Wednesday that the weaker Canadian loonie is being eclipsed by the strength of the U.S. dollar which he expects to boost revenues.

"My view is that the strength of the American dollar would be a tailwind to our top line and you're seeing that," he said following the company's annual general meeting.

He said CGI was looking for acquisitions and the weak loonie would not stop it from hunting in the United States. But the loonie is making Canada's tech companies bigger targets.

"Companies in Canada are on sale - 70 cents on the dollar," he said. "If you are a tech company in the United States ... some of them look at it as R&D. Why try to develop a new solution when there's some small company in Canada that's built it? You just wait and you buy it."

Excluding restructuring costs and other special items, earnings rose 13.5 percent to 84 Canadian cents per share in the first quarter ended Dec. 31, beating analysts' average estimate of 82 Canadian cents, according to Thomson Reuters I/B/E/S.

Roach told analysts that growth this year would stem from areas like improved productivity and rising demand from clients to combat cyber attacks.

CGI said its backlog of signed orders rose to C$21.51 billion ($15.29 billion) at the end of December from C$20.18 billion a year earlier.

Cash-rich CGI can make either smaller niche acquisitions or a larger "transformational" one, he said. The two biggest areas where a transformational acquisition would make an impact are the company's UK and U.S. commercial businesses.

During the quarter, revenue rose about 9 percent to C$716.0 million in the United States and nearly 18 percent to C$365.3 million in the United Kingdom. Total revenue increased 5.6 percent to C$2.68 billion.

Operating expenses rose about 5.8 percent to C$2.35 billion.

Net income rose to C$237.7 million, or 75 Canadian cents per share, from C$236.3 million, or 74 Canadian cents per share, a year earlier.

CGI stock closed up nearly 4 percent at C$57.72. ($1 = 1.4077 Canadian dollars) (Reporting by Amrutha Gayathri in Bengaluru and Allison Lampert in Montreal; editing by Lisa Von Ahn and Richard Chang)

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