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Today we saw the first effects of the Logica acquisition on the financial performance of its new parent, Montreal-based CGI. And you wouldn’t say things have exactly got off to a flying start. In fact, Logica recorded a C$19m loss on revenues of C$568m (c.£358m) for the six weeks of activities included in CGI’s FY results (to 30th September). The ‘problem’ was that Logica’s revenues were down in the period “with no accompanying reductions in the cost base”. CGI management has since started to ‘make adjustments’ to Logica’s cost base.
Logica provided a 13% boost to CGI’s FY revenues – to C$4.77bn – without which CGI’s top line would have been flat. Even excluding Logica, CGI’s operating margin would have been around 11.8%, almost a point lower than the prior year’s 12.6% margin. Logica’s losses, along with acquisition and integration costs, actually left CGI with a 6.1% margin.
None of this should come as a surprise to regular UKHotViews readers (start with Logica RIP and work back from there). OK, this is still early days, but frankly I think it’s a good indicator of the shape of things to come. You can be sure I will have more to say after meeting management.