Image may be NSFW.
Clik here to view.
Canadian headquartered CGI– home of Logica since 20th August 2012 – has released its Q1 results for FY13 (to end January). The results show the first full quarter impact of the Logica acquisition. And we are delighted to say that there’s heaps of great data in the reports to get our teeth around.
The impact of the Logica acquisition is clear to see at the top line. Group revenues were up 147.5% (constant currency) to $2.53b. The increase was down to two factors – 1. The impact of the Logica acquisition and 2. “to a lesser extent” the 19.9% ccy growth in the company’s US business.
Logica is no longer reported as a separate entity. Its operations have been separated into NSESA (Nordics, Southern Europe & South America), France, UK, CEE (Central & Eastern Europe) and Asia Pacific. In the UK, CGI previously had a very small operation. As a result, in Q1, UK revenues were up from $15.9m to $292.9m – now representing 12% of total CGI revenues. There is no direct comparison with Logica's financial results from 2012, as Logica has a December year-end. However, the last available quarterly results were for Q112 (to end March). They showed UK revenues of £191m. That would indicate to us a decline in "Logica" UK revenues in the high single digit percentages in the quarter.
Notably, while the book-to-bill ratio for the Group was an impressive 112% (or $2.8b), by our calculations the ratio in the UK was less than 80% (8% of total bookings, or $224m). This is likely to reflect the fact that Logica’s UK business has a large proportion of revenues from the public sector – 56% in its last financial year. That compared to public sector representing 31% of CGI’s total revenues. In CGI UK, MRD (manufacturing, retail and distribution) and public sector represented 82% of revenues in the quarter. Mind you, if we compare with Logica's Q112 bookings, the UK bookings level does look to have improved.
The impact of costs related to Logica’s acquisition and integration is clear – CGI’s earnings before income tax fell from $144.8m to $22.4m. Logica integration costs in the quarter were $153.4m. Adjusted EBIT grew 49.7% to $209.5m due to the acquisition. Acquisition and integration costs since the date of the acquisition announcement now stand at $408.4m ($263.1m of that is integration costs).
CGI remains positive about the accretive impact of the Logica acquisition on the business in the years ahead. In the next twelve months it expects the acquisition to be accretive in the range of 25% to 30% to CGI’s EPS (excluding acquisition and integration costs”. In addition “as the company continues to realise an approximate amount of $300m of annual business synergies over the next three years at an approximate cost of $400m, we expect the accretion level of EPS to increase”. Of course, there’s a lot of work to do before then. In Q113, the UK EBIT margin fell from 5.8% (in Q111) to 3.1%. The Group EBIT margin was pushed down from 13.6% to 8.3% over the same period. The acquisition negatively impacted the EBIT margin in CE, Asia Pac and NSESA as well. But, as we say, it is early days and the integration is still at an early stage. We will be able to bring you more once we have spoken to CGI’s UK management in the next week or so.
