3. Sponsored by:
Overview
OVERVIEW
CGI is one of the largest providers of business solutions in the
world.
Services include consulting, systems integration, and management of IT and business
functions.
SERVICES &
SCOPE
CGI Group Inc. provides IT and business process services.
Its revenues distributed by service type are: IT services (43%), business process
services (8%), and IT consulting (48%).
Has more than 400 offices across 40 countries in the Americas,
Europe, the Middle East, Asia Pacific, and Africa.
Headquarters are located in Montreal, Quebec.
Rapidly Expanding into Cloud Services
FOUR
STRATEGIC
PILLARS
Renew and extend smaller contracts
Compete for large, long-term outsourcing contracts
Acquire small, niche firms
Pursue large acquisitions that can expand geographical presence
4. Sponsored by:
Markets & SWOT
SECTORS
Revenue by Sector:
1) Government (34%)
2) Manufacturing (24%)
3) Financial services (19%)
4) Telecommunications (15%)
5) Healthcare (8%)
GEOGRAPHY
Revenue by Country:
1) United States (27%)
2) Canada (15%)
3) United Kingdom (13%)
4) France (13%)
5) Sweden (9%)
6) Finland (7%)
7) Rest of the world (16%)
Strength
Revenue sources are stable
and mostly come from
recurring contracts.
Very narrow list of possible
competitors for contracts
such as the U.S. D.O.D.
Weakness
Generally mediocre asset
efficiency.
Relies on rich world
countries for much of its
revenue, which are
experiencing subpar growth.
Opportunities
Rapid growth in cloud services
demand expected in the near-
future.
IT Services consulting as a
whole also set to experience
solid growth.
Threats
Some aspects of IT services
consulting can be
outsourced to cheaper
competitors, though more
sensitive areas (i.e. defence)
are shielded.
5. Sponsored by:
Recent Acquisitions
STANLEY INC.
Acquired Stanley Inc. for $1.07 billion in 2010
Information technology company based in Virginia, included Stanley’s subsidiary
operations Oberon and Techrizon.
Nearly doubled the size of CGI’s U.S. operations.
LOGICA
Merged with the business and technology services company Logica for £1.7
billion.
Largest acquisition to date
Increased the size of the company’s staff from 31,000 to 68,000
professionals, giving it greater presence across the Americas, Europe and
Asia
Made CGI Group the world’s fifth largest independent IT and business
process services company.
6. Sponsored by:
Shareholders
SHAREHOLDERS
Total of 174 institutional holders, with 214,173,730 institutional shares held.
76.27% of its shares are institutional, while 23.73% are non-institutional.
The five largest institutional shareholders are Caisse de dépôt et placement du
Québec (CDPQ) (27.16%), FMR LLC (14.61%), Bank of Montreal (5.91%), Invesco
LTD. (5.10%), and 1832 Asset Management L.P. (4.94%).
76.27%
23.73%
OWNERSHIP
Institutional
Shares
Non-Institutional
Shares
Caisse de dépôt et
placement du
Québec
27%
FMR LLC
15%
Bank of Montreal
6%Invesco LTD.
5%
1832 Asset
Management L.P.
5%
Other
42%
12. Sponsored by:
Risks I
POLITICAL /
REGULATORY
33% of its revenues come from government contracts
Cutback in spending will effect new sources of contracts
Protectionism can favour local companies over foreign contractors
Its domestic market accounts for only 15%
Larger burden of compliance from varying laws and regulations
Moderate
REVENUE
STABILITY
61% of revenue from pre-existing clients, relatively stable.
However, a large portion of revenues originate from U.S. federal government and its
agencies. A sudden severing of all contracts (i.e. for political reasons) would severely
impact earnings
Low/Moderate
CURRENCY
RISK
Its global operations leave it exposed to currency fluctuations.
But: being spread so wide also diversifies some of the risk
The U.S. accounts for 27% of revenues and its currency will have the largest effect
Moderate
COUNTER-
PARTY RISK
Clients can elect to cancel contracts if CGI fails to reach contractual
milestones, leaving it liable for costs already incurred.
Otherwise, most contracts are with large organizations with less volatility
Low
13. Sponsored by:
Risks II
LIQUIDITY
RISK
Had negative working capital for 3 of the last 5 years, now positive
Steady contracts from existing clients mean that capital requirements are
relatively stable.
Low
REPUTATIONAL
RISK
A client suffering a cybersecurity attack could severely damage CGI’s
reputation, especially if the company is found to be at fault.
Outcomes of high visibility projects have a magnified effect on reputation
See Healthcare.gov
High
MACRO RISK
Both an industrial slowdown and government austerity can negatively effect
revenues. Its reliance on U.S. government contracts may leave it especially
susceptible to cutbacks in U.S. spending
Moderate