CGI to cut 1,600 jobs as business transforms
TECHNOLOGY Response to demand for more online services
• Montrealbased technology- service provider CGI Group Inc. said it’s cutting 1,600 jobs while hiring in other areas as it responds to clients’ accelerating demands to provide more online services.
The company will post a pre- tax expense of $ 165 million over the next year to account for the job cuts and “address underutilized resources,” chief financial officer François Boulanger told analysts Wednesday. The stock had its biggest drop since December, closing down 3.15 per cent.
Conversations with clients “indicate a clear and accelerating need for our clients to become digital to meet their customer expectations — this was the top global trend, the top business priority and the top technology priority,” CEO George Schindler said on the call with analysts.
“Nearly 80 per cent of clients interviewed across every industry plan to increase or maintain their IT budgets — with significant increases for new applications and automation.”
He said t he company, which has a staff of about 70,000 around the world, “will continue hiring and developing in- demand expertise” and that the “billable head count” will grow. The cuts are equal to about 2.3 per cent of the workforce.
Like rivals Accenture PLC and International Business Machines Corp., CGI is trying to decrease dependence on traditional t echnology outsourcing work by harnessing demand from businesses and gov- ernments to take their operations and services online. It’s also accelerated mediumsize acquisitions to add banking clients and broaden its reach in the U. S., where it has long relied on government contracts.
A sample of the job offers on CGI’s website includes positions for data analysis, web development and security.
Profit margins declined a half percentage point from a year earlier to 9.8 per cent, the company said in i ts third-quarter earnings statement. Earnings, excluding some items, rose to 93 cents a share, compared with the 94 cents projected by analysts. Revenue topped estimates at $2.84 billion.
CGI measures “will be focused on readjusting its employee skill base in order to improve utilization rates and increase automation, which should lead to improved margins” starting next year, Maher Yaghi, an analyst at Desjardins Capital Markets, wrote in a note Wednesday.
“We do not believe this initiative is likely to result in a negative impact on the company’s revenue growth trend.”
The U. S., CGI’s largest market, was also its fastest growing in the third quarter, with revenue rising 17 per cent to $ 813.7 million. Growth in Canada was 6.8 per cent.
In the U. S., CGI is pitching its services to government and corporate clients with an emphasis on its local workforce there, a message it’s betting will have appeal since t he Trump administration has placed such a heavy emphasis on job creation. The company employs more than 11,000 people in the U. S., very few on a visa, leaving it less exposed than many rivals to an overhaul in the work visa program.