Tuesday, April 29, 2008

CGI Positions Foreign Exchange Impacts

CGI (GIB) announced ”Revenue of $949.1 million, up 5.3% on a constant currency basis; - Q2 2008 bookings of $1.1 billion, up 23.4%; - Earnings before taxes of $100.4 million, up 8.6%; - Net earnings of $68.8 million, up 9.7%; - Net earnings margin of 7.2%, up from 6.6%; - EPS of 21 cents, up 11.7%; - Cash generated from operating activities in Q2 2008 of $44.4 million - Share repurchases in Q2 2008 totalled $68.1 million.”

Hey that all sounds pretty good I think. But read carefully and chew on these comments. “Relative to the same year ago period, foreign exchange fluctuations negatively impacted Q2 2008 revenue by $52.5 million, or 5.5%.” The company is having a hard time reconciling their real results which are impacted by foreign exchange fluctuations with the concept of constant currency basis.

Currencies are not constant. CGI does report in Canadian Dollars but to attempt to position your financial communication on a constant currency basis is a complete dis-service to investors. It is not reality based.

Michael E. Roach, President and Chief Executive Officer. Continued in the press release "As a result, in the first six months of fiscal 2008, we have grown our revenue by more than $100 million on a constant currency basis while improving our net earnings by 33%."

Generally when foreign exchange fluctuations make a company look bad they emphasize constant currency. When foreign exchange fluctuations enhance results, the brilliant management moves are trumpeted to the high heavens. This just creates a suspicion of the current executive and begs too many questions.