CGI helps companies contain costs without cutting staff

Businesses and governments struggling to hire workers are looking increasingly to technology to address the problem, says the chief executive of CGI Inc., a Canadian IT and business consulting services company. In some cases, they’re finding that they didn’t need the employees to begin with.

Labour markets remain tight in several corners of the world and both private and public organizations are wrestling with how to attract employees, George Schindler said in an interview. At the same time, they’re trying to contain costs amid signs that the economic climate is weakening.

Montreal-based CGI is capitalizing on these business conditions, Mr. Schindler said. The company on Wednesday reported a first-quarter profit of $382.4-million or $1.60 per share as revenue climbed 12 per cent to $3.45-million. Bookings grew by $4-billion during the quarter with new business making up one-third of that total. Cash from operations hit a record $605-million.

“They’re looking for efficiencies, because they got open positions they can’t fill,” Mr. Schindler said of CGI’s clients. “It’s actually pretty pronounced in government. We went to one government agency and basically said, ‘Look, we can automate this. We can do this as managed service.’ ”

When the agency responded that it had employees doing that work andsaidit didn’twantto displace them, CGI showed the agency data indicating roughly half the jobs it was concerned about keeping were actually vacant. “We’re not eliminating people. We’re eliminating positions that aren’t filled,” Mr. Schindler said.

The investor exhilaration in tech stocks that built up during the coronavirus crisis is fading around the world and companies have slashed their payrolls in response to changing circumstances. CGI is bucking the trend. It is one of the few tech companies that still has its pandemic stockmarket valuation.

CGI shares gained 4 per cent to close at $118.71 in trading on the Toronto Stock Exchange on Wednesday. The stock has climbed about 70 per cent since March 20, 2020, when the World Health Organization declared COVID-19 a global pandemic.

Inflationary pressure is increasing labour costs for CGI customers, said Julie Godin, the company’s executive vice-presidentof strategic planning and corporate development. “These climbing costs, combined with aging populations and with a shortage of talent, are forcing many of our clients to reconsider their recruitment strategies as well as how they use technology,” she said.

CGI has grown through acquisitions and is earmarking another $1-billion this year for buying opportunities. It is looking for deals in the United States, Germany and Britain in particular, Mr. Schindler said.

The company is also winning new business and shoring up deals with existing clients. New bookings in the quarter included a 10-year pact with the U.S. State Department that will see CGI deliver U.S. visa application services in India and a new four-year deal with the British government to help it on cybersecurity.

Asked to comment on how a potential change in governments in Canada and the United States could affect the business, Mr. Schindler said every government has historically recognized the need to invest in information technology. However, he said changes in government typically lead to new policies, which requires new support. “It’s no longer just people, it’s technology. So change is typically good for us.”

CGI held its annual general meeting online Wednesday after its earnings call. In response to a proposal by shareholder rights group Médac, CGI chairman Serge Godin said the corporation would recommend to its board that it agree to publish the language abilities of directors in its next management circular.

Médac is making a shareholder proposal to that effect this year for each of the 21 companies in which it is invested, including Canada’s big six banks and pillars of the Quebec corporate community such as Alimentation Couche-Tard Inc., Dollarama Inc. and CGI.