July 23, 2008

Buffalo-Based CTG’s Profits More Than Double

By Fred O. Williams, The Buffalo News, N.Y.

Jul. 23--Profits at Computer Task Group more than doubled in the second quarter, prompting the Buffalo-based company to raise its 2008 earnings estimates for the second time this year.

Higher demand for computer solutions work, particularly from the health care industry, helped generate double-digit growth in sales.

"CTG has excellent momentum going into the second half of the year despite signs of further weakness in the general economy," Chairman and Chief Executive Officer James R. Boldt said.

Based in Buffalo, CTG provides computer staffing and technology solutions support for corporate clients, lead by IBM Corp. It employs about 3,500 information technology professionals, with about 200 jobs in the greater Buffalo area.

Sales for the quarter ended June 27 were $94.1 million, up 17.4 percent from a year ago. Profits were $2.1 million, versus $1 million.

On a per-share basis, profits were 13 cents, up from 6 cents in the second quarter of 2007.

A shift to higher-margin technology solutions business helped raise the operating margin to 4.2 percent, from 2.2 percent a year ago.

"This really is the result of the strategy we put in place . . . putting emphasis on health care," Boldt said.

The health care industry now accounts for a quarter of CTG's sales, and revenue from the industry is growing at a 20 percent clip. Hospitals and insurers are rapidly adopting electronic medical records in a push to cut administrative costs and reduce medical errors.

The health care sector more than offset a slump in the financial services industry, where banking woes are slowing demand for staffing, Boldt said. CTG had already seen a reduction in the importance of the sector as financial services off-shored their operations in past years. Financial services clients now account for 9 percent of CTG's business, down from 11 percent a year ago, he said.

"Most of our staffing business in the U. S. has already taken the hit," Boldt said.

Shares fell 13 cents on Tuesday to end the day at $4.25. The quarterly results were released after the markets closed.

CTG raised its projections for 2008 sales to between $363 million and $367 million, representing an increase of 12 percent to 13 percent over 2007. Profits are projected to be 44 cents to 48 cents per share, an increase of 76-92 percent above 2007.

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