Strong growth in its more profitable business – helping hospitals and health care providers implement electronic medical records systems – led to a 48 percent surge in Computer Task Group’s fourth-quarter earnings, the Buffalo-based information technology company said Tuesday.
The earnings, excluding a one-time gain related to life insurance benefits, matched analyst forecasts, although the company’s 7 percent revenue growth was slightly slower than analysts were expecting.
CTG also said that it expects its profits this year to rise by about 22 percent, fueled by a 7 percent increase in revenues, mostly from continued expansion of its electronic medical records work. It also said that it will start paying a dividend of 5 cents per share in April.
“We currently are seeing a tremendous amount of opportunities in our health care business,” James R. Boldt, CTG’s chairman and CEO, said in a conference call. “We expect our electronic medical records business will continue to grow,” mainly because the size and scope of those projects are expanding.
While the electronic medical records projects that CTG has worked on have so far come from hospitals that averaged about 1,200 beds in size, some of the projects the company now is bidding on are from hospitals that are more than four times larger, Boldt said.
“The size of the hospital systems is getting larger, and we expect that to continue,” he said. “It isn’t going to be so much the number of [proposals growing], but the size that’s going to drive our business.”
At the same time, Boldt said, the growth in the health care business is being restrained by the difficulty in hiring new workers who have experience with electronic medical records – a qualification that many potential customers are demanding, Boldt said.
“We’re being impacted by the shortage of people,” he said. “It’s not a shortage of opportunities.”
If CTG were not restrained by those hiring issues, Boldt estimated that CTG’s health care business, which is expected to grow by about 20 percent this year, could grow by as much as 50 percent.
CTG’s fourth-quarter profits jumped to $4.9 million, or 29 cents per share, from $3.3 million, or 20 cents per share. More than half of the increase in profits came from a one-time gain of $800,000, or 5 cents per share, from life insurance proceeds that were paid to the company after the death of a former senior executive. Excluding the life insurance gain, CTG’s earnings matched analyst forecasts of 24 cents per share.
The company’s revenues grew to $107.9 million, from $100.9 million, which was less than the $109 million that analysts were expecting. The company’s solutions business, which is more profitable that CTG’s staffing operations, increased its revenues by 12 percent, fueled by a 13 percent growth in health care revenues. The solutions business now accounts for 42 percent of CTG’s revenues, with health care making up a third of its total sales.
Revenues from CTG’s staffing business rose by 3 percent, with sales to IBM, its biggest client, growing by 2 percent. Boldt said concerns by CTG’s clients about the condition of the economy are keeping a lid on growth in the staffing business. The company’s European revenues, which account for 17 percent of CTG’s total sales, grew by 11 percent. CTG said that it expects its profits this year to rise by 22 percent, to between $1.02 and $1.12 per share, compared with 96 cents per share last year. Revenues are expected to grow by 7 percent, to between $450 million and $460 million, up from $424 million last year.
In this quarter, CTG said, it expects profits to rise by about 20 percent, to between 23 cents and 25 cents per share, with revenues growing by roughly 4 percent, to between $107 million and $109 million.