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World – Disappointing results prompt improvement initiatives at CDI Corp

06 May 2015

US-based engineering and technology services firm CDI Corp (CDI: NYSE) yesterday reported revenue for the first quarter ending 31 March 2015 of USD 257.5 million, a decrease of 6.8% compared with USD 276.3 million during the same period last year. 

  Q1 2015 Q1 2014 Change
Revenue USD 257.5 million USD 276.3 million -6.8%
Gross Profit USD 46.8 million USD 50.8 million -7.9%
EBITDA USD 4.9 million USD 8.9 million -45.8%

Scott J. Friedheim, CEO and President of CDI Corp, commented: “We are implementing, with a sense of urgency, multiple improvement initiatives to deliver profitable growth and transform CDI. We are adding new leadership in key corporate and operational roles, restoring revenue production capacity, enhancing service delivery, and pursuing corporate development opportunities. We look forward to communicating results of these, and other actions, in the coming quarters.”

CDI Corp operates across the Americas, EMEA, and APAC, but provides no geographical breakdown of their financial results. In the UK, the company operates under the brand CDI Anders Elite.

CDI Corp offers services via three brands Global Engineering & Technology Solutions (GETS), Professional Services Staffing (PSS), and Management Recruiters International (MRI). Revenue by each segment was reported as follows:

  Q1 2015 Q1 2014 Change
GETS USD 82.5 million USD 82.3 million +0.3%
PSS USD 161.4 million USD 180.1 million -10.4%
MRI USD 13.5 million USD 13.9 million -2.7%
Total USD 257.5 million USD 276.3 million -6.8%

CDI Corp’s MRI brand derives revenue from contract staffing and from royalties and franchise fees. Revenue breakdown during the quarter was as follows: 

  Q1 2015 Q1 2014 Change
Contract Staffing USD 10.3 million USD 11.1 million -6.8%
Royalties/Fees USD 3.2 million USD 2.8 million +13.8%

Both the GETS and PSS segments derive revenue from Oil, Gas, & Chemical (OGC), Aerospace & Industrial Equipment (AIE), Hi-Tech, and Other. Revenue by segment during Q1 2015, compared with the same period last year, was as follows: 

  Q1 2015 Q1 2014 Change
OGC USD 78.4 million USD 77.6 million +1.0%
AIE USD 35.0 million USD 39.8 million -11.9%
Hi-Tech USD 59.0 million USD 68.0 million -13.3%
Other USD 71.5 million USD 77.0 million -7.2%

The company recorded restructuring and other related costs of USD 47,000 in Q1 2015, compared with USD 370,000 in Q1 2014. The costs were related to restructuring plans undertaken in 2013 and 2014. However, this improvement was offset by a USD 310,000 “Loss on disposition” charge associated with the disposition of the company’s controlling interest in a Mexico-based engineering design company in CDI Corp’s GETS brand. 

Looking forward to the second quarter, the company expects to achieve revenue in the region of USD 245 million to USD 255 million.

According to CDI’s financial statement: “This guidance reflects expected weakness in our North American staffing business, particularly within the PSS OGC vertical, while the Company implements its programmes to restore and grow its revenue generation capability. We expect this weakness will be partially offset by sequential growth in GETS OGC, GETS government services business and the UK-based AndersElite staffing business.”

In trading yesterday, the company’s share price closed down 0.2% at USD 13.70, a decrease of 4% compared with a year ago. Based on its current share price, the company has a market value of USD 269.2 million.