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Column: A new direction for CTG from its new CEO

Bud Crumlish inherited a mess when he took over as CTG's new CEO last July.

Six months later, he has a plan to fix the long-struggling Buffalo information technology company – and investors are buying into it, at least for the moment.

"In short, we are taking the necessary steps to address sustainable and profitable growth," Crumlish said during a conference call with analysts last week after the company reported better-than-expected fourth-quarter sales and profits.

For investors, after four years of falling sales and with profits at a 10-year low, the words "sustainable and profitable growth" had to be music to their ears.

[Related: CTG replaces Bleustein as CEO after 16 months with longtime executive Crumlish]

Here's Crumlish's plan in a nutshell:

  • Revamp its health care services and offerings to win new work from hospitals and big physician practices that have largely stopped spending on the electronic medical records projects that were the bread-and-butter of the health care unit from 2011 to 2013, but have since plunged by 80 percent.
  • After focusing on only the biggest companies, such as Fortune 500 firms, for its staffing services business over the last four-plus decades, Crumlish wants CTG to think smaller. He thinks CTG can win work from mid-sized companies – and make more money while doing it.
  • Expand its European business, which accounts for about a fifth of CTG's $325 million in annual sales, by broadening its market beyond just Belgium and Luxembourg.
  • Broaden its services and offerings for its clients across all of the more than 20 different industries that CTG works in, so the company can try to win more work from its existing clients.
  • Build closer ties between its staffing and IT solutions businesses, especially in the health care market.

"In short, we are taking the necessary steps to address sustainable and profitable growth," says CTG CEO Bud Crumlish.

Crumlish ran CTG’s biggest business unit – its staffing segment – for 15 years, before being tapped to replace the ousted Cliff Blustein as the company's CEO last summer. Blustein, who tried to shift CTG's focus away from health care and more toward its staffing business that provides information technology services and personnel to companies, couldn't stop the company's decline and was shown the door after just 16 months.

The turnover wasn't limited to Blustein, either. The company has replaced two-thirds of its board members over the past 15 months.

While Blustein couldn't deliver for shareholders, Crumlish is making a concerted effort to let them know that he's got their interests at heart.

He scrapped the company's quarterly dividend and used that money to fund a $10 million stock buyback program. So far, the company has spent about a quarter of that money and snapped up 563,000 of its own shares in a move that will bolster CTG's earnings per share simply by reducing the number of shares in circulation. So far, that move looks good. CTG bought its shares at an average price of $4.40 apiece. The stock now trades for around $5.50.

Crumlish also cut costs, reducing CTG's selling and administrative expenses to 17 percent of revenues during the fourth quarter, down from 18.7 percent during the summer.

And he put in place a new, progressive way of paying CTG's top executives. Instead of simply giving top executives thousands of shares of CTG stock as part of their pay packages, those executives now have to deliver for shareholders if they want to keep the stock.

To keep all the shares, CTG's stock has to double over the next three years. To keep even a single share, CTG's stock has to go up by 50 percent.

"If we can't do that, we get nothing," Crumlish said. "We don't get shares unless shareholders get significant value. It's that simple."

Oh, and that program starts in 2018. CTG executives aren't getting any stock this year.

Still, even Crumlish isn't expecting his plan to pay off big. In fact, his expectations are downright modest, predicting 7 percent annual sales growth and profits that won't quite equal 2014 levels.

But for a company whose sales have dropped by 23 percent since 2012 and whose profits have plunged by 74 percent, even modest growth is a landmark occasion.

The big thing, Crumlish said, is getting CTG to carry out the plan and get it to work. "It all comes down to execution," he said.

Can CTG rebuild its health care business by getting clients to use the company for their technology service desk or to manage applications, while also expanding its health care staffing services?

Can CTG build its client base by signing up more mid-sized firms, where Crumlish expects CTG to have more pricing power than it does with the biggest companies?

"They don't have the big buying power that Fortune 500 companies have," he said.

"I truly believe we can compete with anybody, and this is an area that we never really went after before," Crumlish said.

In other words, it's time for CTG to get scrappy.

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