UPDATE: Calian warns shareholders of government cost-cutting

Elizabeth
Elizabeth Howell
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Technology services firm maintains 2011 guidance on private sector

Shares of Calian Technologies Ltd. (TSX:CTY) declined slightly Wednesday after the technology services firm warned government cost-cutting could affect its profits in Q3.

(Stock image)

The firm maintained its guidance of $215 million to $235 million in revenues and net earnings per share of between $1.50 to $1.80 per share, mainly on the back of stronger private-sector contracts. Calian also said it would pay its shareholders a dividend of $0.25 a share June 8.

In response to tight margins, Calian let go of some of its staff during the past quarter, chief executive Ray Basler noted in a conference call in analysts, but did not provide details.

Mr. Basler said his firm would not know the impact of government business for sure until the federal budget is determined, which at this point would be sometime in June. 

"Having a majority (government) is a positive impact (because) some of the initiatives that are in place will move ahead with a majority government. We feel they have a greater chance of moving ahead on time and on scope," he said in a conference call with analysts Wednesday afternoon.

It's also possible that a hiring freeze or downsizing within the federal government could open up more opportunities for contractors, he added, but at this point Calian cannot predict that for sure.

Its net earnings stood at $3.3 million or $0.42 a share in the second quarter on $59.4 million in revenues.

Both earnings and revenues were above last year, when in the same period, Calian reported net earnings of $3.1 million or $0.40 a share on revenues of $53.1 million reported at the same time last year.

The manufacturing group was more adversely affected this quarter due to the strength of the Canadian dollar while the engineering group remained about the same, with the caveat that there is some revenue volatility as contracts finish and begin, Mr. Basler said.

Shares of Calian declined four cents on the Toronto Stock Exchange, trading at $18.65 each as of the early afternoon on Wednesday.

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