Fairfax-based ICF International in recent months has eliminated some jobs and reassigned other employees in its federal business, as uncertainty over government contracting persists.
ICF has had one of the stronger balance sheets of local contractors recently, buoyed by its commercial work. In its most recent quarter, the company posted profit of $10.3 million (52 cents a share), up from nearly $9 million (45 cents) in the same three-month period a year prior. Sales grew 12.3 percent to $239.6 million.
Still, the company’s federal business made little progress, said John M. Wasson, ICF’s president and chief operating officer, in a call with investors.
“ICF typically sees a strong ramp-up in federal revenues beginning in [the second quarter] and continuing into [the third quarter] each year,” he said. “This year, given the significant uncertainty in our federal markets, we experienced no ramp-up in federal revenues from Q1 to Q2, and we now expect no ramp-up of such revenues for Q3 or Q4.”
Additionally, ICF is seeing delays in federal programs and in the government’s approval of subcontractor deals.
The company last month completed an employee realignment that officials said would save more than $10 million in annualized staffing costs. ICF wouldn’t break out how many employees were reassigned to other areas of work and how many saw their roles eliminated, but Sudhakar Kesavan, chairman and chief executive, said about 75 employees were affected.
“Staff reductions were made in areas where we did not see opportunities for growth in the near to intermediate term,” Wasson said. “An immediate priority for us with a portion of these freed-up resources is to add several senior commercial business development leaders.”
Douglas Beck, ICF’s director of corporate development, said in an interview that the company’s total employment remained roughly flat.
According to Kesavan, the company’s commercial work should continue to increase at double-digit rates for the rest of the year.
Still, ICF was forced to lower its outlook for its sales and profit for the year, much like other contractors.
ICF is “seeing more weakness now in the federal business than they thought even a few months ago, and that’s consistent with the broader space,” said George A. Price Jr., senior equity research analyst for information technology services at BB&T Capital Markets, which has relationships with a number of contractors, including ICF. “I thought given their mix, they would actually hold up a little better than it seems that they are.”
Earlier this month, McLean-based contracting giant Booz Allen Hamilton said it would not offer financial forecasts beyond Sept. 30.
“I don’t know that our industry has faced a more difficult and unpredictable period since the peace dividend era in the early 1990s,” said Samuel R. Strickland, the company’s chief financial officer, in a call with investors. “We would like to offer something more than that and extending further in the year, but given the significance of the unknown, it would compromise our credibility and we aren’t willing to do that.”
Other contractors, too, have lowered their forecasts. Dynamics Research Corp., for instance, which has a major office in Arlington, said last month it expects 2012 revenue of $318 million to $326 million, down from an estimate of $328 million to $336 million three months earlier. Fairfax-based ManTech International projected a profit of $105 million, down from the $113 million it expected one quarter earlier.