CTI Engineering's Q2 profit declines 12% amid rising costs

CTI Engineering's operating income for Q2 FY2025 declined by 12% year-over-year, primarily due to an increase in SG&A expenses. Key drivers included higher national insurance employer contributions and professional liability insurance provisions at Waterman Group Plc, increased labor costs in administrative and marketing departments, DX-related outsourcing fees, and system usage fees at CTI Engineering. Additionally, a temporary deterioration in the cost of sales ratio impacted multi-year projects due to extended periods and rework from operational errors.

Looking ahead, CTI Engineering is not currently considering reducing orders received, aiming to balance project intake with available resources and productivity improvements from DX initiatives. The company is actively pursuing Business Portfolio Transformation, categorizing businesses into early, grow, and mature stages, with investments focused on CM/PM and Information Services as future core businesses. Overseas business, monitored monthly, seeks expansion given limited domestic growth opportunities, with profitability assessed by country and M&A opportunities being considered.

The decline in overseas business profitability is partly attributed to the unsuccessful transfer of personnel costs in Waterman Group Plc’s engineer secondment business due to the UK’s economic environment and the need to retain engineers regardless of contract status. While transferring these costs, particularly national insurance employer contributions, will take time, profitability is expected to improve as these are UK government policies affecting all entities. The company also confirmed that they will negotiate with clients if prices rise for multi-year projects with fixed prices.