November 3, 2020
Board of Administrators (the “Board”)
Pc Activity Group Inc.
(“CTG” or the “Firm”)
800 Delaware Avenue
Buffalo, NY 14209
Attn: Daniel Sullivan, Chairman
Expensive Members of the Board of Administrators:
As shareholders of 6.4% of CTG’s widespread inventory, we’re writing once more as a comply with as much as our October 19, 2020 letter to the Board. Now we have not acquired a response, nor have we seen any insider share purchases or a change within the Board’s extreme pay practices. As a substitute, the Firm boasts of its efficiency in its third quarter launch, ignoring CTG’s lagging metrics versus its friends. CTG is losing a uncommon alternative for important worth creation.
CTG must speed up its transformation to shut the hole with its peer group. For years, the Firm has attributed its weak staffing income efficiency to a transition away from low margin work and presents no proof that its managed providers supplier technique is working. Moreover, options’ natural income progress seems anemic versus extra digitally-focused rivals, since its Q3 enhance of $2.2 million or 6.5%, is probably going attributable to foreign money translation and the acquisition of Stardust in early 2020.
CTG’s weak margins supply substantial potential alternative. We had been shocked that CTG’s recently-disclosed options margins lag business averages by such a considerable quantity, significantly after the Firm spent $32 million on “strategic” acquisitions within the 2018-2020 interval.
Since 2015, the Firm has informed shareholders it could actually enhance general margins by way of a turnaround in its US companies. But, after 5 years and three CEOs, Firm margins considerably lag its friends. The Firm factors to its ten-year European transformation as proof that its US turnaround plan will work. Nonetheless, this view ignores the truth that the European transformation required $32 million of acquisitions, solely rising working margins a paltry 1.6% and that the US conglomerate of companies is radically completely different than the European enterprise.
A reconstituted Board is important to direct the creation of a price enhancement plan so as to add a minimal of three% to EBITDA margins (>$10 million) throughout the subsequent two years. The underperforming conglomerate of US staffing and options companies have to be strategically addressed. Digital transformation choices and working processes require a re-examination to scale back value construction and enhance shopper supply. Capital allocation methods must be ready in order that shareholder returns will be additional amplified by deploying capital on selective, excessive ROIC acquisitions and repurchases when shares commerce beneath their intrinsic worth.
The Firm is at a important level as it’s dealing with a quickly evolving market in addition to shareholder discontent. We stay up for seeing instant motion by the Board concerning these issues.
/s/ Evan Wax
/s/ James Lindstrom
Wax Asset Administration
Assurance International Providers LLC
About AGS and WAM
AGS is a value-oriented, operations-focused personal and public funding agency.
WAM is an funding advisory agency that engages within the acquisition and disposition of investments.
SOURCE Assurance International Providers LLC