CSG profits up, bullish on outlook

CSG profits up, bullish on outlook

Listed services provider posts strong results and looks to continue expanding

CSG has pumped up its profits by 24 per cent for the full year to June 30 on the back of its acquisition of Commander’s managed services business and contract wins outside of its Northern Territory base.

The ASX-listed IT services provider (ASX: CSV) pulled in $197.3 million in revenues, up 48 per cent year on year. The company also reduced its debt by $17.3 million to sit at $39.3 million.

CSG CEO, Denis Mackenzie, said while it wasn’t an easy year, CSG had completed several “truly company changing events”.

They were the acquisition of Commander’s managed services business, and winning its first contract outside of the Northern Territory with the Victorian Department of Education and Early Childhood Development.

“We are investing in some bits up here with the Northern Territory Government. We’ve got a large group of people working on bids for a six-month period on some large opportunities,” Mackenzie said. “We have had to bring on some external people and are spending some money on these bids, which are not cheap. But obviously it’s a big opportunity in our back yard which we see as important.”

Notably, Mackenzie maintained a positive outlook for the new financial year and pointed to stronger growth in the second half.

“We are seeing markets in Western Australia start to pick up a little bit now,” he said. “Victoria started about six months ago for us. That is where we have some variability with our income but other than that it is all going okay.”

ABN Amro Morgans senior analyst IT&T, Nick Harris, said the results were positive, especially the move into South Australia.

Earlier in the year, CSG followed on from strong half-yearly results to open up a new office facility in South Australia with plans to bring on 100 new staff.

“The fact they recently won the South Australian education contract, in my opinion, is the single most important event for the company since they listed,” Harris said. “It is something they have been trying to do for quite some time and they obviously have been able to achieve that so it is a great outcome this year. I am definitely positive on that.”

In late July, CSG also announced it would be purchasing Delexian as part of its Oracle expansion plans.

However, it hasn’t all been smooth sailing for the company with it dropping 100 staff from its Canberra operations in late May following the loss of several Government tenders that didn’t renew after the Commander business purchase.

Yet Harris said, in hindsight, the decision to purchase the Commander business provided CSG with the skills and relationships it needed to grow the business.

“It gives them some opportunities that they otherwise would have had to work many, many years to get,” he said. “Financially, it probably ended up net-neutral as a result but what it did do is give them some skills and relationships in Canberra, South Australia and areas like that. To develop those skills off your own bat takes a lot of time so I think it was a good outcome. You could argue it would have been better had they won more contracts but in reality I think if they had their time they would do it again as well.”

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