Maintaining a recurring revenue business model backed with multiple growth plans has paid off for Canberra-based Citadel Group as it reports a 29.4 per cent increase to $128.4 million in underlying revenue for the financial year ending June 30.
Services revenue grew 26.7 per cent to $80.1 million while software revenue was up 35.7 per cent to $47.5 million, the Citadel-IX content management platform grew 66.5 per cent - an area that will continue to see growth particularly driven by its channel partnership with Micro Focus.
Within the services segment, technology services revenue was down from $35 million to $31 million, as Citadel anticipates cautionary spending will continue in this particular segment due to to COVID-19, particularly in the higher education market.
The professional services segment, which includes specialist project, contracting and management services, witnessed a slight uptick in recurring revenue to $16.5 million due to a strong performance in government contracting services.
Underlying earnings before tax rose 25.3 per cent to $29.2 million while net profit from continuing operations rose 6.4 per cent to $11.6 million.
Citadel CEO and managing director Mark McConnell said its acquisition of UK-based Wellbeing Software in April accelerated its shift in earnings mix towards long term global enterprise software contracts with high quality recurring revenue streams.
“An oversubscribed equity raising supported the acquisition, and we have successfully navigated through the global COVID-19 pandemic without accessing the Federal JobKeeper program. Through this period of global instability, we have delivered a strong financial result for our shareholders,” McConnell said.
Citadel noted that there were no cancellations of projects due to COVID-19, but there were reductions in technology spend, delays in project implementations - particularly in the UK, and lengthening of procurement cycles.
Priorities for FY21 include diversifying its technology services capabilities into new verticals such as building/construction, local government and health, along with expanding channel partnerships, progressing health software cross-sell opportunities, investing in R&D and merger and acquisition activities, leveraging its managed services credentials and national security pedigree, and retaining core contracts.
“Our large and qualified pipeline of opportunities now exceeds $800 million, 90 per cent of which is software. We have a strong M&A pipeline focused on scalable software opportunities that build on our current capabilities,” McConnell said.
“Our ongoing transformational program is resulting in a clear shift in the earnings mix to high quality recurring software revenue. Our dedicated executive team are driving this change strategy to deliver a business with a high percentage of recurring revenue software-based revenues across a diverse and global client base that over the medium term, will lead to improved margins.”
Citadel revealed new customer wins with Campbelltown City Council and Victoria University with an overhaul of their content management systems with Citadel-IX, its own Azure-powered solution.