Enterprise exit as CSG flags further $10M decrease in expected earnings

Enterprise exit as CSG flags further $10M decrease in expected earnings

Managed print solutions provider to exit enterprise segment

Julie-Ann Kerin (CSG)

Julie-Ann Kerin (CSG)

CSG (ASX:CSV) has announced another decrease in underlying earnings for the 2018 financial year, this time expecting to post between $9-$11 million.

The move comes as the managed print solutions provider prepares to exit the enterprise market, following a performance review by Morgan Stanley, appointed in February to help the company maximise value for shareholders.

As a result, CSG has created three distinct operating businesses – print, technology and finance – to simplify its go-to-market model.

“A key focus for the FY2019 year is to simplify the business and return it to earnings growth," CSG CEO and managing director Julie-Ann Kerin said.

“While we are disappointed with the expected financial results for FY2018, we are confident that aligning the business to three clear operating segments and implementing the cost-out initiatives will position the business well to return to earnings growth.”

CSG has also updated its revenue guidance to $225 million, previously expected to be between $253-$260 million.

In February, CSG revealed that its underlying earnings before interest, tax, depreciation and amortisation (EBITDA), which was expected to be around $30 million was then updated to up to $21 million for the 2018 financial year.

CSG has attributed the further $10 million approximately decrease to the performance of the enterprise solutions business.

In addition, the business will go through a "major restructure" of both the Australian and New Zealand businesses within sales, service and operations.

The restructure and cost-out initiatives will result in one-off restructuring charges of $2.5 million and approximately $7.7 million in cost savings for FY2019 underlying EBITDA.

In an address to shareholders on 25 June, the company said there was lower than expected equipment sales in enterprise print contracts in New Zealand and a decline in print service revenue more significant in enterprise contracts.

More than four months ago, in February, CSG reported that net profit after tax (NPAT) had declined 136 per cent to a $3 million loss, with underlying NPAT down by 83 per cent, reporting $1.4 million, for the six months ending 2017.

EBITDA was down 67 per cent year-on-year for the period, posting $4.6 million, according to the company's latest financials.

The company is forecasting underlying EBITDA in the range of $17-$20 million for FY2019.

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