CSG shows signs of recovery after exiting enterprise business

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CSG shows signs of recovery after exiting enterprise business
Julie-Ann Kerin

CSG has started showing signs of a turn around after making the decision to exit its enterprise business following years of mounting losses.

The company reported underlying EBITDA of $8.1 million for the six months ending 31 December 2018, while underlying net profit was up 74 percent to $3.3 million.

At the same time, revenue was down six percent to $109.9 million.

CSG has struggled to keep up with its transition from a managed print specialist to an end-to-end IT provider in 2015. After its enterprise business continued to drag down earnings, CSG made the decision to exit the segment in June last year after the company's overall net losses tripled to $150 million in 2018.

The company instead decided to restructure the business from its previous SME and enterprise segments into four solutions-focused categories: print, technology, finance and other.

The technology segment, which includes CSG's technology-as-a-subscription model, grew subscription revenue 11 percent to reach $26.1, while the "other" category comprising professional services grew 10 percent to $5.4 million.

The print business continued to drag down CSG's performance, particularly in New Zealand, with revenue dropping 10 percent to $72.7 million. The finance division, which underpin's the technology-as-a-subscription business, dropped nine percent to $12.2 million, though CSG said it was on track to capitalise on the growth initiatives that are still on the way.

As part of the transformation, CSG has focused on its "high-value technology subscriptions" which reached 24,617 in the half-year.

CSG also implemented a handful of initiatives like a $7.7 million cost-out and $10 million inventory reduction, as well as a program of cultural changes.

CSG also signed a deal with Alibaba Cloud in October last year to add its suite of cloud-based products to its portfolio, including infrastructure, cloud hosting, AI and data analytics suites. The company said the partnership is already starting to pay off after signing up a number of major corporate clients.

"The quality of our revenue continues to improve as momentum builds with our technology and display offerings," chief executive Julie-Ann Kerin said. "In addition, cost-out and inventory reduction initiatives are already positively impacting earnings and cash flow."

In September last year, CSG raised $18 million in capital through shareholders in order to improve cash flow and implement its restructuring efforts.

"This significantly strengthened our balance sheet, de-risked the business, and has allowed us to embark on a number of strategic initiatives that will support our growth over the medium to long term," Kerrin added.

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