CSG prepares for growth after tough year

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CSG prepares for growth after tough year

Published Date: 2019-05-02 | Source: Stephen Gunnion | Author: Stephen Gunnion

CSG prepares for growth after tough year

The services company faced a number of challenges last year as it integrated security acquisitions, lost contracts and fell victim to fraud.

CSG Holdings has reported mixed operational performances from its security, facility management and staffing solutions businesses for the past year, which will result in lower earnings.

The group had already warned that earnings and headline earnings per share for the year to end-March would be more than 20% down on last year and gave an update of its operational performance for the period on Tuesday.

It said it took longer than expected to integrate and consolidate a number of acquisitions it made in the security sector last year. Pressure on consumer spending and rising petrol prices also hampered its new operations. It incurred set-up costs and initial operational losses of R5.5 million as it invested in a new centralised control room in Pretoria, contributing to a decrease in operating profit from the business. However, it said it expected to realise the benefits of these investments over the longer term.

Over the period, it bought Revert Risk Management Solutions, alarm and monitoring business Cortac, and armed response and guarding business Intercity. It also boosted its Facility Management unit with the acquisition of cleaning company Golden Dividend 401 and training company Cleaning Skills Institute.

Within the Facility Management cluster, the group said both CSG Foods and Afriboom Cleaning continued to perform well due to organic growth, cost-cutting and more effective procurement. However, CSG Hygiene, a greenfield project, had a minor negative impact on earnings and Global Industrial Projects' earnings fell sharply after it lost a big mining contract after eight years as a result of the mining charter's focus on local procurement. The contract was awarded to a local empowerment start-up company instead.

CSG said the performance of the Staffing division was substantially down due to a number of reasons, including fraudulent actives and malpractices of about R9 million over a period of time by a senior manager in BDM Staffing, a sizeable contract coming to an end, bad debts mostly from the construction industry being written off and the adverse effect of management changes in two of its businesses. Corrective action had been taken against the offending BDM Staffing manager, it said.

Although the business environment and trading conditions remained challenging, CSG said it was well positioned for growth as a result of its diversification strategy and the creation of the centralised services within the security division.

It said a further trading statement would be issued as soon as there's more certainty on its earnings range. It expects to report its results on 28 June.

Its shares gained 7.4% to 58c on Tuesday.





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