Citadel Group expects revenue to drop

Citadel Group expects revenue to drop

IT services firm expects 30 per cent EBITDA fall from previous year as projects are delayed

Darren Stanley - CEO, The Citadel Group

Darren Stanley - CEO, The Citadel Group

Credit: Citadel Group

The Citadel Group has warned its shareholders of a 30 per cent nosedive in its full year earnings after a challenging fourth quarter.

The Canberra-based IT services provider said it expects its EBITDA for the year ending 30 June 2019 to be in the range of $22 million to $24 million, roughly a third less than the previous year at $34 million.

Its revenue is meanwhile expected to fall between $97 million to $104 million, a potential slide of up to 10 per cent from 2018, when it posted $108.5 million. The gross profit margin is also expected to be reduced to 46 per cent.

According to an update to the Australian Securities Exchange (ASX), the publicly listed company claimed its fortunes had changed after seeing customer-controlled project extensions, which were expected to start within the current period, delayed until the next half year.

In addition, Citadel admitted it had not seen the same increase in customer spend that had occurred in previous years during the last quarter.

However, while the company called the results “disappointing” in the short term, it indicated that further gains would occur over a medium-to-long term period. In particular, its pivot towards a software-as-a-service (SaaS) company was said to be driving its “qualified sales pipeline”.

“The group is adding to its traditional consulting and managed services revenue base (which was dependent on winning new large scale projects to maintain revenue and profit), with a diversified portfolio of SaaS and other software revenue streams,” the update said.

“This, coupled with new clients both in Australia and overseas, will set the company up for success in the future.”

Citadel had seen a promising start to 2019 after seeing a 5.5 per cent increase in revenue to $49.1 million, while its EBITDA reached $13.2 million for the first half year.

At the time, CEO Darren Stanley said the company had its largest ever weighted pipeline of sales, standing at a total of $132 million.

The half year ended with the partial acquisition of technology agency Gruden for $1.65 million in an effort to grow its SaaS capabilities.

Meanwhile in March this year,the company signed a $33 million contract with facilities services provider Spotless Group, which will see it provide technology services for the Royal Adelaide Hospital.

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