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Project delays and Federal election hit Citadel's bottom line

Project delays and Federal election hit Citadel's bottom line

Focused on investing in SaaS

Darren Stanley (Citadel)

Darren Stanley (Citadel)

Credit: Citadel Group

Canberra-based Citadel Group has revealed a "disappointing" 2019 financial year, after experiencing customer project delays and lower fourth quarter customer spending due to the Federal election in May. 

Revenue for FY19 decreased 6.9 per cent to $99.2 million in comparison to the previous year, while earnings before tax (EBITDA) dropped 31.7 per cent to $23.3 million and net profit (NPAT) tumbled 43.8 per cent to $10.9 million. 

Despite the downfall, the company’s software-as-a-service(SaaS) revenue grew 23 per cent from $27.8 million in FY18 to $34.2 million in FY19.

“FY19 was a mixed year for the company. Our FY19 financial performance was disappointing and reflected the delay in customer-controlled project extensions and a lower Q4 customer spend which had historically occurred within our government business, impacted by the Federal Government election,” Citadel CEO Darren Stanley told shareholders.

“However, the result reinforced our view that our Citadel 2.0 strategy is the right growth strategy to drive diversification of our company’s client base and secure a higher percentage of software/SaaS based revenue over time.”

Citadel noted that customer-controlled project extensions, which were expected to commence in the second half of FY19, were delayed into the first half of FY20, and that fourth quarter customer spending that usually occurred in previous years, didn’t come to fruition due to the impact and timing of the Federal government election.  

“The impact of the delays on revenue, combined with the changing mix of revenue from higher margin consulting and managed services, to SaaS and related software services that operate at a reduced margin in the short term before scaling out in the medium term, has seen an overall reduction in gross profit margin,” the company stated. 

Furthermore, Stanley added it was focused on building its business for the long term and the contract wins secured in FY19, positioned them well for the future. 

“More importantly, we’ve continued to invest in new products, processes and channels that will enable our growth,” Stanley said. 

The uptick in revenue within its SaaS business was attributed to the investments made to develop and enhance its software capabilities, the company said, further noting the substantial gains that its Citadel-IX platform has achieved along with the roll out of its new SaaS products such as goTrim and Charm Web. The company also invested in core enterprise health systems - Evolution/Auslab and Kapish products also made a contribution.

These software investments are set to continue as the company has its sights firmly set upon business critical software, big data/knowledge management and digital solutions across the product suite. 

“In FY20, we will enhance our existing software and service offerings, develop new SaaS offerings to complement existing business and move into adjacencies where our pedigree and experience can be effectively leveraged,” he said. “We also see opportunities to leverage our IP into international markets and plan to utilise strategic channel partnerships to support our sales efforts.”

During FY19, Citadel made acquisitions that included Gruden, which provided a government-focused procurement-as-a-service platform, and Noventus which offered up systems integration with requisite security clearances for its work with the Department of Defence. 

“Importantly, we are now on all three towers of the Defence ICTPA Panel,” Stanley added. 

“We are focused on delivering a return to revenue and EBITDA growth in FY20, targeting low double digit organic revenue growth, with margins expected to be broadly consistent with FY19, and a full year contribution from Noventus expected to add circa $18 million in revenue and $2 million in EBITDA. 

“With a balance sheet that continues to be supportive of our investment goals and a weighted pipeline value of $137 million, we see strong opportunities to grow across our core knowledge, health and technology segments.”

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Tags CitadelDarren StanleyFY19 results

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