The CSG Limited (ASX: CSV) share price has been absolutely crushed this morning following the release of its half-year results.
At the time of writing, the print and business technology solutions provider's shares are down 25% to 52 cents, having recovered slightly after hitting a 52-week low of 50 cents in early trade.
Here are the key takeaways:
- Revenue increased 3% on the prior corresponding period to $120.7 million.
- Underlying half-year EBITDA dropped 18% to $14.1 million.
- Underlying net profit after tax before customer contract amortisation fell 25% to $8.3 million.
- Diluted earnings per share of 2.4 cents.
The company's Business Solutions segment was a major drag on its performance during the half. Unfortunately the segment contributes 88.5% of company revenue, so its underperformance is felt hard.
Although revenue in the segment rose slightly, profit after tax dropped by a whopping 45% to $7.5 million as the company was impacted by higher start-up recruitment and labour costs, administration costs, and marketing costs.
This poor performance has unfortunately led to yet another guidance downgrade.
For the full-year, management has downgraded revenue guidance to between $250 million and $275 million. EBITDA has also been downgraded to be in the range of $30 million to $36 million.
Should you buy the dip?
Back in November the company's share price took a similar hit after the release of a less-than-impressive market update.
At that point management reaffirmed its revenue guidance of at least $300 million, but downgraded its EBITDA guidance to between $38 million and $42 million from its previous guidance of $44 million to $48 million.
I was sceptical that the company would achieve its new guidance and unfortunately it appears as though I've been proven correct.
Whilst the latest guidance seems more achievable, two EBITDA downgrades in the space of three months does not fill me with confidence.
Right now I would suggest investors avoid CSG at all costs. I think industry peers IVE Group Ltd (ASX: IGL) and PMP Limited (ASX: PMP) would be far better options.
