The Citadel Group Ltd (ASX: CGL) share price has come under pressure in early trade following the release of a trading update this morning.
At the time of writing the information management specialist's shares are down by over 35% to a 52 week low of $4.43.
What was in today's update?
This morning Citadel released an update on its expected revenue and earnings for the 12 months ending June 30 2019.
According to the release, Citadel now expects revenue for the full year to be in the range of $97 million to $104 million, gross profit margins to be reduced to approximately 46%, and EBITDA to be in the range of $22 million to $24 million.
As a comparison, in FY 2018 the company reported revenue of $108.5 million, a gross profit margin of 50%, and EBITDA of $34 million.
What happened?
The release explains that Citadel's performance has been impacted by customer-controlled project extensions, which were expected to commence during the second half, but are now not expected to commence until the first half of FY 2020.
In addition to this, the company advised that it is not experiencing the same fourth-quarter increase in customer spend that has occurred in prior years.
As a result of this and the switch from higher margin consulting and managed services business to SaaS and related software services, the company has seen an overall reduction in its gross profit margin to an estimated 46%.
But management remains optimistic on the future, advising that "the medium and long term outlook remains strong, based on the consistent expansion of our qualified sales pipeline, especially in the SaaS business."
In light of this, the Citadel board advised that it expects the company to deliver strong growth momentum across all areas of the business in FY 2020.
