CSG Holdings is a demographically representative industrial contract services group founded after the strategic merger and integration of various businesses. Based in South Africa and listed on the Johannesburg Stock Exchange (JSE), the group provides outsourced personnel services, mining and industrial services and contract food and catering services to a diverse array of clients in the retail, mining, manufacturing, petro-chemical, transport, government, healthcare and education sectors. The group is broadly split into Workforce Management, Facility Management and Mining and Plant Support Services. Each division has a variety of brands which carry out their specialised tasks.
The group currently has a JSE market cap of over R600 million, but CSG share price has been on a steady decline on the live online stocks chart.
CSG Shares Growth Driver
CSG’s management teams all have long and successful track records within their various fields, and the group complements this with reliable systems and a well-trained staff complement which provides a solid platform for growth.
The group’s overall strategy is to buy into businesses which cover a full range of complementary services, to establish a one-stop, non-core outsourcing group with a footprint across South Africa. The strategy is based on the tendency of businesses to view non-core divisions as an overhead expense and outsourcing is often the best way to reduce costs and management burdens.
During the financial year ended March 2016, CSG Holdings recorded a slight increase in operating profit (up to R85 million) and a 14% headline earnings per share increase. Earnings were negatively impacted due to pressure on commodity prices, which resulted in business lost from mining and industrial clients, but this was offset by organic growth in sectors not affected by commodity prices. Proprietary company Ukweza Holdings had particularly strong performance, whilst additional earnings were also gained from new acquisitions in the security and cleaning industries. The company is aiming to buy more businesses in these two industries to further diversify its portfolio, whilst putting under performing assets up for sale.
CSG Group Investor Tip
Although shareholders have historically received good dividends and headline earnings per share, CSG Holdings share price have shown a marked decline from R 3 at the beginning of 2014 to R 1.45 by June 2016.
The company’s new major investments in the security and cleaning industries have been touted as a savvy move which will boost profits and CSG share price. The group anticipates that the security cluster will prove highly profitable when turnover reaches R200 million a year. The forecast is that businesses should grow at between 20% and 30% per year, and trade on high margins.
Meanwhile, the group will look to capitalise on improving conditions in the mining and industrial sectors, with a long-term view of growth. Investment analysts agree that CSG shares have underperformed on the stock market so far, but the newacquisitions may boost CSG share price and encourage investors to purchase the shares.
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