In a sign of how far the oil and gas sector has declined, systems integrator CSE Global’ share price crashed to six years low after the company announced a set of poor financial results for the quarter ended 30 September 2016. Profit after tax decreased by a whopping 52.7% year-on-year while revenue dropped 21.6% year-on-year.
I have previously covered on CSE global before in my blog. CSE Global operates in two business segments: process controls (74.0%) and communications and security (26.0%). The company used to be the electronics arm of Singapore Technologies (ST) but after a successful management buy-out in 1997, the company was listed in the Singapore Exchange in 1999. Following a string of acquisitions made over the last two decades, CSE Global has evolved into a technology giant with 30 offices across the world and generated more than 95% of its revenues outside Singapore market.
Currently, CSE derived more than half of its revenue from Americas and about one-third of its revenue from Asia-Pacific. In terms of business sector, CSE derived 76% of its revenue from the oil and gas sector. Therefore, even though CSE has diversified business segments spanning across oil and gas, infrastructure and mining, the ailing oil and gas sector continues to have a devastating effect on the company’s operating results.
In a bid to weather the storm, CSE reduced its global headcount from 1306 in 3Q15 to 1057 in 3Q16. There may be further culling of staff going forward as the management is committed to cost cutting measures in light of massive reduction of new orders from $351 million to $229 million.
Whilst the management has demonstrated discipline in expenses, there were no clear strategies for growing revenue. CSE’s revenue base is too concentrated in the oil and gas sector and given that …Read more