AFFIN101A - Principles of Finance: CSG Limited Annual Report Analysis

This report offers a comprehensive analysis of CSG Limited's financial performance, covering its background, operations, and competitive landscape within the Australian and New Zealand IT managed solutions market. The report examines the structure and content of CSG's annual report, including the director's and auditor's statements, and compares it with JB Hi-Fi Limited's annual report, highlighting areas for improvement in corporate governance, such as the inclusion of social and environmental statements. The analysis identifies major financial differences and changes over two years, commenting on revenue, expenses, and asset valuations. Ratio calculations are performed to evaluate profitability, financial performance, and stability, leading to a conclusion that questions the company's financial health and investment attractiveness due to significant losses and high debt levels. The report is based on the AFFIN101A Principles of Finance and Investment course.

AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
Report: CSG Limited – Australia
Executive Summary
Aim of the report is to provide overview of CSG Limited and details regarding its
operation, competitor, structure of annual report, reviewing contents of the same and some
of the major parts. Report will further focus on the financial performances of the company
over the past 2 yesrs and will identify the items whose values have been changed
significantly. Further through ratio analysis it will comment on its financila stability,
performance and profitability.
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
Contents
Part A – Background and introduction...................................................................................3
(a) Background, competitor and regulatory as well as ethical environmnet.................3
(b) Structure and contents of annual report...................................................................4
(c) Review of director’s report and contents.................................................................4
(d) Review of auditor’s statement.................................................................................5
(e) Comparing the annual report with JB Hi-Fi Limied...............................................5
(f) Additional items under corporate governace...........................................................5
Part B – Differences and changes..........................................................................................6
(a) Identification of major differences..........................................................................6
(b) Commenting on the major differnces......................................................................6
Part C – Calculations..............................................................................................................6
Part D – Conclusion...............................................................................................................7
References..............................................................................................................................8
Appendix................................................................................................................................9
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
Part A – Background and introduction
(a) Background, competitor and regulatory as well as ethical
environmnet
CSG is the public listed ASX entity tgat is providing the IT managed solutions and
office IT solutions to New Zealand and Australian market. Their unique model for business
is focussed on delivering IT services as well as technologies as subscription to the
customers with One cloud, One Monthly bill and One partner (Csg.com.au 2019).
Different services provide by the entity to its customers include –
 End user IT
 IT services that is fully managed
 Solutions for managed print
 Business telephony and cloud communications
 Solutions for contact centre
 Display solutions that includes smart digital signage, interactive whiteboards and
video walls
 Professional services
 Boardroom solutions and video conferencing (Csg.com.au 2019).
Major competitors of the entity includes Lewan technology, Novatech, Synoptek,
Ergo, Thrive and ACP.
Ethical and environmental considerations in Australian technology industry
Ethical consideration – as technology has been improved the standard of living rapid
development created ethical dilemmas for the entities that has adverse impact on the
entities. Though the advancement is technoly sector is beneficial, rapid developments are
pushing the entities to monetize these technologies. ITPA formed set of principles that is
designed for helping the members in possessing sound professional judgment for
upholding the ethical obligatiuons and ideas. The code of ethics published by ITPA obliges
its member to ,aintain integrity and confidentiality for the computer system managed by
them for the advantage of all the people involved with the process and those can be
affected by the same. Further, no single set of the rule is applicable to wide variety of the
scenarios. All the members of ITPA are abide by the code of ethis all the times and failure
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
to which will result in exclusion from the organisation(Rubin, Aas and Stead 2015, Pp.11-
24).
Regulatory environment – Australia is well known for its strength in the regulatory as well
as governance arrangements. Regulators provide required safeguards that assures safety,
environmental, social and the competition outcomes. Strong regulation provides
confidence regarding the fact that the Australian IT products are safe, reliable and
consistent. However, there is trade offs as unnnecessaey regulatory interference srestrict
the business innovation and may not allow to adopt new technologies for growing.
Though, for building existing strength, government propped to work with the industry for
re-thinking regarding regulatory approaches. Legislations are required to be tailored for
innovating the digital practices that includes principle based approaches and technology
neutral (Mishra, Akman & Mishra, 2014, Pp. 29-40)
(b)Structure and contents of annual report
Annual report of the company for the year closed on 30th June 2018 includes the
entity and and entities controlled by it. Annual report is prepared in accordance with the
AAS (Australian accounting standards) and various other associated authoritative
pronouncements of AAS. The financila statements are complied with the IFRS issued by
IASB (Csg.com.au 2019, P.61). Annual report contains the following –
 Message from the chairmen
 Company’s board
 Managing the report of director
 Executive team of the entity
 Director’s report and declaration
 Statement of corporate governance
 Independence declaration of auditors and auditor’s report
 Financial statement and notes to that
 Corporate directory
 Investor relation
(c) Review of director’s report and contents
Director’s report is presented together with the finnacila report for consolidated
entity and consist CSG Limited as well as its subsidiaries. The director’s report contains
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
the details regarding directors of the entity, details regarding company secretary, details
regarding director’s meetingsthat is number of meetings held and number of meetings
attended by him, principle activities of the entity, financial as well as operating review
including risk management approaches, remuneration report, remuneration governance,
remuneration objective, practice and policies, remuneration of non-executive directors,
remunetration table, service agreements and interests of ey management personnel
(Csg.com.au 2019, P.29).
(d)Review of auditor’s statement
As stated by teh auditors, the financila report are providing true and fair view for
the year closed at 30th June 2018 as per the requirement of AASB 101 and are prepared in
compliance with Corporation Act 2001 as well as AAS. Further, as per requirement of
AASB 101 teh financial statements are prepared on going concern assumptions and on the
basis of accrual accounting (Csg.com.au 2019, P.105).
(e) Comparing the annual report with JB Hi-Fi Limied
Annual report of JB Hi-Fi Limited for the year closed on 30th June 2018 includes
the entity and and entities controlled by it. Annual report is prepared in accordance with
the AAS (Australian accounting standards) and various other associated authoritative
pronouncements of AAS. JB Hi-Fi Ltd’s annual report contains the same tpics as covered
by CSG Limited. However, looking into the corporate governance principle it can be found
that the corporate governance section of CSG Limited talks only about diefrent corporate
governance principles whereas the corporate governance section of JB Hi-Fi Limited
includes teh environmental, social and sustainability risks, environmental statement and
social statement that provides the objective and status of the entity more cleary.hence, it is
recommended that CSG /limited shall also incude these sections under the corporate
governance section.
(f) Additional items under corporate governace
Additional items those can be added under corporate governance are –
 Social statement that will states the social responsibility towards employees,
shareholders, customers and suppliers.
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
 Environmental statement that will state the groups commitment towards reducing
impact on Australian environment that its business has. It shall further mention the
initiatives taken by it for achiving the commitments (Csg.com.au 2019, Pp. 18-25).
Part B – Differences and changes
(a) Identification of major differences
Going through the financial statement of the company for the yera cosed at 30th
June 2018 and comparing it with the previous year below mentioned major diferenec are
found –
 Sales revenue for the year dropped to $ 194,590 thosusand that was $ 210,428
thosusands for the year 2017.
 Other expenses increased to 20,587 thousands in 2018 as aganist $ 55,000
thousands for the year 2017
 Inventories balance dropped to $ 48,711 thousands in 2018 as aganist $ 65,810
thousands for the year 2017
 Intangible asset balance dropped to $ 58,156 thousands in 2018 as aganist $
175,851 thousands for the year 2017
 Provisions increased more than twice the balance of last year and incresaed to $
8,728 thousands in 2018 as aganist $ 4,329 thousands for the year 2017
(Csg.com.au 2019, Pp. 56-57).
(b)Commenting on the major differnces
Resaond behind the above mentioned major differences are as follows –
 Main reason behind drop in revenue is the revenue from sale of the goods has been
dropped to $ 89,651 thousands that was $ 106,641 thousand in 2017
 Other expenses increased as $ 16,147 thousands has been charged om account of
derecognition of the unrecoverable asset and $ 20158 thosusands incurred towards
redundancy costs those were not incurred in 2017 (Csg.com.au 2019, Pp. 61-100).
 Inventory balance reduced as balance of finished goods as well as consumables
reduced in the year 2018 as compared to previous year.
 Balance of intangible assets significantly dropped as considerable higher amount
charged as impairment
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
 Amount of provision is incarsed to twice the amount of previous year as additional
provision provided for restructure of the enterprise solution business (Csg.com.au
2019, Pp. 61-100).
Part C – Calculations
From the ratio computations following interpretation can be made –
 Profitability – going through the profitability position it is found out that for both
2017 as well as 2018 the company was unable to generate profit and thereby all the
profitability ratios are in negative (Ehiedu 2014, pp.81-90). Further the situation
became worst in 2018 as compared to 2017 as the net loss increased from 21% to
77%. Owing to loss the entity was unable to provide return on shareholders equity
and further the EPS as well as PE ratio are in negative.
 Finnacial performance – looking further to the financial performance it is found
that though the liquidity position deteriorated in 2018 the current assets of the
company are still sufficient to meet the short term obligation. Further, there are not
musch changes in the efficiency level as the receivable turnover and inventory
turnover has not been changed much (Mousa 2015, Pp. 75-84).
 Stability – looking into the stability of the entity it can be stated that the operating
income of the company is not sufficient to meet the interest obligation. Further, the
debt equity ratio is indicating that the entity is highly dependent on debt finance for
funding its operation. These raise questions on sustainability of the entity
(Loughran and McDonald 2014, Pp.1643-1671)
Part D – Conclusion
From the above, it can be concluded that financially the entity is not performing as
good that may attract investors to invest into the company. Sales of the company has been
dropped as agisnt the previous year. Further, the huge amount of net loss is not able to
prvide return to the shareholders. As the investors are concerned about return on their
investment and the entity is not able to provide the same it is not recommended to invest
into the entity. Further, the high leverage position and depency on outside borrowing is
raising questions on long term sustainability of the entity.
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
References
Csg.com.au. (2019). [online] Available at:
https://www.csg.com.au/getattachment/Content/Articles/Investors/News-
Announcements/CSG_AR_2018_FA-HighRes_WEB.pdf?lang=en-AU [Accessed 13 May
2019].
Ehiedu, V.C., 2014. The impact of liquidity on profitability of some selected companies:
the financial statement analysis (FSA) approach. Research Journal of Finance and
Accounting, 5(5), pp.81-90.
Loughran, T. and McDonald, B., 2014. Measuring readability in financial disclosures. The
Journal of Finance, 69(4), pp.1643-1671.
Minton, B. A., Taillard, J. P., & Williamson, R. 2014. Financial expertise of the board, risk
taking, and performance: Evidence from bank holding companies. Journal of Financial
and Quantitative Analysis, 49(2), 351-380.
Mishra, D., Akman, I., & Mishra, A. (2014). Theory of reasoned action application for
green information technology acceptance. Computers in human behavior, 36, 29-40.
Mousa, G. A. (2015). Financial Ratios versus Data Envelopment Analysis: The Efficiency
Assessment of Banking Sector in Bahrain Bourse. International Journal of Business and
Statistical Analysis, 2(2), 75-84.
Nuhiu, A., Hoti, A., & Bektashi, M. (2017). Determinants of commercial banks
profitability through analysis of financial performance indicators: evidence from
Kosovo. Business: Theory and Practice, 18, 160.
Rubin, T.H., Aas, T.H. and Stead, A., 2015. Knowledge flow in technological business
incubators: evidence from Australia and Israel. Technovation, 41, pp.11-24.
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AFFIN101A – Principles of Finance & Investment <Firstname Lastname Student Number>
Appendix
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