Etion Limited releases interim financial results for the period ending 30 September 2018
Results reflect both business challenges and the impact of new opportunities
28 November 2018
For immediate release
Diversified digital technology group, Etion Limited (Share Code: ETO), has announced a drop in revenue for the period ending 30 September 2018 due to subdued trading conditions, delays in the delivery of a key rail project to the value of R22 million and a large cyber security project to the value of R21 million, causing revenue slippage to the second half of the year.
The Group has reported a 14.4% decrease in revenue from R314.4 million in the corresponding period last year to R269.1 million in the current period. At a gross profit level (R99.2 million), the revenue shortfall was nevertheless offset by good margins generated by the recently acquired cyber security specialist, LAWtrust, which has reported revenue of R51.2 million for the first four months since acquisition.
EBITDA is down by 81.2% from R47.3 million to R8.9 million, and profit after tax has decreased by 103.8% from a profit of R28 million in the previous period to a loss of R2.4 million in the current period. Similarly, HEPS has decreased by 108.3% from 6.11 cents to -0.5 cents and net asset value has decreased by 1.9% from 64.4 cents to 63.2 cents.
The decline in profit after tax was due to the finance costs related to the LAWtrust acquisition, as well as to an increase in operating costs, lower contributions from the existing businesses, and the absorption of the LAWtrust cost base of R26.4 million.
Etion CEO, Teddy Daka, says that while the results reflect a number of factors – including the impact of macroeconomic influences – prospects are positive for the remainder of the year, with the segments in which the Group operates showing growth on a global basis.
Through Etion Create, it is exploring a number of IoT-related business initiatives in South America and the Middle East, where proof of concepts have been successfully implemented and pilot programmes are in place for both connected car and connected electrical metre readings. In the Middle East, geopolitical developments are likely to increase demand for defence and cyber security solutions throughout the region. The fact that Etion has operated in this market for over a decade places it in a good position to benefit from these developments.
Etion Digitise has been focusing on capacity building initiatives, which have allowed access to innovative IP that will potentially provide for expansion into the passenger rail market and into digital mining operations. In the mining industry, it is also expanding its services to include consulting in the area of fatality prevention solutions, which it will deliver through a global partner, generating subscription revenue.
Etion Connect also has improved its order book compared to H1 and is expected to report a firm performance for FY2019. While data usage is proliferating, fibre roll-outs have slowed down over the past two years, and potential for growth in the market over the next three to five years therefore remains strong. The Group estimates that this network catch-up phase will contribute significantly to Etion Connect’s revenue in the next reporting period.
Etion Secure, in turn, has increased access to the financial services market and to government departments following the acquisition of LAWtrust, and is expected to continue to grow its business and to produce good profit margins. Growth will be supported by a planned expansion into global markets, with Australia and New Zealand having been targeted for the introduction of its Digital Signatures Solutions.
“At operational level, we will, of course, continue to optimise margins, manage expenditure, control cash flow and improve reserves,” says Daka. “We will also continue to invest in plant, equipment and human capital in order to remain ahead of the digitisation curve, which is vital to our long-term success.
“On the back of this, we expect a significant recovery in the performance of the Group in the next half of the year.”