AltX-listed digital technology solutions company Ansys has invested in developing its intellectual property (IP) and human capital to capture new business as a result of the digitalisation of operations in the sectors in which it operates, Ansys Group CEO Teddy Daka said during a presentation of the company’s results for the six months to September 30, on Thursday.

The interim results reflect muted market conditions and, although the investment in IP and human capital had a negative impact on profits during the interim period, the new skills and IP are part of the company’s new strategy of creating a “sustainable business capable of seizing additional market segments and the opportunities presented by digitalisation”, he said.

The company will change its name during the first quarter of 2018 to reflect its focus on market shifts including digitalisation, technology convergence and enhancements, customer demands and disruptive technologies to realise new growth over the short and medium term.

Over the course of the past year, Ansys has repositioned itself as a digital technology provider, and leveraged its existing technologies, capabilities and processes to offer new solutions in areas outside its current focus.

It aims to be a significant South African digital technology business by 2020, Daka said.

“By leveraging our own IP and that of partners, the group develops, produces, distributes and integrates technology solutions to enhance customer and consumer safety and productivity, connectivity, cybersecurity and digital defence,” he explained.

The company’s revenue decreased to R314.2-million in the six months under review, down from the R408.6-million in revenue earned during the comparable interim period in 2016.

The company improved its gross profit margin by 6.8% from 24.9% to 31.7%, but earnings before interest, taxes, depreciation and amortisation decreased by 17.3% to R47.3-million and profit after tax decreased by 19.7% to R28-million.

Ansys posted headline earnings a share of 6.11c, down by 19.3% compared with the 7.57c posted in the prior comparable period.

Net asset value a share, however, increased by 25.8% to 64.4c, while the tangible net asset value a share increased by 51.3% to 38.8c.

Revenue from the mining and industrial segment increased marginally by 5.2% to R47.5-million. However, profit from the mining and industrial segment increased by 27% to R7.7-million, while margins increased to 16.2%, as a result of the growth in sales of the firm’s IP.

In its defence and cybersecurity segment, the group’s exports to international markets account for 67% of revenue. Large component orders did not reach the same levels as in the previous interim period and revenue decreased by 49.4% to R58.3-million from R115.2-million. Profit from this segment was consequently lower by 38.2%, although margins showed an improvement to 14.5%.

“The current exchange rate allows us to be competitive in terms of our original design manufacturing (ODM) offerings, and investments made in growing the group’s cybersecurity solutions are expected to provide additional opportunities for growth,” stated Daka.

Local expenditure in defence also remained subdued, prompting the defence industry division to intensify its exports to international markets where defence-related investment remained high. The division leveraged ODM services for local companies with export contracts and increased direct exports of cybersecurity products and ODM services. 

Ansys reported a significant increase in demand for its products, services and solutions in the areas of cybersecurity, defence and telecommunications.

In telecommunications, it made investments to expand its offering to include active equipment, which is expected to improve earnings.

“Continued investment in a digitalised future, as well as an ongoing financial strategy of optimising margins, managing operational expenditure and improving cash reserves, places the group on solid ground. Our strategic focus is on repositioning Ansys to meet future needs and demands, something we believe will be of long-term benefit to our customers, shareholders and stakeholders,” said Daka.