JSE-listed Etion, previously called Ansys, on Wednesday posted a significant triple-digit slide in earnings for the six months ended September 30, mainly as a result of the costs of its latest acquisition, LawTrust.
The diversified digital technology solutions provider reported a 108.6% plunge in profit after tax from R28-million in the first half of 2017 to a loss of R2.4-million in the interim period under review.
The resultant headline earnings a share and basic earnings a share reduced from 6.11c and 6.08c, respectively, in the corresponding period last year, to a current loss of 0.5c, representing a 108.2% contraction.
The company attributed this to the increased finance costs relating to the funding of the LawTrust transaction, an increase in operating costs, a lower contribution by the existing businesses and the absorption of the LawTrust cost base of R26.4-million.
Earnings before interest, taxes, depreciation and amortisation decreased by 81.2% year-on-year to R8.9-million.
Revenue for the six months under review decreased by 14.4% to R314.4-million owing to subdued trading conditions and delays in the delivery of a key R22-million rail project and a R21-million cybersecurity project to the second half of the year.
The reported revenue includes R51.2-million of LawTrust for the four months since acquisition.
“At a gross profit level of R99.2-million, the revenue shortfall was, nevertheless, entirely offset by the good margins generated by the recently acquired LawTrust business. As a result, the group’s gross profit margin increased from 31.7% to 36.9%,” said Etion CEO Teddy Daka.
“At an operational level, we will, of course, continue to optimise margins, manage expenditure, control cash flow and improve reserves. 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.”
He expects a significant recovery in the group’s performance in the second half of the current financial year.
“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,” Daka noted.