JSE-listed Etion reported an improved financial performance during the six months ended September 30, 2021.
The group posted earnings before interest, taxes, depreciation and amortisation (Ebitda) of R100.1-million during the six months to September 30, 2021, a significant improvement on the R22.1-million recorded in the corresponding period last year.
Basic earnings per share and headline earnings per share (HEPS) increased from 0.87c in the first half of 2020 to 12.07c in the six months under review.
HEPS of 4.16c from continuing operations were reported, from a loss of 2.59c in the prior corresponding period.
“Etion’s improved financial performance during the first half of the 2022 financial year reflects the group’s recovery from the varying effects of Covid-19 and the positive impact of our response to the pandemic,” the company said in its results statement.
Etion attributed the increase in profit after tax to R68.2-million, from R4.9-million, to a combination of growth in demand for products and services across all operations and the realignment of costs.
“Connect underwent a significant restructure in the 2021 financial year to align its cost base with its business model and related revenue. Corporate was restructured to align its cost base with that of a listed investment holding company,” Etion noted.
LAWTrust was reported as a discontinued operation for both the six months under review and the corresponding period in the prior year and, consequently reclassified its investment in the underlying assets and liabilities of LAWTrust to assets/liabilities held for sale.
Revenue also climbed during the first half of 2021 to R550.2-million from R247.4-million in the corresponding period in 2020.
Revenue from the continuing operations increased by 181% to R387.9-million, mostly owing to increased investment by Connect’s customers in infrastructure to support demand for fibre to homes and businesses and a surge in orders from Create’s local and international mining and defence customers.
As at October 1, the committed order books for continuing operations was R579-million, which the company said boded well for the remainder of 2022 and the 2023 financial year.
“The gross profit margin of continuing operations improved from 20% to 22% year-on-year owing to an improvement in Create’s product mix, sound cost management and the negotiation of discounted prices from Connect’s US supplier,” Etion continued.
Further, the operating costs from the continuing operations remained under control, increasing marginally by 7% to R44.4-million, despite rapid growth in business activity.
LAWTrust delivered improved financial performance for the first half of the year, resulting in an increase in profit from discontinued operations from R19.6-million to R44.4-million during the half-year under review.
During the six months to September 30, 2021, the group’s net cash position improved by 230% to R196-million, R33.4-million of which was attributable to LAWTrust.
“The increase in cash generated by the continuing operations was attributable to their focus on inventory management and debt collection, as well as favourable credit terms from Connect’s primary US-based supplier, despite challenges in their operating environments such as global silicon shortages and Covid-19-related supply chain disruptions,” Etion commented.
Etion Create’s revenue increased by 63% from R85.9-million in the first half of last year to R139.9-million during the first half of the current half-year under review as a result of the global reopening of economies and the resumption of growth cycles in Create’s targeted markets.
Segment profit increased by 441% to R15.7-million on the back of an improvement in profit margin attributable to the mix of Create’s business and sound cost management.
In Etion Connect, strong revenue and profit growth owing to a focus on key account management to increase sales and logistics and the servicing of a growing pipeline of orders resulted in an increase in revenue of 375% to R248.1-million.
Segment profit increased by 1 635% to R29.5-million owing to the resurgence in demand for fibre connectivity that prompted network operators to increase investment in the infrastructure.
Etion Secure’s revenue, meanwhile increased 48% to R162.3-million during the half-year under review owing to the renewal of a major certificate-based security solution contract to a South African public sector organisation for a further five years in October 2020.
“The development of internal software for customer solutions and replication of internally developed solutions across the growing customer base allowed for economies of scale and the improvement in the gross profit margin resulting in an increase in segment profit of 139% to R49.3-million.”
Secure has been sold effective October 1 for a total purchase consideration of R311-million – sale consideration of R236-million including a net debt and working capital adjustment and pre-closing dividend of R75-million.