Etion Earnings Jump As Turnaround Shows Progress

Etion has a committed order book of R465.3 million on 30 June 2021 and is supported by several growth opportunities.

Etion
Etion

Etion headline earnings a share swell by 1171% to 9.32 cents a share for the year to end-March 2021, giving the JSE-listed tech group investors something to cheer as the turnaround effort shows progress. Headline EPS is South Africa’s main profit gauge.

The group also reported that revenue jumped 20% to R692.1 million, and profit after tax soared by 245% to R52.4 million.

Etion attributed strong growth in profit after tax of R52.6 million to a combination of revenue growth and cost realignment.

The company’s subsidiaries Digitise and Connect underwent a significant restructure to align the cost base with their respective business models and related revenue. Corporate was restructured to align its cost base with that of a listed investment holding company.
Thanks to the volatile South Africa Rand, the company realised an unrealised foreign exchange gains during the year.

As an importer of a product from a US supplier, Connect is vulnerable to fluctuations in ZAR/USD. Connect hedges approximately 70% of foreign supplier payments and is consequently exposed to the remaining balance. The strengthening ZAR/USD (2020: weakening ZAR/USD) resulted in foreign exchange gains of R8.9 million during the current financial year.

The group revenue from continuing operations increased by 21% to R419.3 million.
Connect reversed a three-year decline in revenue and returned to profitability in a competitive market by optimising its business and securing significant growth in orders from two primary customers, including a bulk order deal to support expanding a key customer’s integrated fibre and mobile network over the next three years.

Create experienced a recovery in orders from existing customers and a resurgence in demand from existing and new customers in the mining and defence sectors during the second half of the financial year.

Etion’s net cash position increased to R120.4 million, inclusive of R63 million attributable to LAWTrust, which is being sold to Altron.

Cash generated from operations before working capital changes increased from R51 million to R101 million.

Going forward, Etion has a committed order book of R465.3 million on 30 June 2021 and is supported by several growth opportunities.

“The CheetahNAV tactical navigation solution will further contribute to growth over the next three years. It has also generated interest from customers in South Africa, the rest of Africa and Brazil, and created scope for spin-off products to meet specific customer needs,” Richard Willis, Etion’s acting CEO.

“Growth in the South African mining industry has contributed to increased investment by its mining customers and is expected to be sustained over the next five years.

“It remains positioned to respond to anticipated demand for rail expansion and maintenance services. Create will continue to invest in its own IP and other resources necessary to secure new opportunities.”

Willis added that corporate continues to focus on executing on the strategic goals of unlocking shareholder value.

“These initiatives include assessing and recommending the reinvestment and return to shareholders of free cash flow, repaying and/or restructuring debt and sale of further investments.

 

“Corporate will continue to support the remaining business units in line with the group’s strategy. This will include assessing various growth initiatives and the need for further capital investment if required.”

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