Etion chases future dollar revenue growth
Etion, the listed specialist technology company, is expanding its operations in Africa and the Middle East, chasing US dollars that it expects to help grow its revenue in the next financial year.
Its financial results released yesterday show it concluded the first half of the fiscal year, ended 30 September, with profit after tax surging by 325%, from a loss of R2.4 million to a profit of R5.4 million.
Etion’s revenue for the reporting period was R308.6 million, up by 14.7% from R269.1 million in the previous corresponding period.
Basic earnings per share increased by 294%, from a loss of 0.56c per share to 0.97c per share.
CEO Teddy Daka tells ITWeb that his company is looking beyond borders for growth, due to the restrained local economy.
“Our strategy is underpinned by two things – one, we want to increase our dollar revenue. We recognise the South African economy will be subdued for some time, at least in the short-term, therefore we need to internationalise some of our revenue.
Secondly, he says: “We need to make sure we are investing in solutions that are actually exportable. We have since invested in products that are exportable and we are beginning to see customers responding positively to our solutions; this is actually in the cyber security space.”
Daka says Etion is targeting the Middle East and Sub-Saharan Africa, where the company has on-boarded new customers.
“We are generating a lot of interest in countries within SADC, Central Africa, West Africa as well as the Middle East. This strategy is beginning to show results and we believe we will increase our revenue in the next financial year. Going forward, there will be increased dollar revenue coming from our international strategy.”
Daka was recently in Abidjan, Côte d'Ivoire, identifying potential partners that can represent his firm in the Western African market.
Turning to Etion’s improved interim results, he says the company attributes this to its focus on integrating the LAWTrust acquisition, reducing the cost base and implementing its strategy.
It acquired cyber security firm LAWtrust in 2017 for R108.5 million and this led to Etion creating four new divisions, including Etion Secure, which incorporates LAWtrust.
Since the acquisition, Etion has been focusing on integrating LAWtrust as the building block of the new Etion Secure and identifying projects where it can innovate.
“If you look at our top line, the revenue growth we have experienced is predominantly that we have six months of consolidation of the LAWtrust acquisition; in the previous year it was four months in that period and now it’s a full six months.”
“We also went on an aggressive reduction of costs; we finished phase one of restructuring the digitised business. We have reduced corporate costs significantly and we also streamlined the business optimally.”
During the period, Etion’s subsidiaries had a mixed performance.
Etion Connect recorded slow revenue growth, which has continued into the first half of financial year 2020. The company says this is due to reduced project spending from key clients who have invested less due to a number of macro and micro economic factors.
Moderate revenue growth has been recorded in Etion Create, which it notes was due to delayed buying from Middle East clients.
Furthermore, the company says at a gross profit level of R106.7 million, pricing pressure from customers in its Connect business and the impact of the deteriorating rand/dollar exchange rate resulted in a slight deterioration of margins from 36.9% to 34.6%.
Additionally, Etion says administration and operating expenses increased by R8 million (8.7%), from R91.7 million to R99.7 million.