ETION LIMITED - Financial Results for The Six Months Ended 30 September 2019 - Short-Form Announcement

Financial Results for The Six Months Ended 30 September 2019 - Short-Form Announcement

Etion Limited
(“Etion” or “the company” or “the Group”)

(Incorporated in the Republic of South Africa)
(Registration Number: 1987/001222/06)
Share Code: ETO
ISIN: ZAE000097028



Financial Results for The Six Months Ended 20 September 2019 – Short-Form Announcement




FINANCIAL HIGHLIGHTS




                                                 30 Sep    30 Sep

                                                 2019      2018         %

                                                   R’m     R’m      change

Revenue                                          308,6    269,1       14,7

EBITDA                                           22,5      8,9       152,8

Basic earnings per share (cents)                 0,97      (0,5)      294,0


Headline earnings per share (cents)              0,97      (0,5)      294,0


Note: No dividends have been declared for the six months ended 30 September 2019 or 30
September 2018.


Revenue for the Group for the reporting period was R308.6 million, up by 14.7% from
R269.1 million in the previous corresponding period. The improved performance is driven
mainly by the impact of consolidating the results of Secure for a full 6-month period and
increased revenue realised from the internationalisation strategy. The Group’s performance
has benefited from the rollover of revenue from a key project in the Digitise business.
Slow revenue growth from Connect has continued into the first half of FY20 due to reduced
project spend from our key clients who have invested less due to a number of macro and
micro economic factors. Moderate revenue growth has been recorded in Create due to delayed
buying from the Middle East clients. We are however encouraged by Create’s continued
involvement in design and development work which we anticipate will convert into an uptick
in requests for production as the cycle turns.

At a gross profit level (R106.7 million), pricing pressure from customers in the 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%.

Administration and operating expenses increased by R8 million (8.7%) from R91.7 million
to R99.7 million. The main contributors to this variance are the consolidation of 6 months
of operating expenses attributable to the Secure business (R6.7m) and non-recurring costs
incurred during Phase 1 of the Digitise restructure (R3.8m). The benefit of once off costs
of R10 million relating to the acquisition of Secure, the rebranding of the Group, and
the restructuring of Connect incurred in the prior year, has been offset by the decline
in projects executed during the current period and resultant inability to allocate the
related costs to cost of sales.

The Group has a comprehensive foreign exchange hedging framework. This resulted in a
reduction of the unrealised foreign exchange losses from a loss of R8.1 million to R0.1m,
when restating the trade payables.

Finance costs of R5.7 million have reduced by 27% when excluding interest of R1.3 million
in respect of the right-of-use lease liabilities recognised by the group upon
implementation of IFRS 16 Leases. This was previously included in operating expenses.
Profit after tax (PAT) increased by 325% from a loss of R2.4 million to a profit of R5.4
million. Basic earnings per share increased by 294% from a loss of 0.56 cents per share
to 0.97 cents per share.

Focus was placed on those factors within our control, namely: extracting operational
efficiencies, costs and increased focus on managing working capital. This has contributed
to the significantly improved cash and cash equivalents position of R71,7 million, an
increase of 307% on 1H18 and 91% on FY19.

Cash generated from operations increased by R63.8 million from a negative position of R5.4
million to an improved R58.4 million. The net working capital movement for the period, at
R35.5 million, was positively impacted by the reduced inventory holdings in Connect.
Please refer notes to the financial information for further detail and commentary.

Etion Create
During the reporting period, revenue decreased by 19% from R103.7 million to R84.2 million,
mainly due to anticipated orders being delayed in the defence sector. Segment profit
reduced by 65% to R4.9 million as a direct result of the decrease in revenue.

Etion Digitise
During the reporting period, revenue increased by 50% from R14.8 million to R22.3 million,
mainly due the rollover of revenue from the delivery of the Integrated Systems Display
for a major client.

Etion Connect
During the reporting period, revenue decreased by 15% from R119.8 million to R102.2 million
due to depressed economic growth in South Africa which has caused operators to monetise
past network investments, resulting in reduced capex spend. A negative segment loss of
R2.8 million has been recorded due to a bad debt write-off (customer liquidation), an
increase in the loss allowance provision.

Etion Secure
During the reporting period, revenue increased to R114.1 million due to the increased
focus on growing international markets and the impact of consolidating revenue for the
full 6-month period. Secure generated a segment profit of R20.9 million for the period




SHORT-FORM STATEMENT

This short-form announcement is the responsibility of the directors. It is only a summary
of the information contained in the full announcement and does not contain full or complete
details.

Any investment decision should be based on the full announcement accessible from Wednesday,
27 November 2019, via the JSE link and also available on the Company’s website at

http://www.etion.co.za/investor-relations/

Copies of the full announcement may also be requested by contacting Elvin de Kock by email
at elvin.dekock@etion.co.za and are available for inspection at the Company’s registered
office at no charge, weekdays during office hours.

The JSE link is as follows:

https://senspdf.jse.co.za/documents/2019/jse/isse/etoe/INTRES19.pdf

27 November 2019
Pretoria
Designated adviser
Exchange Sponsors

Date: 27-11-2019 08:15:00
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