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Restructuring, COVID challenges and cloud - FY22 in review

Restructuring, COVID challenges and cloud - FY22 in review

A recap of which tech businesses went into the black and the red in the 12 months to 30 June.

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With COVID-19 sticking around for its third year across the globe, many companies were impacted, both positively and negatively, by the ongoing pandemic. To try and combat this, some of them took on restructuring efforts and a focus on the cloud, but for a few, it wasn’t enough to push the needle into profitability.

One company that is still bearing the brunt of COVID-19 is publicly listed information security provider archTIS, which saw revenue inch up 0.3 per cent to $4.6 million and its net loss after tax sinking $9.4 million into the red.

The company told shareholders that the ongoing challenges and disruptions caused by COVID-19 initially impacted its operations and growth across global markets. 

However, the company did deliver year-on-year growth in both licensing and annual recurring revenues, which were both up 126 per cent and 70 per cent, respectively. Gross profit meanwhile grew to $3.2 million. 

“While neither of these was as high as hoped due to the COVID-affected slow sales start to the FY, the quality of these earnings in terms of marquee clientele, repeatability and improved margins were particularly pleasing,” archTIS chairman Miles Jakeman said. 

Spirit Technology Solutions also said it faced issues, having gone through a ‘very challenging period’ with net profit plunging $53.16 million into the red and earnings before tax dropping 36.9 per cent, to $7.2 million. Meanwhile, revenue increased to $135.3 million.

Spirit said the first half of FY22 was dominated by COVID-19 related lockdowns across Sydney, Melbourne and Brisbane constraining its ability to fully execute on required installations across the capital cities. 

“This represented one of the most difficult markets seen in generations and the resilience of revenue in the first half reflected the strength of the business model in terms of product and geographic diversification. That resilience in revenue however, did not translate into earnings resilience," it noted.

In light of the performance shortfall, Spirit undertook a strategic review and is implementing a restructuring plan for the unit that carries both “opportunity and risk”. As a result, a non-cash impairment expense of $48.4 million was booked in FY22, of which $43.1 million was related to ‘goodwill’. 

Communications software provider Symbio also took on restructuring efforts, with it seeing a drop in both revenue group consolidated net profit with a fall of 6 per cent to $205 million and $14.6 million, respectively. 

“The 2022 financial year was transformational for Symbio as we divested parts of our non-core business, rebranded from MNF to Symbio and made solid progress on our APAC [Asia Pacific] expansion plans,” Symbio co-founder and CEO Rene Sugo said.

“During FY22, we simplified our operations, restructuring into three distinct business divisions, each with a clear product offering, experienced leader, target market, and a defined growth plan.

“Our focus continues to be on investing for growth to take advantage of the multi-billion-dollar cloud communication opportunity, which is supported by megatrends including the rapid rise of remote and hybrid work, uptake of software-as-a-service (SaaS) and the maturation of voice communications in Asia.”

Cirrus Networks saw revenue dip 2 per cent, to $104 million, due in part to the ongoing pandemic.

The company noted the earnings results should be viewed across two halves “given the significant negative events in the business during the first half”, which saw the company successfully defend “a very disruptive and costly low-ball hostile takeover bid while faced with ongoing COVID headwinds on labour and supply chain”.

It should be noted however Cirrus' net profit after tax was up 6.9 per cent, to $471,369.

For at least archTIS and Symbio, their fates could be reversed in FY23, with a report from research firm Forrester claiming that global spending on software will keep growing despite headwinds in the form of inflation, geopolitical risks and labour shortages.

This is largely due to the deployment of cloud and enterprise applications, with overall software spending worldwide anticipated to grow at a compound annual growth rate (CAGR) of 10.3 per cent from 2021 to 2023.

The focus on cloud however is noteworthy in of itself, as the adoption of cloud services is expected to be a major part of the Australian business-to-business (B2B) ICT landscape up to FY26, according to analyst firm Venture Insights.  

At the other end of the growth scale scale, NextDC was one of the greatest success stories of FY22, with net profit swinging from a loss of $23.6 million in the financial year prior to a profit of $9.1 million, due in part to the demand for cloud.

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