Melbourne lockdowns hit Cirrus financials

Matt Sullivan (Cirrus Networks)

Publicly listed managed services and IT solutions provider Cirrus Networks has revealed that COVID-19 lockdowns in Melbourne materially negatively affected its performance over the course of the financial year ending 30 June 2021.  

At the same time, the company’s Western Australian operations underperformed as a result of the turnover of sales and operational staff that could not readily be replaced due to a tighter labour market in the state.  

Cirrus said it expected to announce unaudited FY21 adjusted pre-options earnings before interest, tax, depreciation and amortisation (EBITDA) of $2 million, a substantial drop from the prior year’s EBITDA, which came to $3.6 million.  

This EBITDA expectation also represents a decline from the company’s previous guidance on FY21 adjusted EBITDA of $4.2 million to $4.6 million, which it flagged in February.  

The earnings result is largely attributable to a disappointing services performance and the continued challenging trading conditions in a number of the company’s markets due to direct and indirect impacts of the pandemic, including product supply shortages, import interruptions, limited access to talent and customer-delayed contracts.    

Regardless of those challenges, Cirrus has told shareholders in its latest market update that it expects to deliver unaudited consolidated revenue for FY21 of $106 million, representing an uplift of 11.7 per cent, year-on-year – a new record for the company.  

“The direct and indirect impacts of the COVID-19 pandemic could not be fully anticipated or planned for at the half year,” Cirrus managing director Matt Sullivan said. “However, I am proud of how the team has performed despite the various impacts, which have included microchip shortages, limited access to talent and disruptions to hardware delivery leading to service projects also being delayed. 

“That performance by the team is exemplified by it winning and successfully transitioning our largest ever managed service contract in Canberra during the year, to very positive feedback from the client. 

“While there was an initial hit to productivity and margins during the transition phase, this contract is now running very smoothly and we expect it to provide significant incremental margin improvement in FY22,” he added. 

As noted by Sullivan, the company’s Canberra business maintained strong momentum from the first half of the year into the second, delivering FY21 revenue of $55 million, which was up 94 per cent year on year.  

With a decent backorder and pipeline of opportunities, including three significant delayed contracts, the company remains optimistic about the outlook for FY22.   

“With a healthy cash balance and zero debt, the company commences FY22 very well placed for future acquisitions and strategic investment in further organic growth,” Sullivan said.  

In March, Cirrus Networks revealed it had won a $13 million contract to provide managed services to the federal agency Geoscience Australia, replacing DXC Technology.  

Later that same month, the company said it had won contract renewal extensions with three current managed services projects worth more than $6 million.