Restructuring, COVID challenges and cloud - FY22 in review

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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According to NextDC CEO and managing director Craig Scroggie, the data centre operator continued to grow its customer ecosystem, rising 7 per cent to 1,613, and “remains ideally positioned to capture the benefits of prevailing industry tailwinds driven by the growth in cloud computing and accelerated digitisation.”

Meanwhile, Data#3 experienced a 12.1 per cent rise in revenue, up to $2.2 billion. Of this, $1 billion was public cloud revenue, which rose 31.3 per cent.

Aussie Broadband was another star player, with net profit jumping up 118 per cent year-on-year, to $5.3 million. By comparison, FY21 saw it record a loss of $4.5 million.

Revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) were also up and breaking records during the 12 months to 30 June, rising 56 per cent, to $546.9 million, and 107 per cent, to $39.4 million, respectively.

In fact, Aussie Broadband’s EBITDA exceeded its guidance for the second financial year in a row.

Vonex was another profitable business experiencing solid growth, with post-tax profit jumping up 108 per cent, to $331,000 in the black. 

According to the wholesale and retail telecommunications services provider’s chairman, Nicholas Ong, the profit rebound was due to increased scale and a tight focus on cost controls, resulting in its maiden full-year profit since listing on the Australian Securities Exchange (ASX).

In terms of pure dollar value, no one could beat NBN Co’s revenue of $5.1 billion for its financial year ending 30 June.

The result came down to approximately 316,000 additional net activations since 30 June 2021 and counted 8.5 million residential and business premises connected to the network. 

In particular, it recognised increasing demand for higher speed tiers with 76 per cent of customers on retail plans based on wholesale download speed tiers of 50 Mbps and above and 18 per cent of residential customers using plans based on wholesale speed tiers offering download speeds of up to 100 Mbps and above.

Although not reaching the triple digits, Atturra also had a strong financial year in its first report posted to the ASX since listing in December last year, with revenue rising 37 per cent, to $134.6 million, and profit after tax up to $8.08 million.

While not a full financial year result, Dicker Data’s half-yearly came in during report season, with revenue rising 36 per cent, to $1.5 billion.

The distributor's results were due to advanced solutions such as infrastructure, networking, security and software returning to high levels of growth as business confidence climbs.

The company also noted that demand for end user computing and devices had normalised while its professional audio visual (AV) division continued to grow above expectations.

“The company delivered strong growth in H122 as a result of the continued digital transformation of the corporate, commercial and government sectors in Australia and New Zealand," Dicker Data CEO and chairman David Dicker said at the time.

“Demand remains strong across the company’s product portfolio highlighting IT distribution’s essential role in enabling access to technology and the appetite of the local market for technology services and products. 

“This trend shows no signs of slowing as the digital transformation continues.”

TPG Telecom was another business to report on its half-yearly result, with it reporting its net profit after tax rising 114 per cent, to $167 million, and service profit increasing by 0.7 pe4r cent, to $2.2 billion.

Retailer JB Hi-Fi managed to end the financial year with a net profit after tax increase of 7.7 per cent, to $544.9 million. It didn’t refer to a figure for profit, but it did specify that overall sales rose 3.5 per cent year-on-year to a record A$9.2 billion in FY22.

Superloop saw a dramatic swing for both revenue and profit, with total revenue rising 137 per cent to $262.5 million and net profit after tax dropping 82.5 per cent to $52.6 million into the red. 

Likewise, Tesserent’s statutory revenue was up 50 per cent to $113 million and its net loss almost doubled to $8.8 million.

Data centre provider DC Two was in a similar boat, with revenue increasing 143 per cent and its loss for the year grew 20 per cent to $4.3 million.

By comparison, MOQ Limited experienced a less dramatic result, with revenue increasing 18 per cent to $81.9 million and net loss after tax coming to $6.4 million.