Sluggish economic growth stalks Etion
Revenue of diversified digital technology group slips as clients postpone projects to second half of financial year
Diversified digital technology group Etion has blamed its poor performance for the six months to September 30 on the country’s economic woes, as key customers delayed delivery of multimillion-rand projects.
The group, which offers technological services to clients such as Transnet, SA Revenue Service, the home affairs department, Vumatel, Absa and Telkom, attributed the 14.4% slippage in its revenue to, among others factors, the deferment to the second half of the financial year of rail and cybersecurity projects, valued at R22m and R21m, respectively.
Etion CEO Teddy Daka said on Wednesday that slow growth affected the company’s customers. Although clients wanted fibre, the number of people taking up the services is not as high as expected, he said, referring to the roll-out of fibre by the country’s major network operators.
He said there is a big gap between the number of “homes passed” by a cable network that can be connected to it and homes connected. “I think the homes passed [figure] is sitting at over 900,000 and homes connected is just between 240,000 to 250,000.
“These clients are not reaping more from their investments… because the economy is down, which means uptake in terms of our services to them is reduced.”
Etion has therefore shifted its offerings to where there is still higher demand, hence the focus on cybersecurity, he said. “That has allowed us to intensify our internationalisation process.”
Two years ago, 16% of Etien’s sales were international. This has grown to 20%. “Two years back it was a few countries within the SADC [Southern African Development Community] region and in the Middle East. Now we have clients in South America, sub-Saharan Africa, Australasia and New Zealand. That is going to give us a hedge given what is happening in the South African economy.”
He said the company expected the first half to be tough, but looking forward there are signs of recovery in the economy. “From where we sit, we can see that purchase orders are beginning to come in,” Daka said.
The company expects “a much more solid” financial performance in the second half of the financial year. “The slowness that we have experienced is not so much due to what we did not do. It is predominantly due to what happened externally,” he said.
Etion said business confidence has started to lift mainly because of the government’s “business-friendly” initiatives. These included the government’s decision to set aside R400bn for infrastructure over the next three fiscal years.
Etion’s loss for the six months was R2.4m, while headline earnings per share fell from 6.11c to a loss of 0.5c per share.