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Technology group Etion, which reported a more than 12-fold jump in half-year earnings on Wednesday, forecasts further growth in operations the coming 18 months, driven by an upturn in the mining, defence and fibre-optics markets.
Listed on the JSE’s Altx stock market for small and growth companies, Etion offers digital and cybersecurity services, mostly for banks, insurance companies, governments and businesses.
Growth in SA’s mining industry “has contributed to increased investment by mining customers and is expected to continue over the next five years,” Etion said, adding that would benefit its Create unit, which specialises in software, firmware, analogue/RF products and digital hardware design, and electronic manufacturing.
The group has two divisions — Etion Connect and Etion Create. A third unit, Etion Secure, was sold to JSE-listed technology group Altron for R245m, effective October 1.
The Connect unit, which provides cabling, network management and engineering services to the telecommunications sector is set to benefit from growth in the fibre-optics market. One of its main customers has plans to provide fibre connections for 300,000 households annually, which could lead to a steady revenue stream for Etion.
“Technology upgrades and doubling of customer capacity by fibre network operators without doubling prices are driving additional demand for connectivity,” Etion said.
Robust demand for the group’s digital services helped boost profit after tax to R68.2m in the six months to end-September from R4.9m in same period a year earlier.
Group revenue more than doubled to R550.2m, benefiting from strong demand during Covid-19 for faster and more secure internet services.
Revenue from the continuing operations grew 181% to R387.9m, largely due to increased investment by Connect’s customers in infrastructure to support demand for fibre to homes and businesses, and a surge in orders from Create’s local and international mining and defence customers, the group said.
At the beginning of October, the committed order books for continuing operations amounted to R579m, which bodes well for the remainder of 2022 and the 2023 financial year, the group said.
Etion is looking to sell its remaining businesses and may delist.
“The board is in the process of engaging with prospective bidders for both operating entities and is in a fairly advanced stage of discussions,” the group said.
Etion’s shares were up 17.2% to 34c in afternoon trade, though the stock is illiquid, giving the group a market value of R192m. The stock has risen just under 10% so far in 2021, and 74% since the beginning of 2020.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.