Spirit Technology posts $53 million loss amid managed services challenges

Spirit Technology supported itself through the 2022 financial year partly through asset sales, ending with a $138.7 million revenue and $53.1 million loss, which was a significant dive from its $1.1 million profit in the corresponding period. 

The company’s ASX release said it had “been a challenging year, particularly in managed services.” 

The division was impacted by supply chain delays and inflationary pressure on equipment, and the “complexity and breadth of product sets, customer sizes, vendors and systems straining delivery and support to maintain customer experience,” the company said.

It also said “underperformance from some products acquired via VPD resulting in churn plus sales and operational effort to remediate” impacted managed services.

While managed services generated more revenue than Spirit’s corporate, cyber security or collaboration and communication division, this was partly due to ‘divestment of non-core assets…returning net $18.5 million in capital to balance sheet.”

During the first half of the financial year, Spirit sold off its fixed wireless for $21 million to telco operator Maret Group, and its residential internet business to DGTek for $5 million. 

Spirit’s corporate division lost $656 million, while its managed IT services generated $69. 6 million, its cyber security division made $31.3 million and its collaboration & communication division made $34.9 million. 

Spirit said a “non-current asset impairment of $48.3 million, write-down of IT&T acquisitions goodwill and other assets” helped cause the 37 percent fall in underlying EBITDA to $7.3 million in the 2022 financial year from $11.5 million in the corresponding period.  

The company said its collaboration and communication division’s success in the period was achieved by Spirit-owned Nexgen becoming the first partner to offer Cisco Webex Wholesale in APJC.

In February the company restructured into three core units to align brands that it acquired into different offerings targeting SMB, midmarket and enterprise clients. 

The original Spirit brand would target mid-market offerings, the company said, while Nextgen, which it acquired in March last year, would target small business offerings, and Intalock, which it acquired in 2020, would target corporate and enterprise offerings. 

During the second half of the 2022 financial year, Spirit’s chief executive officer and managing direct Sol Lukatsky stepped down and was replaced a few months late by former Tesserent chief executive officer Julian Challingsworth.