Spirit Technology records loss in first half of FY24, but security sales increased

[Correction: This article has been corrected to state that Spirit's collaboration and communication business generated sales of $19.78 million for the six months ending 31 December 2023, not $9.78 million, which the article originally incorrectly stated.]

Spirit Technology Solutions has reported declines in profit and revenue for the first half of the 2024 financial year, though security sales increased.

For the six months ending 31 December 2023, the digital transformation and modern workplace services firm reported a net loss after tax of $5.2 million, down 33 per cent from the $7.79 million net loss sustained in 1H FY23. 

Spirit's sales decreased 15 per cent to $57.03 million.

"The board continues to acknowledge the financial performance at a group and individual segment level requires a significant uplift to meet expectations," Spirit said in its ASX release.

Decline in collaboration and communication sales

Spirit's collaboration and communication business generated sales of $19.78 million, down from $22.58 million in 1H FY23.

The company said the decline "reflects product-based revenue constraints (associated with economic inflationary market factors dampening SME business confidence and hence demand) that started to present in H2 FY23."

Spirit said "a sustained rebound in hardware sales is difficult to forecast" but noted the company "has seen a positive start to H2 FY24 with customers showing improved levels of confidence and sales."

Cybersecurity services sales rebound

For its cybersecurity business, Spirit reported revenue of $19.22 million, up from $14.85 million in 1H FY23.

"The recovery in segment performance builds on the initiatives and investments made in FY23 centered around sales and delivery capabilities," the company said.

"The Security Operations Centre ("SOC") in Brisbane remains a key differentiator against generic SOC capabilities provided by other Australian managed service providers and is now supporting a growing number of leading Australian organisations."

Managed services sales decline

Spirit's managed services business achieved $18.16 million in sales, down from $30.06 million in 1H FY23.

The company said the decline in sales "reflects the segment's divestment programs and associated customer novation impacts," as well as "the loss of customers due to regrettable churn alongside a lack of new 'logo' recurring revenue." 

Future outlook

Spirit said it "continues to evolve as it progresses its transition into a modern technology service provider," noting its $34.6 million acquisition of Sydney cybersecurity firm InfoTrust, announced in February 2024, "expands Spirit's presence in the growing cybersecurity market."

"The company's immediate strategic priorities are focused on extracting the revenue and gross margin synergies that this acquisition presents and accelerating cross-sell opportunities from Spirit's other segments into InfoTrust's customer base."

Spirit also noted "there will be ongoing acceleration of initiatives within the managed services business segment to move that division's [underlying EBITDA] to a positive position."