The Over The Wire Holdings Ltd (ASX: OTW) share price has come under pressure today after the release of its half year result.
The telco and cloud services company’s shares were down as much as 22% to a 52-week low of $3.57 this morning. At the time of writing they are down 19% to $3.73.
What happened in the first half?
For the six months ended December 31, Over The Wire reported revenue of $42.9 million. This was an increase of 25% over the prior corresponding period, but fell short of management’s expectations.
Whilst growth was delivered across all four of its product lines, an 8% increase in revenue in the key Data Networks segment weighed on its overall growth.
On the bottom line, the company posted a 27% decline in net profit after tax to $2.3 million for the half.
Over The Wire’s managing director, Michael Omeros, acknowledged that the company had underperformed during the first half.
He said: “Although our first half revenue is behind our budget, the strength of our current sales pipeline and the orders being provisioned gives us confidence of a strong second half result in line with our expectations. We remain focused on delivering organic growth, especially of the recurring kind, as this is the best form of long-term growth and a good indicator of the future strength of our business.”
Mr Omeros pointed out that there are a number of new capabilities that are being finalised in the next six months It will be launching a Microsoft Teams Direct Routing service and adding post-paid mobile services to its product portfolio.
But the biggest milestone will be for its NetSIP offering. He explained: “The most significant milestone for us though is approaching the final stages of our carrier interconnect project that will see NetSIP become a ‘Tier 1’ voice carrier. Complemented by quality acquisitions, which will be a focal area for the remainder of the calendar year, we can see strong opportunities for growth and remain committed to delivering on our strategy.”
Overall, management believes the company is tracking well against its strategy and notes that it continues to generate positive operational cash flow and maintain a strong balance sheet.
It believes it remains well positioned to continue to deliver organic growth and pursue further accretive acquisitions. It is also confident that it will achieve its second half targets and deliver sustainable profit growth for shareholders.
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia has recommended Over The Wire Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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