Electro Optic Systems (ASX:EOS) share price falls despite revenue growth

Shares in the space and defence technology group are under pressure on Monday.

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The Electro Optic Systems Holdings Ltd (ASX: EOS) share price is falling lower on Monday despite the Aussie technology company reporting a jump in half-year revenue.

Electro Optic Systems share price falls despite revenue growth

Shares in the space and defence group are falling after the group released its half-year results this morning. Some of the key takeaways include:

  • Revenue up 30% on the prior corresponding period (pcp) to $97.8 million
  • Underlying earnings before interest and tax (EBIT) before SpaceLink Costs and foreign exchange moves up 85% to -$2.1 million
  • Statutory EBIT up 58% on pcp to -$7.6 million
  • Statutory diluted earnings per share up 31% on pcp to -8.5 cents
  • Operating cash flow of $4.6 million, compared to -$62.6 million outflow in 1H 2020

The EOS share price has slumped lower following this morning's update. That's despite the company noting COVID-19 disruptions weighing on earnings.

What did the 1H 2021 look like for EOS?

The Aussie tech group reported defence segment revenue growth of 25% during the period to $83.2 million. A major overseas contract and Commonwealth of Australia deals continue to underpin group earnings.

Electro Optic Systems' communications (ex. SpaceLink) revenue jumped 60% to $13 million, while space segment revenue surged 126% to $1.6 million.

The defence and space technology company focused on research and development investment during the period but said monetisation and commercialisation are still a "work in progress".

The Electro Optic Systems share price fell 18.5% from 4 January to 30 June. COVID-19 restrictions slowed customer decision making during the year, with the company in "advanced negotiations" with existing customers for more than $1 billion worth of new contracts to be awarded in the next 6 months.

What's next for Electro Optic Systems and its share price?

Electro Optic Systems reported a $2.6 billion risk-weighted sales pipeline for its EOS Defence Systems. The order book sits at $375 million, with 30% domestic and 70% offshore. EOS expects to recognise 30% of the order book as revenue in the current period, with half in 2022 and the remainder in 2023.

The group cited increasing geopolitical tensions and a manufacturing-heavy COVID-19 recovery plan as key positives looking ahead to FY22.

The Electro Optic Systems share price is falling lower on Monday, and is now down more than 32% year to date.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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