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Just in: Electro Optic (ASX:EOS) share price tanks on FY20 results

Shares in Electro Optic Systems Holdings Ltd (ASX: EOS) have fallen more than 9% today after the company released its FY20 results.

Electro Optic Systems is a leading technology company that’s involved in products such as software, lasers, electronics, optronics, telescopes and precision mechanisms. It operates in 17 countries and has over 500 employees around the world.

What did EOS report?

EOS reported revenue growth from ordinary activities of $180 million, up 9% on the prior corresponding period (pcp), despite complications arising from COVID-19.

Significant investment in inventory resulted in a negative operating cash flow of $109 million, and a net loss after tax of $25.6 million.

Longer than expected delivery times from decreased availability of international freight meant that a significant amount of revenue will be deferred into 2021 and 2022 as the delivery schedules are further pushed out.

Profitability throughout FY20 was further impacted by more indirect costs expensed as incurred throughout the period.

Segment performance

Defence revenue finished the year down by 1% due to COVID-19 interruptions. Due to the delivery issues, roughly $40 million of revenue was deferred into 2021, however, management has said this segment should return to profitability in 2021.

Communications revenue has come off a small base as a result of the company’s EM Solutions acquisition in 2019, which gives an unclear picture of the growth rate. Losses arising from SpaceLink will be mitigated in the second quarter as it transitions to independent funding.

Space Systems revenue increased by 27% over the period, boosted by the growing awareness and importance of space applications with a strong sales pipeline indicated by management.

FY21 growth plans

The below image shows a summary of nine products that will be a focus during the year and their respective revenue opportunities.

EOS FY21 Growth Priorities | Source: EOS FY2020 Results Presentation

Electro Optic has various products on the horizon as well as a large backlog with committed contracts not yet fulfilled. This includes EM Solutions backlog of $21 million, which will underpin FY21 revenue growth.

The pipeline is also strong with 208 separate opportunities, which has increased partially due to project deferrals caused by COVID-19. The company estimates a risked pipeline of $3.6 billion, representing the potential revenue from contracts it has tendered for (or qualified to tender for) over the next 36 months.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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