ASX-listed managed service provider (MSP) Spirit has reported significant declines in both revenue and profit for the first half of the 2024 financial year, but sees itself as a business in transition, and a major acquisition will contribute significantly moving forward.
For the six months ending December 31, 2023, Spirit reported a sales decline of 15%, to AUD $57.03 million, and a net loss after tax of $5.2 million. The latter figure, however, is an improvement from the first half of the previous financial year, which saw a $7.79 million loss.
These losses were attributed to declining interest in the company’s collaboration and communication business, which only generated $9.78 million, compared with $22.58 million for the same period in FY23.
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Spirit’s turnaround strategy: Cybersecurity
In a statement, Spirit acknowledged that market conditions were resulting in changing demand from customers. “The drop in segment performance YoY at both a revenue and [underlying EBITDA] basis 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,” the statement reads.
However, Spirit sees significant opportunity in cybersecurity. “The market is asking for solutions that improve their resilience to cyber attacks, climate change, and are responsive to challenging business conditions,” it noted in a separate report.
Analyst firm Gartner has also said that “resilience,” “security,” and “risk management” should be key priorities for MSPs in Australia.
To this end, Spirit cited the acquisition of InfoTrust in early February 2024 as a critical step in pivoting the company to meet market needs. InfoTrust cost Spirit $34.6 million, and is expected to make a substantial impact given that cybersecurity sales ($19.22 million) were one of the few categories for the company that had seen year-on-year gains ($14.85 million in 1H FY23).
This strategic pivot echoes comments made by Datacom late last year, which showed that customers were desperate for managed services in security. Likewise, Cisco (which is a vendor partner for Spirit) was doubling down on security as its major play for double-digit growth this year.
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