Cyber security services provider Shearwater Group (LON: SWG) appears set to return to profit this year. The core software businesses have been integrated, as have two of the three consultancy businesses. The cost savings will show through in the second half.
In the six months to September 2023, revenues dipped from £10.8m to £10.5m. That was due to much lower software revenues. Even so, gross profit improved and, stripping out amortisation and exceptionals, the underlying loss reduced £493,000 to £93,000. That is before restructuring costs.
AIM-quoted Shearwater is winning new contracts with 41 new clients signing up this year, including a UK government department. New software launches should help software revenues to rebuild.
The strong balance sheet has helped Shearwater to weather the tougher trading. The second half cash position is always higher than at the half way stage. Net cash of £5m is forecast for the end of March 2023.
Cavendish forecasts a full year turnaround from a loss of £1.3m to an underlying pre-tax profit of £1m. The share price lost 3.5p, ending the day at 45.5p. That is less than eleven times prospective earnings. There is a need for cyber security software and services and if Shearwater can continue to win business the share price should recover.
