The Megaport Limited (ASX: MP1) share price is soaring today in what’s shaping up as a stellar day for ASX technology shares.

Shares in the global software company are currently trading at $8.14 each, a 10% gain. For perspective, the S&P/ASX 200 Index (ASX: XJO) is 1% higher at the time of writing.

Let’s take a look at what is likely impacting the Megaport share price.

Technology shares rise

The Megaport share price is rising more than many stocks today, but it is not alone in the tech sector. The Block Inc (ASX: SQ2) share price is up 4.02%, while Brainchip Holdings Ltd (ASX: BRN) is 5.43% ahead and Pivotal Systems Corporation (ASX: PVS) is surging 20.5%. Life360 Inc (ASX: 360) is also jumping 10.84% while Appen Ltd (ASX: APX) is a more modest 1.07% in the green.

The S&P/ASX All Technology Index (ASX: XTX) is 2.42% ahead today, while the S&P/ASX 200 Information Technology Index (ASX: XIJ) is lifting 2.39%.

ASX technology shares, including Megaport, are rising after the technology-heavy NASDAQ lifted higher in the US overnight.

The Nasdaq Composite Index jumped 2.14%. Investors reacted positively to comments from the US Federal Reserve that may provide a clue on the direction of the Fed’s monetary tightening plans.

In comments cited by CNBC, US Fed vice chair Lael Brainard warned there could be “risks associated with overtightening”. She said:

At some point in the tightening cycle, the risks will become more two-sided.

The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening.

Australian technology shares tend to follow in the footsteps of their US counterparts. Also, Megaport has a significant revenue base in the United States. In the company’s latest financial results, Megaport said the US “accounted for 51% of group revenues in June 2022″.

Megaport share price snapshot

The Megaport share price has fallen 56% in the year to date and 53% in the past year.

However, in the past week, Megaport shares have risen 12%.

Megaport has a market capitalisation of about $1.3 billion based on its current share price.

The post Megaport share price soars 10% as ASX tech shares trump on Thursday appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares having such a top run on Thursday?
• Why is the Block share price charging higher today?
• Here are the top 10 ASX 200 shares today
• Why has the Block share price dumped 24% in a month?
• What is the highest BrainChip shares have ever been?

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd, Block, Inc., Life360, Inc., and MEGAPORT FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended MEGAPORT FPO. 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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Thursday is proving to be a rough session for the Beach Energy Ltd (ASX: BPT) share price.

The oil and gas producer is sinking alongside the value of the black liquid.

The Beach Energy share price is trading at $1.64 at the time of writing. That’s 1.8% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is trading higher today, gaining 0.89% right now.

Let’s take a closer look at what’s going wrong for the ASX 200 energy giant’s stock.

Beach Energy share price tumbles alongside oil

The Beach Energy share price is suffering alongside many of its ASX 200 peers today after energy commodity prices tanked overnight.

The S&P/ASX 200 Energy Index (ASX: XEJ) is down 3.67% right now, with Beach Energy coming in as its second-worst performer.

Taking the unfortunate lead is none other than Woodside Energy Group Ltd (ASX: WDS). Its share price has plummeted 6.42% right now.

Their suffering follows a disastrous night for oil prices.

The Brent crude oil price fell 5.2% to US$88 a barrel while most of Australia slept – marking a new seven-month low.

Meanwhile, the US Nymex crude oil price dumped 5.7% to hit US$81.94 a barrel – its lowest point since January.

The downturn was driven by recession concerns bolstered by disappointing Chinese trade data, Reuters reports.

It was reportedly worsened by a strengthening of the US dollar against the Japanese yen and the pound sterling. That makes oil more expensive for those trading in the currencies.

Joining the Beach Energy share price in the red today are fellow energy shares Santos Ltd (ASX: STO), Worley Ltd (ASX: WOR), and Viva Energy Group Ltd (ASX: VEA). They’ve fallen 1.3%, 0.75%, and 0.36% respectively.

Most other ASX 200 energy shares are trading in the green at the time of writing.

The post Why is the Beach Energy share price sinking on Thursday? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Friday
• Blocked again: Here’s what happened to ASX 200 shares last time the Suez was cut off
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Xero Limited (ASX: XRO) share price has returned to form on Thursday.

In early afternoon trade, the cloud accounting platform provider’s shares are up 3.5% to $87.00.

Why is the Xero share price rising?

There have been a couple of catalysts for the rise in the Xero share price on Thursday.

The first has been a rebound in the local tech sector following a strong night of trade on Wall Street’s NASDAQ index.

For example, at the time of writing, the S&P/ASX All Technology Index is up a sizeable 2.4%.

Bullish broker note

Also giving the Xero share price a lift has been a broker note out of Goldman Sachs this morning.

According to the note, the broker has retained its buy rating and $111.00 price target on the company’s shares.

Based on the current Xero share price, this implies potential upside of almost 28% for investors over the next 12 months.

What did the broker say?

Goldman was pleased with what it heard at the latest Xerocon event in Sydney this week.

One of the items the broker highlighted was management’s commentary on the underperforming UK business. It explained:

Xero noted the weaker than expected UK sub growth was partly due to the slower than expected MTD impact, and partly from the restructuring/go-to market changes. However Xero noted that business revenue growth remains on track, and the company is focused on optimizing for the best long-term mix between subscriber and ARPU growth. Finally it was noted that the UK team understands what is happening and has a good handle on addressing the issues.

Another positive was the reception from partners to Xero’s 15% app store commission charge. Goldman said:

Commentary was supportive of Xero, with the 15% app-store fee well below distribution costs/commissions in other industries. Ecosystem partners had varying degrees of dependence on Xero for distribution, with direct sales a key focus for some, while some payment partners such as GoCardless (who operate in 30 countries) estimated c.25% of total volume was from Xero – we note the company recently (Feb-22) estimated it had > US$25bn in annual payments.

All in all, the broker remains positive on the company and continues to forecast strong growth over the medium term.

The post Why the Xero share price is racing higher and could keep climbing appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares having such a top run on Thursday?
• 5 things to watch on the ASX 200 on Thursday
• Financial powerhouse: Why I think these stats make Xero shares irresistible
• ASX 200 tech shares are getting hammered on Monday. Here’s why
• Up 20% in 2 months, is the Xero share price a buy today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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The De Grey Mining Limited (ASX: DEG) share price is in the green today. The explorer this morning posted prefeasibility study outcomes for its Mallina gold project in Western Australia.

Shares of De Grey Mining currently trade for 94.5 cents, up 2.72%, after peaking nearly 6% in early morning trade.

Meanwhile, the S&P/ASX 200 Materials Index (ASX: XMJ) is also off to a good start this morning, up 1.45%.

Let’s look at the highlights of the ASX gold miner’s study.

Prefeasibility study outcomes

The prefeasibility study followed a scoping study completed last year for its key financial outcomes and assumptions. The prefeasibility study upgraded these ratios significantly.

The company announced:

• Life of mine up to 13.6 years from 10 years
• Average processed grade up to 1.6 g/t Au from 1.4 g/t Au
• Ore tonnes mined up to 136 metric tonnes from 100 metric tonnes
• Recovered gold up to 6.4 million ounces from 4.3 million ounces
• EBITDA for the life of mine up to $7.1 billion from $4.8 billion
• Total pre-production capital costs up to $1.05 billion from $893 million

De Grey also announced that its maiden Hemi Reserve has 5.1 million ounces of gold at a grade of 1.5g/t Au, which it says is “one of the largest and highest grade maiden reserves in recent decades”.

De Grey managing director and CEO Glenn Jardine said:

Total production has increased by nearly 50% from the scoping study to 6.4Moz with the annual gold production rate increasing by around 25% to 540,0000zpa over the first ten years. The increased production has been achieved at increased levels of JORC measured and indicated resources within the production profile averaging clase to 9096 over the first ten years of production compared with 70% in the scoping study. In addition, the Company saw increased resource grade at most Hemi deposits from resource definition drilling conducted over the past tweive months, particularly at Diucon and Eagle where the average combined resource grade increased by over 30%

De Grey share price snapshot

The company share price is down around 22% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is also down year to date, but less at a 9% loss.

At the current share price, De Grey Mining presides a market capitalisation of $1.29 billion.

The post Why is the De Grey share price rushing higher on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• These are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• Guess which ASX 200 company bought over $65 million of De Grey shares in August
• These are the 10 most shorted ASX shares

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Block Inc (ASX: SQ2) share price is leaping higher in morning trade, up 4.4%.

Block shares closed yesterday trading for $96.65 and are currently trading for $100.94 apiece.

The ASX buy now, pay later (BNPL) share, which acquired Afterpay in January this year, isn’t the only tech stock enjoying a good run today.

While the S&P/ASX 200 Index (ASX: XJO) is up a healthy 0.4%, the S&P/ASX All Technology Index (ASX: XTX) is charging 1.9% higher at the time of writing.

Rival BNPL shares Zip Co Ltd (ASX: ZIP) and Sezzle Inc (ASX: SZL) are also both outperforming. Zip shares are currently up 3.6% and the Sezzle share price has gained 3.5%.

What’s piquing investor interest?

The Block share price is leaping higher following a strong rebound in US markets yesterday (overnight Aussie time).

The tech-heavy NASDAQ led the charge, closing up 2.1%.

Block is dual listed. And its NYSE-listed shares also outperformed yesterday, closing the day up 3.9%. Typically, when the Block share price gains on the NYSE, you’ll find a similar trend playing out on the ASX the following day.

So why the broader market rally?

According to Edward Moya, senior market analyst at Oanda (courtesy of Bloomberg):

Stocks are rebounding as the global bond market selloff takes a break. Economic momentum remains for the US economy, and that could only improve if inflation continues to soften. Investors seem poised to enter a holding pattern until the September 13th inflation report.

Should US inflation figures come in on the lighter side, that would portend potentially less aggressive tightening for the Federal Reserve. That, in turn, would offer some welcome tailwinds to BNPL stocks.

Block share price snapshot

It’s going to take a fair bit more than today’s rally to see the Block share price return to where it stood when the company first listed on the ASX on 20 January.

At that time, Block shares were swapping hands for $176.63. Shares closed for highs of $194.36 on 30 March, but it’s been mostly downhill since then.

Since 20 January, the Block share price is down a painful 43%. That compares to an 8% loss posted by the ASX 200 over that same period.

The post Why is the Block share price charging higher today? appeared first on The Motley Fool Australia.

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More reading

• Why has the Block share price dumped 24% in a month?
• These are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• Why is the Block share price plunging 8% today?
• These are the 10 most shorted ASX shares

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. 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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The Link Administration Holdings Ltd (ASX: LNK) share price is surging this morning on news Australia’s competition watchdog will not oppose the company’s acquisition.

Shares in the administrative technology company are currently trading 6.26% higher at $4.58 each after reaching an intraday high of $4.71 a share. That represents a 9.28% jump.

This morning, the Australian Competition & Consumer Commission (ACCC) gave the green light to a takeover proposed by legal technology company Dye & Durham Corporation (TSX: DND).

The ACCC said it came to its conclusion after accepting a court-enforceable undertaking from Dye & Durham that will see it divest its existing Australian business.

Let’s check the details.

Link share price catches bid with ACCC tick

Way back in December 2021, Dye & Durham made its initial proposal to buy Link through a scheme of arrangement.

It originally offered $5.50 per share, however, came back with a revised offer of $4.30 per share more than seven months later.

Spurring the lower valuation was the ACCC’s initial involvement in the proposed transaction and the downturn in equity markets this year.

Unsurprisingly, Link declined the offer. This led to another offer of $4.81 per share which Link shareholders eventually accepted with a 98% majority.

The ACCC initially voiced concerns due to Link’s ownership of PEXA Group Ltd (ASX: PXA).

Link holds a 42.77% shareholding in PEXA, a company that operates an electronic lodgement network for digital conveyancing settlements. Both Link and Dye & Durham also operate in conveyancing via their exposure to data management and analytics.

“To accept [Dye & Durham’s] D&D’s proposed undertaking, we need to be satisfied that it will effectively address all competition concerns but is also structured in a way that can be relied upon to be workable and effective,” the ACCC said at the time.

ACCC’s seal of approval

Now, the competition watchdog has revised its stance after a court order that forces D&D to sell its existing Australian businesses to select buyers approved by ACCC.

“Without the divestment of D&D’s Australian businesses, the proposed acquisition would have aligned PEXA, a near monopoly provider of Electronic Lodgment Network services, with D&D, a significant supplier of software to lawyers and conveyancers,” the ACCC said today.

“Ultimately, the ACCC concluded that the proposed acquisition, taking into consideration the divestiture undertaking, would be unlikely to substantially lessen competition,” it concluded.

Today’s price action sees the Link share price down less than 1% over the past 12 months although it remains around 18% lower year to date.

The post Link share price surges 9% on ACCC takeover nod appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Link share price marching higher on revenue boost
• Pexa share price higher as revenue, profit surges in FY22
• Why I’m watching these ASX All Ordinaries shares like a hawk
• Why are ASX 200 tech shares having such a cracker of a day?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Link Administration Holdings Ltd and PEXA Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The oil price has undergone its fair share of twists and bends this year to date. The spike in energy prices in 2022 so far has been the second-highest on record since the oil shocks of the 1970s.

Except this time it’s different. Today, the oil industry is contending with an entirely new set of challenges.

Supply disruptions from the conflict in Europe, rising energy demand amid the impending European winter, and lower oil reserves are all contributing to sustained volatility in the pricing of oil.

Brent Crude oil, the world’s oil pricing benchmark, has seen its price gyrate substantially from December 2021. It now trades at US$87.7/Bbl, down from its last peak of US$120/Bbl on 9 June.

Brent’s journey to stardom – and then back again – is seen on the chart below, alongside West Texas Intermediate (WTI) crude oil futures for the 12 months to date.

Oil price continues to falter

After a short reversal, the oil price turned sharply on 29 August and has been pushing south ever since.

This week, futures on Brent Crude oil fell to their lowest mark since January this year, as concerns mount around global economic growth and a strong US dollar.

Investors seem particularly concerned at the prospects of a looming recession – especially in Europe – driven by higher energy prices and surging interest rates.

“[T]he market is basing its concerns about what will happen due to sharply higher energy prices in Europe, slowing demand in Europe, and interest rates rising,” analysts led by Paul Flynn at Price Futures Group said in a recent note.

Meanwhile, “[w]eak customs data from top importer China and renewed coronavirus-induced restrictions in several cities threatened further economic damages and subdued fuel consumption,” Trading Economics says.

“On top of that, lingering global growth concerns amid anticipation of an extended period of tightening financial conditions continued to rattle sentiment,” it added.

In addition, the OPEC+ alliance, in its most recent meeting, agreed to slash its daily oil output by 100,000 barrels per day, an unexpected move that added further volatility to the oil price.

Finally, another wave of fresh downside pressure came from weaker import data from China, showing that its crude oil imports fell 9.4% year on year to August.

“The world’s largest crude importer brought in 40.35 million tonnes of crude oil last month, equivalent to about 9.5 million barrels per day (bpd), data from the General Administration of Customs showed,” Reuters reported.

“That compared to 8.79 million bpd in July and 10.49 million bpd in August 2021.”

What the reduction in oil futures says for the level of inflation, energy prices, and cost of living is yet to be seen. Nevertheless, the declines are certainly worth thinking about.

Meantime, the volatility has been a boon for ASX oil shares like Woodside Energy Group Ltd (ASX: WDS) and Santos Ltd (ASX: STO). Their share prices are up 44% and 21% this year to date respectively, whilst broad equity markets have suffered significant drawdowns.

The post Why has the oil price been so volatile lately? appeared first on The Motley Fool Australia.

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More reading

• Why is the Woodside share price crashing 7% today?
• 5 things to watch on the ASX 200 on Thursday
• Why is the Woodside share price on the slide today?
• Why is the Santos share price slipping on Wednesday?
• Hoping to pocket the monster Woodside dividend? Read this

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The FBR Ltd (ASX: FBR) share price is jumping, up 6.4% today.

For readers who haven’t heard of FBR before, it is designing, developing, building and operating an automated and stabilised bricklaying robot called Hadrian X.

It continues to make progress. For example, in November 2021, it announced that it had executed a term sheet with GP Vivienda to supply its ‘wall as a service’ (WaaS) for between 2,000 to 5,000 homes in Mexico using the Hadrian X robot. FBR has also entered into a memorandum of understanding (MoU) with Liebherr-Mischtechnik. The MoU intention is to co-operate, industrialise and commercialise the next Hadrian X robot for the global construction market.

These promising signs haven’t been missed by Australia’s biggest brickmaker, Brickworks Limited (ASX: BKW).

Last week, it was revealed that Brickworks had increased its ownership of FBR from 7.16% to 11.94%. It paid around $6.5 million for this increased holding.

But now, there is speculation that the business is a takeover target, which could be boosting the FBR share price.

Brickworks to make a move?

Brickworks has been strategically building up its stake in the business. According to reporting by the Australian Financial Review, it could mean that an actual takeover offer is getting close.

The AFR reported that fund manager sources believe the FBR business “has always made sense” for Brickworks as a way for it to provide low-cost bricklaying. Particularly at a time when construction costs are increasing, which is hurting the margins of both the builders and building product producers like Brickworks.

How could this play out? Speculation is that Brickworks may aim to increase its shareholding to 20% of the business, “make the most of a few creep provisions,” and then launch a takeover attempt.

It was suggested that the takeover approach could happen sooner rather than later. The newspaper also pointed out that FBR may need to raise more capital in the future to fund its ongoing operations and growth. This could enable Brickworks to buy more shares at a cheaper price.

Brickworks has previously taken part in a placement with FBR, raising $1.93 million, which helped it increase its shareholding of the business.

FBR share price snapshot

Over the last month, FBR shares have risen by 63%. The Brickworks share price is up 1.28% today, at the time of writing.

The post FBR share price climbs amid Brickworks takeover rumours appeared first on The Motley Fool Australia.

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• Dividend beasts: 3 ASX 200 shares that have delivered reliable payouts over the past 7 years

Motley Fool contributor Tristan Harrison has positions in Brickworks. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks. 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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The Tyro Payments Ltd (ASX: TYR) share price is rocketing higher after the company knocked back an unsolicited takeover bid.

A consortium of private equity investors put forward a $1.27 per share bid for total control of the financial technology company. That represents an enterprise value of $693.9 million.

The bid was rejected by the company this morning. It said the offer significantly undervalues it.

The Tyro share price is $1.235 at the time of writing, 25.08% higher than its previous close, after touching an intraday high of $1.295. That represents a 31.47% jump.

Let’s take a closer look at today’s news from the payments services provider.

Tyro share price leaps on rejected takeover bid

The Tyro share price is surging on news the company has rejected a near-$700 million takeover bid.

The offer was put forward by a consortium led by tech-focused investment firm Potentia Capital Management. The group also includes HarbourVest Partners, MLC Investments Limited, and The Construction and Building Unions Superannuation Fund.

Tyro’s board slapped the $1.27 per share offer away, saying:

The indicative proposal is materially below Tyro’s fundamental value and highly opportunistic given [it] is substantially below where Tyro’s share price has traded in the past 12 months.

The company also said the offer is highly conditional.

On top of that, Tyro pointed out its growth prospects and its increasing share of the Australian payments and business banking markets. It also said it expects its operating leverage will strengthen in the medium term and noted it’s well funded for growth.

Interestingly, the consortium secured the support of major Tyro shareholder Grok Ventures.

Readers might recognise Grok as the investment vehicle of Atlassian Corporation (NASDAQ: TEAM) co-founder Mike Cannon-Brooks. It was an integral piece of the puzzle that ultimately dismantled AGL Energy Limited (ASX: AGL)’s planned demerger.

The consortium struck a deal with Grok that would see the firm’s 12.5% stake in the company voted towards its bid.

Grok will also be blocked from acting on any competing proposals unless such a proposal is at least 25 cents greater than that of the most recent bid from the consortium.

The Tyro share price fell 66% between the start of 2022 and Wednesday’s close. At its current price, it’s down 57% year to date.

The post Tyro share price rallies 31% following rejected takeover bid appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Atlassian and Tyro Payments. The Motley Fool Australia has recommended Tyro Payments. 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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The Electro Optic Systems Hldg Ltd (ASX: EOS) share price has returned from its lengthy suspension and crashed deep into the red.

In morning trade, the embattled defence and space systems company’s shares were down as much as 35% to 47 cents. It has since recovered a touch and is currently down 23% to 55.5 cents.

Investors have been selling down the Electro Optic Systems share price following the eventual release of its delayed half-year results.

Electro Optic Systems share price crashes on half-year update

• Revenue down 45% to $53.8 million
• EBITDA loss of $34.7 million
• Net loss after tax increased from $11.7 million to $99 million
• Financing agreement signed with Soul Patts
• FY 2022 guidance being reassessed

What happened during the half?

For the six months ended 30 June, Electro Optic Systems reported a 45% decline in revenue to $53.8 million. Management blamed this on delayed revenue recognition arising from supply chain disruptions.

Things were even worse further down the income statement, with the company reporting a whopping $99 million loss after tax for the six months. This was a ~750% increase on the $11.7 million loss it recorded a year earlier.

However, it is worth noting that $54.4 million of this loss is attributable to the impairment of assets and onerous contracts held in SpaceLink.

Spacelink is the company’s satellite communications business which has an almighty task of competing against Elon Musk’s Starlink and Apple’s new satellite-connected handsets.

Though, whether the company will hold onto the cash-burning Spacelink business, only time will tell. Management revealed that it continues to explore opportunities to realise value from the SpaceLink assets and remains in active negotiations with potential partners and purchasers.

The rest of the loss has been blamed on the company having a cost structure larger than required for the current level of revenue. Positively, this is being addressed as part of the organisational restructure being implemented following a strategic review.

Restructure

Electro Optic Systems revealed that it is adopting a leaner structure that will prioritise existing business lines that are profitable and respond to customer procurement activity rather than anticipating requirements through customer planning documents.

Significant management changes, reductions in workforce, and a simplified strategy and business plan are also in the works. Full-year cost savings of at least $20 million are expected from these changes.

To support it through these challenging times, major shareholder Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has agreed to refinance the $35 million Roadnight debt facility that was due to expire on 6 September 2022 and extended the current maturity date to 26 September 2022.

Management expects to seek further extensions from Soul Patts as part of a staged refinancing of the company. Though, it acknowledges that there can be no guarantee that such extensions will be obtained.

Soul Patts has also agreed to provide the company with a $20 million working capital facility.

Outlook

Electro Optic Systems was previously guiding to FY 2022 revenue at or above 2021 levels of $212 million.

However, in light of the challenging first half and supply chain uncertainties, the company is reviewing its guidance and will provide an update at a later date.

The post Electro Optic Systems share price crashes 35% after first-half shocker appeared first on The Motley Fool Australia.

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More reading

• Why is the Electro Optic Systems share price frozen today?
• Why has the Electro Optic Systems share price soared 16% in 2 days?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems Holdings Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia 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 Scott Phillips.

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