Increasing turnover, positive half-year result

Previously known only to dedicated retail investors, but since Delta's listing on the BUX, the wider stock market public should be used to the fact that the Board of Directors decided in 2020 that Delta's financial year would traditionally run from 1 July to 30 June. Therefore, the IT company, which is now listed on the BUX, will be able to report on the first half of the 2022-23 financial year by the end of March.

The combination of recession, a more cautious government spending and a domestic corporate sector gasping for breath after a period of covid is making it difficult for companies that dare to think in five-year plans and set targets over such a time horizon. At the same time, in the case of Delta, the half-yearly report shows no sign of a slowdown in sales growth. Compared with the same period of the previous financial year, the group achieved net sales of HUF 10.93 billion in the first half of the year. This is already 71.51T$3.3 billion higher than the previous year.

The result was more modest compared to the volume of sales, HUF 18.8 million, but if we compare it with the similar period of a year earlier, we can characterise it as a huge turnaround even without any optimism: in the similar period of 2021-22 Delta Technologies Plc had to suffer a loss of more than HUF 300 million. The current respectable result was achieved despite the fact that the interest rate environment has already had some impact on the financing of the loan portfolio, while energy and fuel costs have attracted attention in operating costs, despite the fact that Delta Technologies is not a manufacturing company but an IT services and consulting firm.

While Delta's recent confidence-inspiring numbers are helped by the fact that the first half of the 2021-22 financial year (which is calendar 2021's second half) was still very much in the covid territory, the strategic response to this challenge is more likely to be reflected in this level of revenue growth. The risk management measures adopted at the time, sales-oriented organisational changes, and better use of synergies between member companies - for example in the field of transport IT or the ability to service Ipar4.0 orders - meant that the company was able to close the previous financial year with record net sales of HUF 26.66 billion and a profit after tax of HUF 1 billion. 

Thus, given the outlook for the sector, the revenue (HUF 50-55 billion) and EBITDA (margin of HUF 111T3T) targets for 2027 remain in place.

Of course, in order to be able to do this, the company will have to respond to market changes: Delta is working on business partnerships that will give it access to the most complex IT orders, so it can confidently take on higher value-added orders from Industry 4.0, or on the education, healthcare and digitalisation front in public administration. These objectives will be supported by the establishment of domestic supplier representation offices of prominent international partners and the acquisition of domestic development companies. In the latter area, the company's management is monitoring half a hundred potential acquisition targets on an ongoing basis. 

Delta Systems Ltd. is also a successful participant in public procurement procedures with IT content. The aggregate amount of framework agreements listed in the management forecast published in October 2022, amounting to approximately HUF 1 800 billion, is similar to the amount in the period of the current semi-annual report. At the same time, the expected calls for proposals under the digital sub-heading of the EU's Recovery and Resilience Facility (RRF) programme are being kept under review, as Delta's competences and past references are also assured for the programmes to be announced under the HUF 680 billion framework.

Delta Technologies also considers the opportunity for its subsidiary Delta Systems Ltd. to participate in the procurement procedures announced under the NATO Security Investment Programmes at its level of qualification as a result of the first half of the financial year. With the certification, the company has become one of the approximately 250 domestic companies that have NATO supplier capability.

In addition to increasing the order book, they are also looking for ways to deliver service delivery contracts that provide ongoing revenue more efficiently and at higher margins. Looking ahead, the report highlights that Delta Technologies Plc. Delta Systems Limited Liability Company, a wholly owned subsidiary of Delta Informatika Zrt. with 100%, is negotiating, with the support in principle of the Board of Directors, the acquisition of the profitable support business of New Line Kft. and the purchase of 100% of the share capital of Delta Informatika Zrt. and the simultaneous merger of Delta Informatika Zrt. into Delta Systems Kft.

The merger of the Subsidiaries into Delta Systems Ltd. was also completed at the time of the publication of the half-yearly report. The simplified company structure is designed to broaden transparency and support efficient operations by maximising synergies during organisational restructuring, cost efficiency and improvements, while speeding up the process of preparing financial reports, publishing them quarterly. The above will allow for a regular analysis of the Company's business processes, facilitating the reclassification of Delta shares from BSE Standard to BSE Premium and regular communication with fund managers as institutional investors.