Investment Matters

Company News: Paragon, Threat Protect and TZ Limited

Paragon Care

Paragon Care’s result represented a period of transition, in which the company bore the costs of implementing the consolidation of its IT systems, divested its legacy capital business and integrated a number of acquisitions it has recently made.

Underlying operating earnings were $28.2m (from its continuing business), in line with its revised guidance given in February.  The company grew its revenue by 5% (excluding its most recent acquisition: Total Communications) with its gross margin declining slightly (40% vs 41% in the pcp).

Paragon’s continuing businesses made a net profit of $8.7m over the period.  However, statutory net profit was -$23m over the period.  As a result, the company elected to not pay a final dividend.

The statutory loss was largely attributable to its legacy capital equipment business (sold to Cabrini Health in June) which was a significant detractor from performance for FY-19, along with impairments to software and amortisation of a contract.  We therefore see statutory net profit normalising in the new financial year.

There remains to be further efficiencies to be garnered from the integration and rationalisation of its businesses, with the company identifying a further $6.5m in costs improvements which it aims to achieve over the next 18 months.  Furthermore, there remains significant potential for the company to grow its revenue through expanding its customer base and product offering.

paragon care

Threat Protect

Threat Protect completed two major acquisitions during the year, including the acquisition of monitored lines from Monitored Security Systems Pty Ltd (MSS) and a substantial ($35.8m) acquisition in Onwatch, a similar security monitoring and alarm business. 

As part of these acquisitions the company has significantly grown its customer base and expanded its geographic presence.  In addition, it expects to achieve significant synergies in management cost overheads and control room operations.  In the interim, it has carried these costs, in addition to integration costs which have had an impact on its bottom line in FY-19.

The company grew its revenue in FY-19 by 34% to $19.7m (albeit its run rate of revenue is higher, as this result does not reflect a full-year contribution from both the MSS and Onwatch acquisitions). 

It reported an adjusted EBITDA (earnings before interest, tax and depreciation) of $2.9m in FY-19, after allowing for one-off and non-cash items, in comparison to $1.4m in the previous period.  We expect its ongoing profitability to improve as it realises further scale benefits, bedding in previous acquisitions (and as associated integration costs dissipate).

Threat Protect

TZ Limited

TZ demonstrated a loss for the year, as it continues to work towards achieving profitability through building scale.  The company’s overall revenue increased marginally in FY-19 in comparison to FY-18.  Revenue growth was strongest in Asia and EMEA (Europe, the Middle East and Africa), with growth of 34% and 3% respectively while sales in Australia and the USA declined.

The company underwent a major restructuring over the period, including that of its US operations (which constitute a majority of its revenue) and reduced overheads in Singapore and Malaysia.  These actions, along with remediation issues and organisational changes impacted profitability but are expected to deliver significant savings in FY-20.

TZ continues working towards increasing its market presence and awareness, on the back of its track record, having delivered solutions to many of the world’s largest brands.

TZ