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Why the Damstra (ASX:DTC) share price is crashing 11% lower today

The Damstra Holdings Ltd (ASX:DTC) share price is under pressure on Friday and down 11%. Here’s why its shares are crashing lower today…
The post Why the Damstra (ASX:DTC) share price is crashing 11% lower today appeared first on The Motley Fool Australia. –

man looking down falling line chart, falling share price

The Damstra Holdings Ltd (ASX: DTC) share price is out of form on Friday and tumbling lower.

In afternoon trade, the integrated workplace management solutions provider’s shares are down over 11% to $1.18.

Why is the Damstra share price down 10%?

There have been a couple of catalysts for today’s decline in the Damstra share price.

The first and main catalyst is the market selloff, which has been particularly severe in the technology sector.

So much so, the S&P/ASX All Technology Index (ASX: XTX) is down almost 5% this afternoon. This compares to a 2% decline by the benchmark S&P/ASX 200 Index (ASX: XJO).

What else happened?

In addition to this, this morning Damstra released its half year results, which may have fallen short of some investors’ expectations.

For the six months ended 31 December, Damstra reported a 29.6% increase in revenue to $13.3 million.

However, despite this strong top line growth, the company’s pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 4% to $2.5 million. This was driven by the company’s acquisition of the loss-making Vault Intelligence business during the half.

This ultimately led to Damstra posting a loss after tax of $5.5 million for the half.

At the end of the period, the company had a cash balance of $7.5 million and no debt.

Management commentary

Damstra’s CEO, Christian Damstra, commented: “Damstra has performed very well in the first half of FY21, despite some external challenges, and we continue to execute on our strategic growth agenda. We are particularly pleased with the benefits from the Vault acquisition. What was a loss-making business has been seamlessly integrated with minimal impact on our underlying financial performance.”

“Our Gross Margin increased to 75% and EBITDA margin was maintained above 20% (at 21% compared to 25% in the PCP), demonstrating earnings leverage from increased scale. This was most clearly shown during Q2 where the rate of increase in costs was less than half the rate of increase in revenue. Looking forward, we are confident that structural costs will continue to rise at a rate of less than half that of revenue.”

Outlook

Mr Damstra revealed that the company’s growth has accelerated since the end of the half.

“Pleasingly, we are now seeing growth accelerating, building on our positive Q2 momentum. January unaudited revenue was up 61% on PCP and we expect this positive trend to continue. COVID did impact some of our client operations, particularly in the northern hemisphere, which in some instances slowed contract signing and onsite installation of our product solutions. Importantly we did not lose any clients as a result of COVID and activity levels are beginning to return.”

Despite today’s decline, the Damstra share price is up 21% over the last 12 months.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Damstra (ASX:DTC) share price is crashing 11% lower today appeared first on The Motley Fool Australia.

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