During the year, cyber security services contributed 31% to the total turnover, and the implementation of cyber security solutions contributed 69%. In 2023, Safetech Innovations gained 14 new customers from the Romanian market.
Other operating revenues increased by 361% in 2023, up to RON1.6 million, the major share of these revenues representing subsidies for investments transferred into revenues and corresponding to the depreciation recorded for own solutions (non-reimbursable European funds project, completed in 2019).
In terms of expenses, in 2023, the biggest contribution was represented by employee benefits expenses, which increased by 16% compared to 2022, reaching RON11.5 million. The Company had 62 employees at the end of 2023, up from 50 employees at the end of 2022. The second major cost is the cost with merchandise, which increased by 71% compared to 2022, up to approximately RON10 million. This increase is driven by the larger size of the business and represents the cost of the implemented solutions.
Other operating expenses decreased by 15% in 2023, up to RON4.4 million. This category includes services performed by third parties, royalty expenses, management premises and rents, as well as postage and telecommunications charges. The decrease is also caused by not including the cost of goods in this category, while the other expenses, representing the costs with the equipment and licenses related to the project with EU funds, registered a lower level than those in 2023. The costs of raw materials and consumables also registered a decrease of 41% in 2023 compared to the previous year, up to RON7.1 million due to registering a lower turnover compared to last year.
Depreciation and amortization decreased by 24% in 2023 to RON2.4 million and represent fixed assets such as laptops, furniture, monitors, as well as a process automation solution, purchased in 2021 as part of the EU research and development project, necessary to carry out the activity in order to increase the company’s competitiveness. These elements generate expenses with monthly amortization, by amortizing them using the straight-line method. The category of provisions, worth RON121K, represent receivables from uncertain customers, whose maturity has exceeded 6 months or are facing insolvency.
At an individual level, the operating result reached RON11.1 million in 2023, a decrease of 5% compared to the previous year, mainly due to registering a lower turnover compared to last year.
Financial expenses increased by 12% compared to 2022, reaching RON225 thousand. At the same time, financial revenues decreased by 28% in 2023, up to RON115 thousand. Therefore, the gross result for 2023 was RON11 million, a 5% decrease compared to the previous year. The profit tax decreased by 5%, up to RON1.3 million in 2023, in line with the decrease in the gross result. Therefore, the net result at individual for 2023 was RON9.7 million, a decrease of 5% compared to the previous year.
At a consolidated level, where the results of the UK entity (Safetech UK) are included, considering that this entity did not record sales in 2023, the turnover is similar to that recorded at the individual level, and the net profit amounted to RON3.8 million, a decrease of 37% compared to 2022. Considering that the activity in the UK was not at the level we intended, following an assessment carried out at the end of 2023, which aimed to identify the means of accelerating the company’s development on the UK market, Safetech UK has adopted a new strategy, of focusing on a larger volume of contracts with lower value. At the same time, following the evaluation, we reorganized the respective entity, reducing expenses by 40%. We predict that the effects will be seen starting from Q2 2024, the company also said in its report. “2023 was a year characterized by ups and downs (…). In 2023, we were involved in multiple cybersecurity projects, registering requests for both our services and cybersecurity solutions. As we announced through current reports, in 2023, we signed three significant contracts with an approximate value of more than 4 million euros. However, the year could have been better. The first half of 2023 gave us confidence that we would have a year at least as good as 2022. But, starting from the second part of last year, things took an unexpected turn, with several reasons for concern, which have led to a decrease in requests for cybersecurity services and solutions or stagnation in the development of projects. Among these reasons, we list the discussions held throughout the past year at the legislative level regarding fiscal changes, as well as the ordinance regarding the reduction of expenses by public institutions. These elements had a direct and indirect impact on our revenues,” said Victor Gansac, Chairman of the Board of Directors and CEO of Safetech Innovations. The proposal of 2024 Income and Expenditure Budget envisages, at the consolidated level, total revenues of RON64.8 million and a net profit of RON13.1 million. Earlier 2024, Safetech signed recurring cybersecurity incident response and monitoring contracts with four new clients and estimates that in Q1 2024, it will record an increase in individual net profit by more than 100% compared to the same period in 2023. “Even if the financial results for 2023 were not in line with our expectations, looking ahead, we anticipate that things will look better in 2024. Cybersecurity challenges are becoming more complex and the need for cybersecurity services and solutions is intensifying. The beginning of this year is a promising one, with Safetech Innovations Romania signing recurring contracts for monitoring and responding to cybersecurity incidents with four new clients, until the publication of this report, as well as a significant contract announced this month, with a value of approximately RON3.6 million. Additionally, we would like to mention that 2024 has started very well and we have signed three projects with European funds, totaling RON4 million, through our involvement in various multinational consortia at European level. We also won a project with European funds at the national level, worth RON6.2 million and we will sign the contract in the following period,” added Victor Gansac. Safetech Innovations has been listed on the Main Market of the Bucharest Stock Exchange since February 6, 2023 and has a market value of RON165 million after its shares have lost 3.5% so far in 2024, amid deals worth RON11.3 million, as per stock market data. Safetech Innovations’ preliminary financial results for 2023, at an individual and consolidated level, are unaudited.