EOS H1 Revenue Drops 58%, Gains $90.5m from EMS Sale, Backlog Hits $307m

Financial Overview

Electro Optic Systems Holdings Limited (ASX, EOS) reported a mixed half-year result for the period ending 30 June 2025. The company’s continuing operations saw revenue plunge by 58.2% to $44.1 million, driven largely by the completion of a significant Middle East contract. This revenue contraction contributed to a loss after tax of $44.8 million from continuing operations, a marked deterioration from the prior year’s $10.8 million loss.

However, the group’s overall profitability was buoyed by the divestment of its EM Solutions Pty Limited subsidiary in January 2025. The sale generated gross proceeds of approximately $160 million and a gain on sale of $90.5 million, substantially offsetting the operating losses and resulting in a total net profit before tax of $46.1 million for the group.

Operational Segments, Defence and Space

EOS operates two core divisions, Defence Systems and Space Systems. Defence Systems revenue fell sharply by 61.8% to $38.8 million, reflecting reduced activity after fulfilling a longstanding Middle East contract. Despite this, the division secured a landmark new contract to deliver High Energy Laser Weapon technology to a European NATO member valued at €71.4 million (approximately A$125 million), with delivery scheduled between 2025 and 2028.

Meanwhile, the Space Systems segment demonstrated resilience, with revenue rising 28% to $5.3 million. This growth was supported by ongoing contracts with the Australian Defence Force and new agreements with European customers, including a €3 million contract for precision optical equipment.

Contract Backlog and Market Outlook

As of 22 August 2025, EOS reported a contract backlog of $307 million, nearly doubling from $170 million at the end of June. This backlog includes the recent laser weapons contract and other significant orders, positioning the company for revenue growth in the second half of 2025 and beyond.

EOS continues to pursue multiple opportunities globally, including advanced negotiations for a $100 million remote weapon system contract with Hanwha for Australia’s Land 400 Phase 3 project. The company also highlighted growing demand for counter-drone technologies and next-generation remote weapon systems, with new product launches incorporating AI and enhanced lethality.

Balance Sheet and Cash Flow

Following the EMS divestment and early repayment of all borrowings to Washington H. Soul Pattinson, EOS is debt-free with cash and term deposits totaling $130.3 million at June 30, up from $52.3 million at year-end 2024. Operating cash outflows narrowed to $9.2 million, a significant improvement from the prior period’s $30.6 million outflow.

The company also disclosed an offset credit obligation related to a joint venture in the Middle East, involving local manufacturing of remote weapon systems. EOS is in compliance with this commitment, which is secured by a $25.9 million cash deposit guaranteed by Export Finance Australia.

Looking Ahead

EOS’s outlook remains cautiously optimistic. The company expects 2025 revenue to be weighted towards the second half, driven by contract backlog execution and new contract awards. While the defence market’s inherent unpredictability and contract timing pose risks, EOS’s strengthened balance sheet and robust pipeline provide a solid foundation for growth. The company will continue to update the market as contracts progress and new opportunities materialize.