Senetas Faces Timing Risks Despite Narrowed Loss and Strong Cash Position

Stable Revenue Despite Regional Challenges

Senetas Corporation Limited (ASX: SEN), a specialist in high-assurance encryption technology, has reported a half-year loss after tax of $557,791 for the six months ended 31 December 2025. This represents a significant improvement from the $1.92 million loss recorded in the previous corresponding period. Revenue remained largely unchanged at $9.48 million, reflecting steady demand across its core markets.

Growth in the Asia Pacific and Europe, Middle East & Africa (EMEA) regions was notable, with Asia Pacific sales up 42% and EMEA up 33%. However, softness in the US commercial market tempered overall performance, despite a solid government and defence sector presence.

Middle East Sales Delay and Expected Boost

A key factor impacting the half-year results was the delay in completing a large Middle Eastern sale due to export permit issues. This transaction, valued at $1.3 million in revenue and expected to contribute $1.0 million in profit before tax, is anticipated to close in the March quarter of 2026. Completion of this sale is expected to materially enhance Senetas’ second-half performance.

Operational and Strategic Highlights

Gross margins were temporarily compressed due to a sales mix skewed towards lower-margin inventory transfers and increased materials and support expenses. Despite this, the Senetas operating segment reported a net profit after tax of $1.8 million, up from $1.6 million in the prior period.

Senetas continues to invest in sovereign encryption capabilities, which are increasingly in demand in Asia and the Middle East. The company is also advancing its post-quantum encryption technology and developing next-generation hardware encryptors to broaden its product range.

During the period, Senetas announced a strategic alliance with Nokia to deliver integrated encryption solutions tailored for mission-critical network environments. This partnership combines Senetas’s quantum-resistant encryption with Nokia’s Defence-in-Depth cybersecurity framework, positioning both companies to address evolving security demands.

Capital Management and Balance Sheet Strength

Senetas completed a $2 million capital return to shareholders and a 100:1 share consolidation in late 2025, reducing the number of shares on issue to approximately 16.6 million. The company ended the half with $6.7 million in cash, expected to rise to around $15 million in March 2026 following receipt of proceeds from the sale of its former Votiro business.

The balance sheet remains robust with net assets of $43.9 million and no debt in the operating business. Senetas’s investment in Menlo Security Inc., valued at $31.4 million, represents a significant growth asset with potential for further value creation.

Outlook and Market Positioning

Looking ahead, Senetas expects revenue and profit growth in FY2026, driven by expanding sales momentum and new opportunities in Asia, the Middle East, and South America. The timing of large contract completions remains variable, but successful closures could underpin a strong full-year result.

The company’s focus on expanding security certifications and bespoke sovereign encryption products aims to unlock new markets and use cases. Meanwhile, ongoing capital management initiatives will be guided by cash flow and market conditions.