GeoOp: Oops, we released the wrong report

Oops. GeoOp [NZX: GEO] says it released the wrong half-year report on Friday.

It is now backing off a break-even date mentioned in the report (the second half of 2017) and from up to 15% in cost savings from "synergies" with its new acquisition, Interface IT.

In a statement to the NZX Alternative exchange, the workforce management app maker says "Due to human error, an early draft of the chairperson and chief executive officer report was included within the Interim Report ... The draft incorrectly posted to NZAX contained certain forward-looking assumptions relating to potential cost synergies and a target break-even date. These were modified or deleted in subsequent drafts."

While the company has painted it as a simple human error, tech commentator Ben Kepes is less forgiving, saying "Heads should roll. This is an absolute embarrassment for the entire local technology industry."

The two statements included in error were:

The combined entity is expected to reach break-even in the second half of 2017, with a significantly reduced cash outflow over 2016 and the first half of 2017, as a result of the transaction.

GEO notes that 10-15% cost-out synergies and realisable revenue synergies have been identified between its business and that of Interface IT, its proposed acquisition, and that the combined entity is expected to have significantly reduced cash requirements and time to break even. GEO has now commenced a detailed three month internal merger analysis to guide its operational decisions and to plan future cash flows.

On Friday, GeoOp narrowed its first-half loss as revenue nearly doubled, and said it had bought Australian mobile sales application developer InterfaceIT.

The Auckland-based company reported a loss of $1.8 million, or 5.77c per share, in the six months ended December 31, it said in a statement. GeoOp changed its balance date last year and compared its latest result to the six months through September 30, 2014, when it reported a loss of $2.7 million, or 23.9c per share.

Revenue nearly doubled to just over $1 million from $529,000 in the 2014 period, while expenses decreased 10% to $1.9 million. The company's latest result was bolstered by $284,000 in grants from government-funded Callaghan Innovation, compared with the previous period when it didn't receive any.

The company is counting on capturing market share through the growing use of smartphones, where its app can be used by small and medium-sized enterprises to manage their workforces.

In the six months to December, GeoOp said it developed partnerships with US-based App Direct and IT solutions company MyCloudCure, improved integration with MYOB and Intuit Quickbooks, and launched its own payment software, GeoPay.

"In addition to both improved top line and bottom line results, GeoOp added underlying strength to its future prospects over this period," chief executive Anna Cicognani said. "The integration with MYOB and partnerships with MyCloudCure and TradeBusters have been key for us to reach deeper into our target market, as well as adding GeoPay, our on-the-spot payment and collection system."

At balance date the company had $2.7 million in cash, from $1.5 million in the comparable period. It gained $2.5 million from a capital raising followed by a share purchase plan which raised another $628,000.

Separately, the company announced it has bought InterfaceIT for $9 million in scrip and convertible notes, dependent on shareholder approval. The purchase price may increase based on the performance of the merged entity over the 12 months following completion.

The Australian company provides cloud-based programmes for managing in-field, face-to-face sales teams. Its customers include Trustpower, Australia's Simply Energy, Aussie Farmers Direct and Telstra, and SunRun in the US.

To pay for the purchase, GeoOp will issue $6 million of shares at 40c per share and three million unlisted convertible notes at a face value of $1 each to InterfaceIT. The notes accrue zero interest and can be converted at the 90-day volume weighted average price or repaid two years after completion.

GeoOp's NZAX-listed shares were unchanged at 38c and have dropped 5% so far this year.

InterfaceIT is a joint venture between entrepreneur Jordan Muir and merchant bank North Ridge Partners. GeoOp said InterfaceIT's shareholders could end up with a maximum holding of 30.47% in GeoOp though that's also subject to the performance adjustment.

"We look forward to welcoming the stakeholders in InterfaceIT, who have a successful track record in active technology investing, as future shareholders in GEO," Ms Cicognani said. "We expect they will bring additional capability to the business and help drive its journey to profitable growth."

On a pro forma basis, GeoOp and InterfaceIT would have reported a loss of $4.2 million loss in the December period on revenue of $4.3 million. The companies have agreed to continue a cost reduction plan within the first 12 months of the two entities being operationally combined.

The company also announced the resignation of director Jodi Mitchell. Mitchell became a director in August 2014 and said she remains very supportive of the direction the company is taking.

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