SLI Systems curbs full year loss, regroups as recurring revenues fall

E-commerce software seller SLI Systems [NZX: SLI] narrowed its annual loss, reflecting cost containment during a restructuring following the loss of three major customers.

The Christchurch-based company posted a $162,000 loss for the year to June 30, from a $7.55 million loss in the previous year, it said in a statement. Revenue increased to $35 million from $28.1 million, but the key metric for the company's future success - annualised recurring revenues - fell to $31.2 million from $34.6 million after two major customers became insolvent and another took its e-commerce functions in-house.

As a result, the company's customer retention rate by value fell to 84 percent from 87 percent the year before, although gross margin on sales improved to 77 percent from 74 percent.

The strength of the New Zealand dollar against both the US dollar and the British pound also saw ARR fall 10 percent on a reported currency basis, with those two markets responsible for 64 percent and 21 percent of sales respectively.

After a change of chief executive and the appointment of three new senior executives, "SLI has put in place new business processes and organisational structures to lift the performance of the business for the long term," chairman Greg Cross said. The company remained top-ranked by the Internet Retailer website as "most chosen SaaS (software-as-a-service) search provider to the USA's top 1,000 online retailers", of whom 83 are SLI customers.

The restructuring would lead to an "appropriate growth trajectory" and "prevent the unfavourable performance events that have weighed on ARR in recent periods," said Cross, who forecast "a return to growth in ARR in the current financial year".

By conserving cash during the sales downturn, the company had achieved a temporary net cash inflow for the year of $1.18 million, compared with a $5.81 million outflow the previous year.

"We expect net cash outflows in the coming year as we return to a growth trajectory," he said. SLI shares closed yesterday at 80 cents and have risen 2.6 percent since the start of the year, having listed in May 2013 at $1.15 and trading as high as $2.85 a share in January 2014. The company is not yet paying dividends.

New customers won in the period include the Australian department store David Jones and UK stationery retailer WH Smith in the UK.

Chief executive Chris Brennan said SLI was "shifting our marketing to be far more focused and our sales model more aligned to with contemporary sales models in SaaS businesses, driving toward more efficiencies and more typical economic metrics".

At balance date, the company held cash balances of $6.8 million, which directors said were sufficient to meet its growth plans.

(BusinessDesk)

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