SLI Systems shares drop 4%, extending slide to new record low

SLI Systems shares dropped 4%, taking the stock to a new record low, as investors remain cool on the prospects for companies chasing rapid growth in foreign markets.

The shares fell 2c to 48c, and have slumped 44% since the e-commerce software seller reported a narrower annual loss in August as it overhauled its business in the wake of losing three major customers. SLI has hired a new chief executive and appointed three other senior managers to address the decline in revenue, with a view to getting the company back on track in the current financial year.

"With a new chief executive and changing a few things, that might take a bit more time to gain more direction for that company," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "They lost a big customer or two as well so investors are marking it down but when you look at the volumes there's not much there."

SLI narrowed its annual loss to $162,000 for the year to June 30, from a $7.55 million loss in the previous year, and while revenue was up 25% to $35 million, annualised recurring revenues – a key metric for software-as-a-service firms – fell to $31.2 million from $34.6 million as a result of the lost customers and the strength of the kiwi dollar.

Since reporting on August 25, SLI has filed its annual report and notice of annual meeting, where chairman Greg Cross and co-founder Shaun Ryan will be up for re-election to the board at the November 4 gathering.

SLI went public in 2013, selling shares at $1.15 apiece to raise $27 million to fund its international growth aspirations. It was one of eight software or high-end hardware developers to join the NZX in 2013 and 2014, of which just cinema software and analytics developer Vista Group International and utilities and airports software maker Gentrack Group are trading above their offer price.

Williamson said SLI was one of a number of companies seeking to rapidly build the business at the expense of short-term profits that had fallen out of favour with investors in recent times, name-checking intelligence software developer Wynyard Group, whose shares have plunged to 18.5c from the $1.15 price in the 2013 initial public offering.

"SLI just hasn't quite achieved the significant growth that these types of companies need to get to cashflow positive and investors are always worried if they don't achieve it," he said. "The market is either very hot or very cold with these types of companies, and it's particularly cold at the moment."

(BusinessDesk)

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