IkeGPS narrows annual loss through sales growth, trimmed wage bill

IkeGPS chief executive Glenn Milnes. Photo / File

IkeGPS, the unprofitable laser measurement tool maker, narrowed its annual loss after lifting sales 37 per cent and cutting a fifth from its wage bill, and is optimistic positive cash flow generated in the fourth quarter will persist, meaning it won't need to raise more capital.

The Wellington-based company reported a net loss of $6.7 million, or 9 cents per share, in the 12 months ended March 31, compared to a loss of $10.6m, or 18 cents, a year earlier, it said in a statement.

Operating revenue rose to $7.7m from $5.7m, with sales of the firm's IKE4 product beating expectations while its Spike tool fell short of forecast.

IkeGPS cut 19 per cent from its wage bill to $6.5m, with a smaller spend on research and development, helping cut operating costs 18 per cent to $10.8m.

The company's operating cash outflow narrowed to $2.8m for the year from a $9m outflow in 2017, and ikeGPS said cash flow was positive in the final three months of the financial year, a position it expects to keep through the 2019 year. It held cash and equivalents of $2.6m as at March 31, including a $4m share placement to investors last August.

"FY18 was a positive period for our business with all key performance metrics improving significantly against FY17," chief executive Glenn Milnes said.

"We believe that FY19 can be a stronger period again for both the IKE4 solution in the US communications and electric utility market and for the Spike solution in the signage and geospatial markets."

The company expects to lift annual sales by more than 30 per cent again and keep operating costs flat, leading to earnings before interest, tax, depreciation and amortisation breaking even.

Despite the optimism, the board acknowledged its status as a 'going concern' relied on a base business plan where sales keep growing and costs are kept down, and if the operating cash outflow persisted, ikeGPS would need to raise additional capital or find new funding.

The directors said the firm has scope for deeper cuts to spending. A stress test of the 2019 plan, reducing forecast sales by 15 per cent and expenses by $428,000, would still keep ikeGPS as a going concern, albeit with less cash. The directors said they believe they'd be able to raise more capital if needed.

Auditor PwC noted that 'material uncertainty related to going concern' in its report, saying if ikeGPS doesn't achieve the business plan, and achieve forecast sales growth in particular, it might not be able to meet its obligations as they fall due. The auditor assessed group materiality at $400,000, or 5 per cent of the firm's three-year average pre-tax loss.

The shares last traded at 59 cents, and have jumped 40 per cent so far this year, making it the sixth best performer on the S&P/NZX All Index.