SLI Systems delays start for self-service model, still on track for profit

SLI Systems shares rose 3.2 percent to 32 cents, and have climbed from a record low 18 cents in December.Photo: Getty Images

SLI Systems has delayed the start of a cheaper self-service model, although the e-commerce software developer’s cost-cutting measures to prepare for that strategy is likely to ensure it achieves a profit this year.

The Christchurch-based company had planned to roll out a suite of self-service products by June 30 but said today it has encountered bigger than anticipated hurdles and now doesn’t see the products launched until 2019.

Cost cutting to prepare for the new products helped SLI achieve a profit of $1.1 million in the six months ended Dec. 31 and today the company said second-half profit was expected to exceed $1.1 million, implying annual profit will be more than $2.2 million. It reported a loss of $1.9 million in 2017.

Annualised recurring revenue – a favoured sales measure for software firms – is expected to be similar to the $31.1 million reported in 2017.

SLI expected the new strategy to deliver bigger profit with a broader available market and cheaper service costs, as retailers take a more hands-on approach in running their own e-commerce channels.

“Although we have made progress, we have found the challenges have been greater than we expected,” chief executive Chris Brennan said in a statement. “We remain positive that our new strategy is the correct decision to restore a higher level of sustained growth and we continue to develop and validate our plans.”

The new strategy follows the installation of a new executive team at the software firm which has struggled to gain traction since going public in 2013.

“With SLI transitioning to a new self-service product strategy, we have scaled back sales and marketing expenditure and consequently we have seen our steady stream of high-margin annualised recurring revenue generate profits and cash,” Brennan said. “Cash generation and profitability has also been enhanced by initiatives to improve customer satisfaction and operating efficiency.”

SLI said second-half net cash inflow will be higher than $793,000 reported in the six months ended Dec. 31, implying an annual inflow of about $1.6 million, compared to an outflow of $1.1 million in 2017. That’s forecast to give the software developer more than $8 million in cash as at June 30.

The shares rose 3.2 percent to 32 cents, and have climbed from a record low 18 cents in December. The shares were sold at $1.50 a piece in SLI’s May 2013 initial public offer, when it raised $27 million, of which $15 million was new capital which was used to hire sales and marketing staff, expand into new markets and develop new products.

The company said it will update that outlook when it reports its annual result in August.

(BusinessDesk)