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SLI Systems posts maiden profit as weaker kiwi bolsters export revenue

Tuesday 28th August 2018

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SLI Systems says it won't stop chasing high margin growth overseas to keep its books in the black. 

The Christchurch-based software developer reported a maiden profit of $4 million in the 12 months ended June 30, turning around a loss of $1.9 million a year earlier. Revenue rose 7 percent to $33.8 million, buoyed by foreign exchange gains. SLI accelerated cost-cutting, trimming 9.9 percent from operating expenses to $11.8 million and reducing its wage bill 9.3 percent to $18.6 million. 

Annual recurring revenue, a favoured measure among software-as-a-service companies, was flat at $33.6 million in constant currency terms. Gains in the Asia Pacific region and the UK offset declines in North America and South America. The company generates about half its revenue from the US, and over the course of the year the kiwi depreciated 7.9 percent against the greenback. 

"We are pleased with the progress we have made building the financial strength of the company and making good our commitment not to seek new equity from investors," chief executive Chris Brennan said in a statement. "We are achieving this by scaling back spending on sales and marketing and closely aligning any expenditure not linked with new product development to our immediate growth expectations and customer retention."

The e-commerce software seller changed strategy to a greater self-service model where customers can more easily build their own capabilities as retailers facing the pinch refrain from deploying a number of different technologies at once. 

SLI is still chasing high margin customers overseas, and Brennan said that means short-term profit will remain uncertain. 

"The company is focused on delivering its new product range and our goals are long-term growth in high margin recurring revenue rather than short- to medium-term profit," he said.

The software developer will release new cloud-based products in the 2019 financial year, but is running "slightly later than originally expected" due to the European Union's new data protection regulations and the company's own shift in strategy. 

SLI generated an operating cash inflow of $3.7 million, compared to an outflow of $792,000 a year earlier. That helped boost cash and equivalents to $9.1 million as at June 30. 

SLI shares fell 9.1 percent to 30 cents, trimming their gain this year to 50 percent. It is the sixth-biggest gainer on the S&P/NZX All Index, but still well down from the $1.50 sale price in its 2013 initial public offering. 


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