AD1 Holdings reports healthy end to FY20 underpinned by business realignment and cost cuts

AD1 Holdings ASX FY20 business cost cuts Prashant Chandra
The recruitment platform provider has posted a 74% rise in full-year operating revenue to $3.4 million.

Recruitment technology platform provider AD1 Holdings (ASX: AD1) has reported a healthy end to the 2020 financial year, providing it with a “strong foundation” for future growth.

In his annual letter to shareholders, AD1 managing director Prashant Chandra said the company’s decision to undertake a realignment in strategy during the year has accelerated the pathway to breakeven.

Key deliverables included integrating the Utilities Software Services (USS, acquired in 2019) revenue stream into the business to provide innovative and cost-effective solutions to the retail energy market.

USS has particular expertise in developing and integrating enterprise cloud-based platforms that automate customer billing, sales and market operations.

Its offerings include Software-as-a-Service (SaaS) platforms for billing, sales and price comparisons; customer self-service portals; utility information technology systems consulting and support; and business process outsourcing (BPO) services alleviating the need for customers to manage their own complex billing queries.

Strong foundation

AD1 sought to build a strong revenue foundation during the year by renewing its existing contracts, which included multi-year terms for the provision of its employment platform Managed Services Agreements with the New South Wales and Victorian governments.

“These are the two largest employers in the country and the NSW government, in particular, is our oldest customer,” Mr Chandra said.

“Their renewals demonstrate the strength of our relationship with clients as well as the confidence that both these organisations have in our service offering.”

New clients during the year included the Pharmacy Guild of Australia and iGeno, which contracted AD1’s employment platform solution and utilities services platform, respectively.

AD1 was selected as the preferred supplier for 3P Energy – a relationship which this month translated into a three-year Managed Services Agreement for the provision of AD1’s full suite of utilities SaaS solutions and related services.

“These contract extensions mean that [we have] retained all revenue-contributing employment platform customers, with almost 97% of the associated subscription revenue secured on multi-year terms,” Mr Chandra said.

Financial performance

AD1’s operating revenue for the year was recorded at $3.4 million, representing an increase of 74% on 2019’s figures.

Operating expenses reduced by $1.03 million (or 15%) while net losses reduced by $2.2 million (or 50%) on the same period.

AD1 raised $1.83 million in mid-2019 through a $650,000 private placement to cornerstone investor Smedley Family Office and an associated share purchase plan to help pursue its business strategy and for general working capital purposes.

Cost rationalisation

AD1 concluded a cost rationalisation program in December designed to better align its outgoings with current and expected revenue.

At the time of the program’s launch, Mr Chandra said the company expected to be able to meet its objective of “achieving organic breakeven” in the second half of the 2020 financial year and enter the new year on a cashflow positive run rate.

“We now have an optimised cost structure, which better aligns with our current revenue whilst ensuring the required bandwidth to deliver [our] organic growth strategy,” he said.

“We believe the full benefit of the optimised cost base will be seen in the second half of [financial year] 2020,” Mr Chandra added.

The success of the cost reduction program was demonstrated in June, when AD1 delivered its first ever cashflow positive quarter.

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