Jayride’s strategic review to deliver $3.75m in annual cost savings

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By Imelda Cotton - 
Jayride ASX JAY investor presentation

A strategic review of operations by airport transfer business Jayride Group (ASX: JAY) has delivered a 44% reduction in fixed costs, saving the company $3.75 million per year and shortening the pathway to becoming cashflow positive.

The review was initiated in November to focus on near-term profitability with higher margins, as well as advancing opportunities for acquisitive growth.

It has generated fixed cost reductions, a new pricing strategy, operational efficiencies and improved relationships with suppliers.

Initial impacts are expected to be seen by the third quarter of this financial year, with full realisation of a reduced cost base by year end.

The cost-saving activity is not expected to materially impact the company’s ability to achieve future growth.

Strategy shift

Jayride has committed to targeting segments with higher margins and lower average orders, while abandoning the “anyone, anywhere” approach.

It will move to a “net plus” pricing model, avoiding highly-commoditised segments and improving contribution margins per trip and will also work closely with transport partners to deliver technology and process improvements and improve net rates.

Testing of the new pricing strategy in February is reported to have triggered a material improvement in contribution margins with only a marginal drop in trip volume across direct and partner channels.

Management change

Executive chair Rod Cuthbert welcomed the review at a time when Jayride was experiencing a management change.

“A strategic review captures the opportunity that a change in leadership presents to work towards improved outcomes and will help us align and focus on the most expedient path to profitability and self-sustainability,” he said in November.

“We are in a challenging position — our plans to build booking volumes through major online partnerships have so far delivered bookings with unattractive margins, while our go-to market in the US and European agency channels has yet to result in the momentum we had expected.”

Sharpened focus

The review was intended to sharpen focus and reduce overheads, with a ground-up assessment of the company’s core strategy and operating structure, as well as the market fit of its offerings.

“Jayride’s approach to date has been overly broad — encompassing business-to-business, business-to-customer and business-to-business-to-customer offerings – seeking the largest addressable market, rather than a directed approach which targets the markets where we are confident in developing a competitive advantage across multiple geographies,” Mr Cuthbert said.

“Our decisions around future investment will be driven by this more focused approach.”