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Post-acquisition restructuring costs hit MOQ’s financials

Post-acquisition restructuring costs hit MOQ’s financials

Restructuring costs arising from 2016 acquisitions have come in at around $1,070,000

MOQ Limited (ASX:MOQ) spent more than $1 million on integration and restructuring costs during the financial year ending June, following its acquisitions of Tetran Group and Skoolbag last year.

In May last year, the publicly-listed integrator completed its acquisition of managed cloud services and professional services IT company, Tetran Group, in a bid to bolster its managed services capabilities.

Also in 2016, MOQ acquired education sector software-as-a-service provider, Skoolbag. A move likewise touted as helping to propel the company’s managed services and grow the commercialised IP base of the business.

Now, in its latest preliminary annual financial report – released on 30 August – the company has revealed that the non-recurring integration and restructuring costs arising from the acquisitions have come in at around $1,070,000.

This figure consists of $469,000 in implementing the new Service Management System, scheduled to be completed in Q1FY18, aimed at enabling improved business processes and scalability. It also includes $278,000 invested in integration activities, mainly in H1FY17, including marketing, travel and strategic planning off-sites to bring together the Tetran and MOQdigital teams.

The costs tally also consists of $323,000 due to restructures to some of the professional services practices, as well as the departures of some members of the senior management team, who have not been replaced.

“Whilst revenues and market presence grew substantially in FY17, operating performance for the year was impacted by the significant investment and re-shaping of the merged operations,” the company told investors.

On the upside, MOQ said that it has seen an almost 100 per cent Tetran client retention rate since the acquisition.

Despite the costs incurred by the acquisitions and the resulting integration efforts, MOQ saw considerable growth during the year.

The company enjoyed a 62 per cent year-on-year increase in revenues, to $54.9 million, and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.8 million.

However, after costs, the company posted net post-tax profit (NPAT) of just $100,976. It should be noted that this result was a substantial turnaround from the previous year’s NPAT loss of $534,604.

The company’s individual business segments also enjoyed substantial revenue growth during the year, with recurring services revenue growth of 123 per cent, to $10.8 million, professional services revenue growth of 40 per cent, to $15 million and technology sales revenue growth of 58 per cent, to $29.1 million.

The financials come after a year of top tier changes for the company, with consolidation in the company’s management team seeing the departure of some senior management personnel.

One of those to depart was the company’s former CEO, Nicki Page, with the industry veteran exiting the cloud integrator after over two years in the hot seat. Effective 31 May, Page was replaced by former COO, Joe D’Addio, as managing director and CEO.

At the same time, key personnel additions to the NSW business were made in a bid to enhance the company’s go-to-market and service delivery capability and capacity, positioning for FY18.

“FY18 now represents an opportunity for the company to continue with its strategy to develop, build and acquire complementary cloud focused technology businesses to pursue suitable growth opportunities by either organic investment or through synergistic acquisitions in the technology sector,” the company said.


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Tags MOQ LimitedJoe D’AddioMOQdigitalNicki Page

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