Publicly-listed IT services provider MOQ Limited has posted a net loss after tax of $14.5 million for the year ending 30 June, with the company’s financials impacted by costs and impairments associated with prior acquisitions.
The company’s net profit after tax (NPAT) tally saw a 733 per cent year-on-year decline, while revenue for the year fell by 4 per cent, to just under $65.2 million.
A big factor in the latest figures was the company’s decision to fully impair the goodwill related to its past acquisitions of Tetran and Skoolbag due to the uncertainty around the impacts of the COVID-19 pandemic. The impact of this impairment was $13.3 million. to the results.
At the same time, the company also incurred losses in abnormal amortisation costs, merger and acquisition advisory costs and integration costs related to its $7.5 million acquisition of Wardy IT in August last year.
On the upside, reported pre-impairment earnings before interest, tax, depreciation and amortisation saw an increase, to around $2.9 million, compared to the previous year’s $1.3 million.
The company told shareholders that the reporting period for FY20 featured a “unique event in the shape of the COVID-19 pandemic” and, as such, the company’s year became a story of two distinct experiences.
The first ‘experience’ was the initial eight-month period to the end of February 2020, in which the company’s focus was on completing and integrating the Wardy IT Solutions acquisition and reshaping the MOQdigital business to further pivot to-wards the high growth digital services market, which was one of the company’s primary focuses during the period.
The second ‘experience’ revolved around the COVID-19 pandemic period from March to June 2020, essentially the final third of FY20, a period in which the company’s customers were faced with a range of pressures and uncertainty, resulting in a hesitation to commit to major long-standing projects. This factor majorly impacted the company’s traditionally stronger finish to a financial year and hence its profitability.
“MOQ entered the COVID-19 pandemic period whilst in the middle of a concerted restructuring and cost reduction exercise,” the company told shareholders in a statement. “Additionally, we were receiving the benefit of onboarding of the Wardy IT Solutions business, which had continued to perform well post acquisition.
“These two positive actions in H2 of FY20, along with the federal government’s JobKeeper Program, would prove to be major assets as we navigated the COVID-19 period downturn.
“Bookings and Revenues dropped significantly through March and April, as customers deferred plans to acquire technology or invest in major projects and initiatives. The initial negative impact on profitability and our cash flow position was significant.
“The resulting substantial drop in revenue, mainly in technology sales, resulted in MOQ Limited’s Australian based operating entities qualifying for the JobKeeper program,” it added.
However, the services side of MOQdigital’s business was not as dramatically impacted as its technology sales revenues. The company’s managed services revenues remained steady and relatively reliable with minimal negative impact, while professional services, despite being initially impacted, recovered to pre COVID-19 levels by June 2020.
Looking ahead, the company said it was pleased to report that business performance for the start of FY21 has been positive with many of its customers residing in low impact vertical markets, such as government, education, utilities, mining and financial services, continuing their investment cycles which had been stalled by COVID-19.
At the time of writing, the company was seeing new or additional requirements for technology solutions and services to assist customers with adjusting to the remote work environment that is not only necessary but becoming part of the ‘new normal’.
Digital Transformation initiatives, meanwhile, are restarting or continuing, as customers determine that much of this investment is also necessary to maintain competitiveness, ensure cost reduction or business improvement, regardless of COVID-19.
Additionally, a growing number of customers have taken the decision to reduce headcount in their businesses, and this has impacted their ability to service their own ongoing IT requirements.
“This will become an emerging market opportunity over the next six to twelve months,” the company said.
Broadly, the general market for adoption of cloud services such as Microsoft’s Azure is accelerating at double digit growth rates through the pandemic period and into the foreseeable future. This is resulting in increased professional and operational services opportunities for providers such as MOQ, it said.