Dear fellow shareholders,
Please find enclosed unaudited accounts for the six-month period ending 30th September 2017. These results show a small operating profit, but a minor loss when fund-raising costs are included, which is in line with the projection given at our AGM. We expect the 2nd half of the financial year to be significantly stronger, as we already have a full order book from both repeat and new customers. Our biggest issue at present is producing the instruments we have orders for.
The major event in our business over the last six months was the $7.5m capital raise of new equity which was strongly supported by both existing and new shareholders. This will result in a step change as we configure our business for the rapid growth we expect. While we have been profitable and growing for a number of years, we have had to manage Syft conservatively to prove our business as previous unrealised promises had eroded investor confidence. This cautious mode of operation has had a large opportunity cost given the size of the potential pie.
Syft has the potential to be a large and very profitable company. We operate in a multi-billion dollar market and our financial success over the last four years highlights the validity of our technology and business model. However, for us to be truly successful, we need to make greater investment in sales, marketing and customer driven development.
There are other benefits of this capital raise. New sophisticated investors come with high expectations both around profitability and governance which forces us to work harder to achieve greater success. They also require greater transparency and reporting, and this increased discipline will result in a better company overall.
Coinciding with the capital raise is the increase in governance through the addition of two new directors. One is myself as I move from CEO to the role of Managing Director, and the other is Martin Goldfinch. Martin is the fund manager at ACC responsible for Private Equity investments and is very well respected in the investment community. He has been a strong supporter of Syft since our 2013 recapitalisation and his advice/mentorship has already added a lot of value for Syft. This influence will only increase in his new official capacity.
Analysing our results further highlight the financial benefits that will accrue from the increased funding.
Gross margin is higher than last year but less than projected. There are two reasons for this:
- Higher production costs due to our Dual Polarity Ion Source. This has been more successful that we envisaged, but we have incurred additional production costs, mostly in labour as more development is currently required to optimise the manufacturing process. We expect to be able to reduce these costs in the future.
- Less direct sales as we have put less people in market than predicted.
These issues are now being addressed as fund raising has given us access to greater resources.
The constraint to growth for Syft is talented people. While Syft staff numbers have grown significantly in the last 12 months, we are still severely under-resourced. We have more opportunities than we can service, more profitable development opportunities that we can’t complete, and instrument orders that pressure our manufacturing process. Increased funding has enabled us to be more aggressive on recruiting. There is still a lag as it takes time to recruit and train the best people, but we have now we have started the process.
I have just returned from Europe where we held a large Vehicle Interiors Air Quality (VIAQ) symposium with over 100 attendees. This was a fantastic, well organised event which really raised the profile of Syft in Europe and will likely lead to a number of sales, now and in the future. This show highlighted to me how much Syft has changed over the last few years as we now compete against the best on a world stage and is a portent of where Syft is heading.
During this visit we also finalised the opening of our European office as we move more people into in-market positions. We are also in the process of opening a US and Asian office over the next 12 months and my expectation that in three years time, Syft will employ more people outside New Zealand, than within. While Syft will always remain a New Zealand company, the simple fact is that over 99% of our sales are overseas and having people in these markets will help us grow faster.
Finally, we have added another New Zealand office, just around the corner from our existing office in Craft place due to our rapidly growing work force. The challenge for us at Syft is to maintain and grow the same vibrant culture that has been so instrumental in our success, in multiple locations throughout the world.
I am very excited about our Company’s future and now that we are well financially resourced, we are in a very strong position to streamline our processes and capitalise on the enormous opportunities we see in the market place with our ultimate destiny now in our own hands.
Thank you again for all your support.
|Interim Report – 30 September 2017|