Tomizone (ASX:TOM) finished the six months ending December 2017 with a $2.48 million net after-tax loss (NPAT) amid its ongoing transformation into a full-blown managed service provider.
The publicly-listed company reported a revenue surge of over $500,000, to $1.68 million, during the first half of the 2018 financial year, no doubt helped by its acquisitions of Bluesky and Ironman Group in October 2017.
However, the company’s costs and expenses ballooned during the period, contributing to the deepening losses for the half-year – its loss for the same period the year prior stood at $1.4 million.
The company told shareholders that, for the first half of the reporting period, the Tomizone business was limited to its existing legacy Wi-Fi business.
“As a standalone this business did not have sufficient scale to be sustainable and the company implemented a strategy to rebuild the company,” the company said.
The company also pointed out that the acquisitions of Bluesky and Ironman Group in New Zealand late last year, and the full impact of the acquisitions, was only occurring towards the end of the period.
Tomizone implemented a new board and management team in August 2017 and, following a review of the group, more than $2 million of costs were removed from the business. A further $500,000 has been identified to be removed in coming months.
“The majority of these cost reductions were actioned in the later part of the period and hence had minimal impact on the result for this period,” the company said.
Tomizone said it has also chosen to impair the carrying value of several older platforms that are no longer used but were carried on the balance sheet.
However, the company’s cost cutting efforts did not prevent it from coming under scrutiny by the Australian Securities Exchange (ASX), where it is listed.
In February, Tomizone defended its ability to continue operating after the ASX questioned its ability to keep trading following at least two quarters of losses.
“Tomizone has taken the steps necessary during the period to position it for a successful transition to scale and profitability,” the company told shareholders on 28 February. The restructure and integration of acquisitions is an endorsement of the company’s strategy.
“The benefits from actions taken by the company over the last six months will be accounted for in the current half. Your board and management continues to work tirelessly to build shareholder value and we thank all shareholders for their ongoing support,” it said.
Despite capping off the first half of FY18 with a multimillion-dollar loss, the company is currently in the process of mounting its third acquisition in the New Zealand market.
The company said in late February it expected to garner an additional A$1 million in annual revenue after inking a deal to acquire a New Zealand-based managed services provider (MSP).
While the company is yet to reveal the identity of the acquisition target, sources indicate that a likely candidate for the deal is Sweep Internet, a New Zealand hosting and business communications specialist. However, this has not been confirmed by either company.