Syft post first-half loss as costs climb
Syft Technologies, which makes high-tech chemical sniffer devices to test air quality, reported a first-half loss partly due to fundraising costs but said it expects the rest of the year to be "significantly stronger" as it continues to ramp up spending in key areas like sales and marketing.
Christchurch-based Syft, which trades on the Unlisted market, reported a loss of $40,000 in the six months to Sept. 30 versus a profit of $779,000 in the same period a year earlier. Total operating revenue rose to $4.8 million from $4.4 million, but expenses jumped to $3.1 million from $1.9 million. Of that, capital raising costs were $271,000 while sales and development costs increased to $2.1 million from $1.4 million.
"The major event in our business over the last six months was the $7.5 million capital raise of new equity which was strongly supported by both existing and new shareholders," said chief executive Doug Hastie in a statement. The funds would result in a "step change" as "we configure our business for the rapid growth we expect."
Hastie said the company has been managed conservatively but "this cautious mode of operation has had a large opportunity cost give the size of the potential pie."
Syft has the potential to be a large and very profitable company, "but to be truly successful, we need to make greater investment in sales, marketing and customer driven development," he said.
One of its main constraints is finding talented people, he said. While staff numbers have increased "we are still severely under-resourced," said Hastie. "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." The increased funding has allowed it to be more aggressive on recruiting but there is still a lag as it takes time to recruit and train, he said.
The company's core product uses sensors to sniff out contaminants in the air, even in minuscule amounts. It also has technology for the environmental industry to monitor potentially harmful gases, and rapid trace analysis for high-precision technology manufacturing equipment, which can be damaged by contaminants in the air.
Hastie said the company's gross margin was higher than a year earlier but less than projected due to higher production costs and fewer direct sales. Syft's gross profit of $2.8 million was at a gross margin of 58.8 percent of total revenue, up from 57.1 percent a year earlier.
"These issues are now being addressed as fundraising has given us access to greater resources," Hastie said.
Syft recently finalised the opening of its European office and is in the process of opening US and Asian offices over the next 12 months. "My expectation that in three years time, Syft will employ more people outside New Zealand, than within," he said.
Looking ahead, Hastie said the second half would be 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 shares last traded at $1.20 on the Unlisted market.
Read NBR Radar's profile on Doug Hastie and Syft Technologies.