Technology company, K2fly Ltd (ASX: K2F) supplies people, products and strategic alliances focussed on solving problems for clients mainly from the asset-intensive industries like Water, Mining, Rail, Oil & Gas, Electricity, Facilities Management, Aviation and Defence.
Three key operational and revenue generating segments of the business include- Owned software, offering the Infoscope software solution via strategic alliances with GE(USA), Esri (USA) and SAP (Germany); 3rd party software, offering software solutions developed by OBI Partners (USA), Kony (USA), Pointerra Limited (Australia), ABB (Switzerland), Totalmobile (UK) and Capita plc (UK); and lastly Consulting services, offering the cutting-edge advice on asset management and digital transformation.
On 3 June 2019, K2F updated the market that it has completed the acquisition of RCubed, following the previously released announcement (7 May 2019) regarding a binding Heads of Agreement (HoA) signed for K2F’s subsidiary, K2fly RCubed Pty Ltd, to acquire South Africa-based Prodmark Pty Ltd and its related entities with respect to the RCubed Resources and Reserve Reporting software.
The consideration for the transaction involved an AU$ 450,000 of upfront payment as well as the preservation of key operational employees over the next three years with performance incentives. In addition, a South Africa-based company has been incorporated by K2F. The new entity will take on the existing staff of twelve and utilise the office facilities in Centurion within the Gauteng Province.
According to K2F, the highly complementary acquisition fits well with its Infoscope SaaS offering and strengthens its proprietary SaaS business vertical, which now includes:
Mineral Resource Governance – RCubed, a resource and reserve reporting solution that supports reporting codes such as NI43101, JORC and SAMREC across the major stock exchanges – including NYSE, TSX, ASX, LSE and JSE.
Natural Resource Governance – Infoscope, an Enterprise Land Management, Natural Resource Governance and Stakeholder Relations solution for the Energy and Resources market.
The combination of the two solutions is expected to support K2F in delivering its long-term strategy to provide its clients (mainly Resource Companies) a compelling, comprehensive solution to better fulfil their Environmental, Social and Governance (ESG) responsibilities, and develop sustainability reports that underpin their social license to operate.
K2fly Business Vertical (Source: Company’s Investor Presentation)
Imerys SA Contract
An agreement has been signed with Imerys SA (following the RCubed deal) for distribution of the RCubed Software solution for Imerys’ mineral sand operations in over 80 locations across 25 countries worldwide. Imerys SA specialises in the production and processing of industrial minerals with revenues of ~ EUR 4.5 billion per annum and over 18,000 employees. The initial implementation cost for the contract is more than AU$ 150,000 in the first year with recurring revenues expected on an annual basis.
The immediate signing of this significant client demonstrates strong demand for RCubed Software solution from global multinational mining giants and is consistent with the company’s strategy of growing SaaS revenues.
Recently, the company reported impressive financial metrics for the quarter ended March 2019 (Q3 FY2019). The invoices raised increased 38% (pcp basis) to the value of AU$ 838k while the invoices raised to date for FY 2019 totalled AU$ 2.69 million (more than the total revenue for FY 2018). The net cash as of 31 March 2019 was AU$ 705K. Given the ongoing developments, revenue continues to grow with the outlook for remainder of FY 2019 being positive, as per the company.
Invoice Growth (Source: Company’s Investor Presentation)
With a market capitalisation of AU$ 8.67 million and ~ 75.35 million outstanding shares, K2F is trading at AU$ 0.125, climbing up 8.7% (As at AEST 03:55 PM, 3 June 2019).
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