K2fly Limited (ASX: K2F), an ASX listed technology company, is focussed on providing solutions and products, where industry know-how and digital innovation meet, for clients primarily operating in the asset-intensive industries like Mining, Rail, Water, Electricity, Gas, Facilities Management, Oil & Gas, Aviation and Defence.
The company generates revenue via three broad operating segments briefed below:I. Owned software - K2fly’s owned Software Solutions portfolio comprises RCubed and Infoscope and it has strategic alliances with global technology companies such as Esri (USA), GE(USA) and SAP (Germany).
- RCubed- A globally-applicable mineral resources and ore reserve governance, compliance and reporting software application that supports reporting codes including JORC, NI43101 and SAMREC for 33 commodities in 22 countries across the five major stock exchanges –TSX, NYSE, LSE, ASX and JSE.
Publicly listed mineral resource companies are subject to the requirements as laid down by CRIRSCO (Reporting Standards) as well as specific governance, legislative and stock exchange compliance requirements, depending on the countries they operate. As a result, mineral resource companies must demonstrate rigorous and transparent processes for mineral inventory capture, validation and reporting.
- Infoscope, a data collaboration platform and Land Management, Natural Resource Governance solution, which is directly applicable to the infrastructure, resources, environment & biodiversity, utilities, and cultural heritage sectors
Natural resource governance refers to the norms, institutions and processes that determine how responsibilities over natural resources are managed, their subsequent impacts, and the role of and benefits to the citizens including women, men, indigenous peoples and local communities as stakeholders.
K2fly’s strategic goal is to reach global leadership in environmental, social and governance (ESG) and help its resource industry clients to develop sustainability reports that underpin their social license to operate on land.
Through a sustainability report, a company communicates its sustainability performance and impacts of an investment in a company or business.
II. 3rd party software - K2fly is also engaged in commercialising and re-selling software solutions developed by other industry players such as Switzerland-based ABB, USA-based Kony and also OBI Partners, UK-based Totalmobile and Capita plc and Australia-based Pointerra Limited.
III. Consulting services - K2fly’s subject matter experts provide its clients with leading edge advice which is usually for a short timeframe and has high value rather than providing long-term operational support. There are no annuity revenues associated with these assignments unlike the Software-as-a-Service (SaaS) products.
K2fly is governed by a highly experienced team, led by Mr Brian Miller who is serving as the CEO of the company that is focussed on driving digital transformation and process improvement for clients. A recent interview with the CEO can be READ about here.
Operational and Revenue Update
Recently, on 17 June 2019, the company released its Operational and Revenue Update, where it reported consistent progress towards its corporate goal of increasing revenue, including growing its own software business.
Revenue and Cash- K2fly reported that in April 2019, the invoices raised totalled approximately $207,000, as compared to $ 80,000 in the previous corresponding period (pcp) of April 2018, reflecting an increase of about 158%. Subsequently in May 2019, K2F invoiced clients for approximately $718,000, compared to $430,000 in the pcp of May 2018, an increase of approximately 67%, also marking May 2019 as the largest ever month in terms of invoices raised.
According to K2fly, Q4 is the most significant quarter as far as invoice raising is concerned. Continuing with the trend, the company is currently on track to invoice clients in June for around $500,000, that is expected to result in significantly more than $1 million invoices for Q4 2019, significantly higher than $978,000 invoiced in Q4 2018.
Management is closely monitoring K2F’s cash position and expenditure. As at 13 June 2019, the total cash in hand amounted to more than $700,000 and over $1 million in Aged Receivables from existing clients. K2fly has an extensive clientele of Tier 1 companies from various sectors.
The company also added that it had received a payment of approximately $ 82,000 from the Australian Taxation Office (ATO) as an R&D Tax Incentive.
RCubed Acquisition- The company recently closed the acquisition of the RCubed from Prodmark in South Africa (See figure below). RCubed’s major clients are Teck Resources, Anglo Gold Ashanti and Impala Platinum. Furthermore, this acquisition augurs well for the company as it strengthens its owned SaaS solution, Infoscope, serving the Resources sector.
K2F is actively progressing the sales pipeline for RCubed with major mining entities, as RCubed is uniquely positioned as a commercial off the shelf software solution for mineral resource and reserve reporting.
Consulting- During May 2019, K2F also commenced its assignments with two new name clients in Queensland- New Hope Group (ASX: NHC) and Stanwell Energy. Besides, the company won additional work or contract extensions with existing clients including Western Power, Arc Infrastructure, Fortescue Metals Group Limited (ASX: FMG), Programmed and Westgold Resources Ltd (ASX: WGX).
The company plans to deliver further details in the next release of K2F’s Appendix 4C for Q4 2019 and also anticipates releasing a further operational update soon after the end of Q4 2019.
Stock performance :
K2fly has a market capitalisation of around AUD 14.32 million with ~ 75.35 million outstanding shares. On 17 June 2019, the K2F stock settled the day’s trade at AUD 0.180, with around 212,586 shares traded. Besides, K2F has generated a massive return of 72.73% in the past one month. It has generated a return of 58.33% and 40.74% in the past three and six months, respectively.
Recently on 7 June 2019, K2fly’s CEO and Director, Mr Brian Peter Miller bought additional direct interest in the company on purchasing 8,789 Listed Options (now totalling 285,237 Listed Options) at AUD 0.20, expiring 18 May 2020 at a value consideration of AUD 362.56 on the market.
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