Resignation of CFO Andrew Dalziel
Plexure advises that CFO Andrew Dalziel has resigned.
Dalziel had been with the company nearly 5 years and played an important role in the company's turnaround. I outlined in my initial thesis I would consider selling if any of Norman, Dalziel or Herbison left and have to stay true to this.
Of additional concern is a lack of new customer signings, a deteriorating company culture and difficulty executing their growth strategy.
Austo Healthcare (AHC) is a provider of nurse call systems and software for hospitals and aged care facilities. Their Tacera system is best-in-class with recent R&D efforts to allow for real-time location of nurse staff to automate procedures, provide efficiencies and generate actionable data for customers.
Covid impacted the business heavily as they were unable to access sites to perform installations, upgrades and maintenance easily. This can be seen in the revenue chart below as revenues fell sharply in 2H20 and 1H21.
However the company continued to win new contracts and this resulted in a record order book which is now being eaten into with the recent FY21 update confirming 2H21 has seen a return to the $16-17m revenue of 2019. Interestingly, despite calling out a record order book at both the FY20 and 1H21 results, management confirmed the book continues to grow and is still at a record level despite the increased revenue meaning they are replenishing the orders faster than booking revenue even as restrictions are removed.
AHC have spent the last couple of years trying to shift their business model while also contending with US/China tariffs and then Covid-19.
I think management should be commended on the results they have achieved so far to try and move the business from a lower margin pure hardware business to a higher margin hardware/software business.
As can be seen in the image below, the business began to shift production from a reliance on Chinese suppliers to several outsourced manufacturers around the world to the point where their Dallas manufacturing plant was closed in December 2020.
A combination of growing higher margin software revenue and outsourcing lower margin manufacturing saw gross margins grow from 44% to nearly 53% in 2H20 despite Covid affected revenue and the onset of higher shipping costs from Covid disruptions.
The FY21 report will be interesting to see where margins land with manufacturing now fully outsourced and the effects of Covid beginning to dissipate in key markets.