Brisbane’s latest tech stock dips on debut, says profits up to three years away

Felix Group started life on the ASX with 7 million of its shares traded on its first day and closing slightly down on its IPO price.

Jan 13, 2021, updated Jan 13, 2021
Felix chief executive Mike Davis.

Felix chief executive Mike Davis.

The Software as a Service company’s prospectus, which was made public yesterday, revealed that it has yet to make a profit or be cashflow positive. A significant part of its revenue was also from one customer and its shares were likely to be impacted by liquidity constraints.

However, while one big customer was worth about 14 per cent of the Felix revenue in 2020, there was a multi-year agreement. Felix also has some major corporates such as CIMIC and Mondelphous on its books.

Chief executive Mike Davis said the pathway to profit was probably not long after a loss last year of $5.2 million and a loss of $4.1 million in 2018.

“It’s something we foresee in the next two to three years. It’s a balance between continuing to invest for growth versus profitability. We have a strong focus on growing top-line revenue while keeping our cost base under control. At the same time we have some pretty exciting opportunities for growth in Australia and overseas,” Davis said.

The capital raising of $12 million was backed by some leading institutions and was considered a success by the company, but its shares closed yesterday at 35 cents, down on the 36 cent market price. The stock had traded as high as 39 cents and this morning was trading at 37 cents.

It had previously raised about $25 million from investors and will have a market capitalisation of about $47 million.

About 39 per cent of the company’s shares on issue will be held in escrow with new shareholders holding only about 26 per cent of the shares. Management and pre-existing shareholders will hold the rest and a significant amount of stock held by management will be escrowed for up to two years.

However, Davis said the company did not want to issue more shares than were necessary with the funds to be used to promote its product development and expansion.

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The Felix prospectus notes that the structure of the shareholdings and the large number of shares held in escrow “will impact on liquidity for up to two years which may cause, or at least contribute to, limited liquidity in the market for shares”.

A former director of the company, David Williams, is associated with Moggs Creek which has retained 14 per cent of the company’s shares. Williams has also been kept on as an adviser and his company Kidder Williams will receive about 1 million options as a success fee for its role in the float.

Davis said the listing was a momentous occasion and had been a long time coming.

“We’re excited about delivering our next phase of growth and we welcome our new investors on this journey,” he said.

“Our ASX listing … is a major step towards us harnessing our competitive technological advantages to increase our presence in global growth markets.”

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