Australian networking and communications Company Freshtel, who 18 months ago said that they were more interested in overseas markets than the Australian market has sacked their senior management team and is now, looking at delisting from the ASX.
Among those to have exited the Company is the former CEO, CIO and COO. They have cut staff numbers by half and are considering delisting from the stock exchange as it continues to bleed cash at a worrying rate.
A major drop in revenues from UK supermarket giant Tesco which sold calling cards from Freshtel was a major factor in this year’s downturn. Their products are sold in Australia by JB Hi Fi.
Four months after raising $1.8 million in a rights issue aimed at financing restructure of the company. Freshtel has $2.36 million in the bank, and is burning cash at the rate of $300,000 a month, its annual report published yesterday reveals.
That suggests, in the absence of a massive turnaround, Freshtel could face a new crisis in six or seven months. Its shares closed at just one cent on the ASX yesterday, down 0.6 cent, or 37 percent.
“This has been an extremely difficult year for Freshtel with revenues shrinking significantly from the previous year and with costs running at a high monthly rate which, together, have caused large cash losses,” admitted Chairman Allan Sullivan in yesterday’s annual report.
Freshtel announced a net loss of $10.2 million for the year to June 30, on revenue of $3.22 million. Last year it lost $7.8 million on revenue of $4.8 million.
“Management has achieved much in reducing costs but the poor year-end result means that further significant cost reductions have been identified and will be implemented to try to achieve the margins required to bring the business to break even,” said Sullivan.
Trimming headcount including the executive team has been one way of cutting costs. Gone and not replaced are CEO Rhonda O’Connell (who finished up yesterday); CIO John Coates and COO Ian Jackson, whose role was made redundant.
Allan Sullivan will take over the CEO’s role as well as being chairman. He does not appear to take a salary.
Departure of O’Connell, Coates and Jackson is saving the company around $1 million a year, judging by the remuneration report: $414,000 for O’Donnell in the past financial year, and just under $300K each for the other two.
Overall headcount has dropped from 62 to 30.
Sullivan previously CEO and director of another troubled company, ERG said delisting the company would save hundreds of thousands of dollars in listing fees, audit and support infrastructure and staff costs, and give the company “a profile more in accordance with its current financial performance”.
He said Freshtel is also looking at merger opportunities that would assist in broadening its market offering in the wholesale SME sector. It will also continue to develop key applications for mobile VoIP, calling card applications and its Voicedot Network.