The overhaul that term deposit marketplace Cashwerkz made to its business last year, with moves into bond brokerage and asset manager incubation, resulted in a cost blowout over the December 2020 half that has raised a question as to its viability.
Last August, the company launched a service offering bonds and other fixed income products to wholesale investors and financial advisers.
The company said the service, BondIncome, would attract investors looking for higher interest rates than those currently available on savings accounts and TDs and that the business would deliver a higher margin.
Also in August, it launched FundIncome, an incubator for asset managers seeking to establish their own funds management businesses.
In November, it took a 25 per cent interest in Fortlake Asset Management, a fixed income fund manager.
The company earned revenue of A$1.9 million in the six months to December, compared with revenue of $438,000 in the previous corresponding period.
This was more than offset by big increases in expenses, including employment expenses rising from $1.9 million to $7.5 million, which resulted in a loss of $8.8 million.
Cash outflows from operating activities during the half were $3.9 million. The company has cash and cash equivalents of $2.1 million and net assets of $10.9 million.
Once again, the company’s financial report has been qualified, with auditor BDO saying there is “material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business”.
The financial report for the December 2019 half was also qualified.
The directors’ report in the latest financial report said: “At the date of this report, the directors are of the opinion that there are reasonable grounds to expect that the group’s operational and financial performance will improve and will be able to continue as a going concern.”
“In the event the time to fully scale these new offerings is extended or the revenue from the offerings is delayed or below forecast expectations, additional funding support may be required. The group has a history of being able to raise capital and restructure operations when required,” the directors’ report said.
The company raised $5 million in a placement last May and issued $4.5 million of notes in December.
Cashwerkz said Fortlake has received $300 million of mandates and is cash flow positive. It said the carrying value of its investment in the business the business was $2.1 million.