In 2019, over 40% of Aussie businesses were using paid Cloud services, injecting $9 billion over five years into the country’s economy. Cloud services eliminate the need for hardware or complex internal mechanisms and take the onus on themselves to provide your business with a range of services. Using the internet, they give you access to services like data storage or invoicing and more.
It’s a popular concept finding significant uptake in the Australian market. And companies like Communications Platform-as-a-Service (CPaaS), Unified Communications-as-a-Service (UCaaS) and other cloud services provider Comms Group (ASX: CCG) are taking full advantage of it.
The Company has a toe dipped across waters, but it does not rely on Cloud alone. It has diversified its sources of income by also getting in on the real estate action and limited resourcing.
In its latest business update and restructuring announcement, Comms Group stated that its business continues to trade in line with expectations, with new sales contracts on the horizon.
Comms Group has rationalized and restructured its office requirements, recently re-letting excess office space in the Sydney CBD, which has generated $240k in rental income per annum to offset existing costs.
Comms Group has also conducted a review of resourcing within domestic retail businesses, which has highlighted excess resourcing levels. As a result, the Company has commenced a restructuring and expects to deliver around $2 million of annualised operating cost savings. Most of these savings will be realized in Q4 of FY23.
The Company has also been able to generate cost savings by deriving synergies with the onPlatinum ICT business (an information, communication and tech company). Comms Group acquired onPlatinum to primarily focus on network and cost of goods sold. Thanks to the combined profitability, Comms Group expects to deliver approximately $200k in annualised savings by the end of June 2023, with a further $100k per annum in FY24.
In H1 FY23, its revenue shot up by 64.5% to $28.5 million. Even so, its cash equivalents fell from $2.9 million to about $1.7 million, possibly prompting the restructure.
Comms Group remains on track to achieve underlying earnings of over $5 million for FY23, dependent upon the delivery of these synergies. On a full-year basis, the business expects to achieve underlying annualised EBITDA of approximately $7 million, which includes corporate overhead costs of $2 million.
In addition, Comms Group has reported good progress in its global business unit. The Company has been working with key customer Vodafone on an enhanced contractual arrangement. It will release more details in the coming weeks.
Overall, Comms Group is demonstrating a proactive approach to optimizing its business operations and generating cost savings. These developments are expected to have a positive impact on the Company’s financial performance, which will be closely monitored by industry analysts in the coming months.
In an industry becoming saturated with “aaS” alternatives, Comms Group is attempting its hand at CPaaS and UCaaS. Would a new cost-cutting measure be focusing on one of the two?
Alinda is a Business Reporter for The Sentiment
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