SOCO faces cash pressure despite stronger second-half performance

Axsym impairment drives statutory loss

SOCO’s FY26 headline is a $6.35 million statutory net loss, a sharp reversal from the $68,275 profit recorded a year earlier. The main culprit was a $5.12 million non-cash impairment of the Axsym cash-generating unit, including a full write-off of $4.61 million in goodwill and a further $504,980 reduction in customer relationship assets.

The impairment had no direct cash impact, and the company said no further Axsym earn-out is payable. But the charge is more than accounting debris: it records that Axsym’s performance fell short of the assumptions used when the business was acquired. SOCO’s net tangible assets per share consequently moved to negative 0.09 cents from 0.37 cents a year earlier.

Second-half margins show operational recovery

Behind the annual loss sits a markedly stronger second half. Revenue rose 12.5% to $10.92 million, gross margin recovered from 20.1% in H1 to 30.5%, and management said both underlying EBITDA and operating cash flow returned to positive territory. Full-year revenue still fell 3.1% to $20.62 million, but gross profit increased 2.6% to $5.28 million as the group’s annual gross margin improved to 25.6% from 24.2%.

The improvement came as delayed projects moved into delivery and cost initiatives took effect. SOCO said its core consulting business delivered three consecutive half-years of revenue growth, while support and recurring revenue reached $2.77 million and increased 25% between the first and second halves. That mix is strategically useful, although the filing does not establish whether the improved margin and cash performance can be sustained across a full year.

Contracting activity provides the more tangible bridge into FY27. SOCO signed more than $24 million of contracts during FY26, with contracted sales increasing by more than 40% from H1 to H2. About $9.5 million of contracted project value was carried into the new financial year, and a further $4 million was secured after 30 June.

Cash position leaves little room for execution errors

The balance sheet remains a constraint on the recovery story. SOCO finished June with $1.09 million in cash, used $339,939 in operating cash during the year and reported net current liabilities of $370,880. It had $255,008 of undrawn bank funding, but the facility amortises monthly and expires on 31 December 2026. The directors nevertheless said forecast cash flows, contracted work and cost measures support preparation of the accounts on a going-concern basis.

Execution now matters more than the contract tally. SOCO must mobilise the carried-forward work, convert it into invoiced revenue and preserve the second-half margin while improving collections and working capital. The next meaningful test will be whether the $9.5 million project backlog produces cash before the debt facility reaches its expiry date, rather than simply adding another promising line to the annual report.