Nearmap to cut staff to save costs despite no impact yet from coronavirus

Aerial imagery firm Nearmap is cutting staff and pay even if it has yet to feel the impact of a looming COVID-19 downturn.

An example of Nearmap’s aerial imagery. Picture: Nearmap

Aerial imagery company Nearmap will cut jobs and pay to trim costs and shore up its financial position ahead of the looming economic downturn.

The company says it has yet to feel the full impact the coronavirus pandemic has had on the economy to date.

But Nearmap’s shares surged almost 15 per cent on Tuesday morning as investors welcomed its response to COVID-19, which is aimed at reducing its overall cost base by 30 per cent and achieving a break-even cash position by the end of the 2020 financial year.

Chief executive Dr Rob Newman said the company’s short-term sales performance remained relatively unchanged, but he would cut costs to try to bolster its capital position during the economic downturn.

“While we continue to monitor our trading conditions and have not yet seen a material impact, we consider it prudent in these times to maintain a strong balance sheet and preserve our cash balance without the need for additional capital,” Dr Newman said in a briefing to investors.

For six months starting from May 1, executive and board salaries will be reduced by 25 per cent, while all other employees will take a 20 per cent pay cut.

As part of the cost-cutting measures, a permanent staff reduction equivalent to 10 per cent of the company’s workforce will be implemented, for roles which are deemed to be less critical.

Nearmap has around 300 employees, according to its latest annual report.

The company, which operates primarily in Australia and the US via a cloud-based subscription service, will also defer this financial year’s short-term incentive bonus schemes for employees.

However, it is seeking to implement an employee shareholder program, which will be designed to offset the loss of income caused by pay cuts.

Nearmap chief financial officer Andy Watt told investors the details of the equity program were still being worked through.

Mr Watt noted cost cuts would enable the company to maintain financial flexibility while navigating the uncertain environment induced by the virus.

“The business has been through a period of significant growth which means that there are areas that we can scale back to …” he said.

“We retain the core of the business, continue to invest in areas that offer the potential for strong returns and remain confident in the long-term growth aspirations of the business.”

Nearmap is expected to provide an update on its cash balance in May, when it is scheduled to issue earnings guidance.

The cost management program was welcomed by Royal Bank of Canada analysts, who set a 12-month price target for the company of $1.65 per share.

Nearmap’s shares closed up 3.3 per cent on Tuesday at $1.24.

RBC did note it remained cautious about whether selling new products in the US during the economic downturn is viable.

In its interim results, the company posted a net loss of $18.6m, a blowout by 843 per cent compared to the previous corresponding period, which booked a half yearly loss of $1.97m.

Nearmap attributes the loss to a 61 per cent increase in its operating base.

COVID-19 has had little impact on its ongoing commercialisation strategies for 3D, artificial intelligence and roof geometry content services.

The company said it will continue the development of its next generation camera system throughout the cost-cutting period.