Careteq Reports 7.1% Revenue Drop, Loss Slashed by 97% in FY25
Careteq Limited reported a dramatic reduction in its FY25 loss to just $72,204, down from $2.67 million the prior year, while facing a significant $3.6 million dispute with the Australian Taxation Office over R&D tax claims.
- FY25 revenue declined 7.1% to $7.73 million
- Loss after tax narrowed 97% to $72,204
- Full acquisition of Embedded Health Solutions completed
- Divestment of Sofihub business executed
- ATO demands $3.6 million repayment on R&D tax incentives, under formal dispute
Financial Performance Highlights
Careteq Limited (ASX – CTQ) has released its preliminary final report for the fiscal year ended 30 June 2025, revealing a significant turnaround in its bottom line. Revenues from ordinary activities declined modestly by 7.1% to $7.73 million, yet the company slashed its loss after tax by 97.3%, reporting a loss of just $72,204 compared to a $2.67 million loss in FY24. This improvement reflects operational efficiencies and strategic restructuring.
Strategic Moves – Acquisition and Divestment
During the year, Careteq completed the full acquisition of Embedded Health Solutions Pty Ltd, consolidating its stake and integrating the subsidiary fully into its operations. This move is expected to enhance synergies and streamline revenue streams. Conversely, Careteq divested its Sofihub business, an online adaptive care platform, for $0.58 million in cash, aiming to improve net operating cash flow by approximately $0.8 million annually and accelerate the path to profitability.
Cash Flow and Balance Sheet Overview
The company’s cash flow from operations remained negative at $732,058, with net cash decreasing to $1.05 million by year-end. Net tangible assets per share declined to a negative 0.40 cents, reflecting accumulated losses and ongoing investment in growth initiatives. Despite this, goodwill remains unimpaired based on management’s discounted cash flow analysis, suggesting confidence in the underlying business value.
Regulatory Challenge – ATO R&D Tax Incentive Dispute
A material regulatory risk looms as the Australian Taxation Office (ATO) issued amended assessments seeking repayment of $2.6 million in R&D tax incentive refunds, plus penalties of $0.65 million and interest of $0.34 million, totaling approximately $3.6 million. These adjustments follow a review of Careteq’s R&D claims for the 2021 to 2023 financial years. Careteq maintains its strong conviction in the validity of its claims, having lodged formal objections and engaged legal advisors to contest the assessments. The outcome remains uncertain and could materially impact future financials.
Audit and Going Concern
The financial statements are currently under audit, with directors anticipating an unqualified audit opinion. However, the auditor’s report is expected to include a paragraph addressing material uncertainty related to the company’s ability to continue as a going concern, reflecting ongoing operational and regulatory challenges.
Outlook and Market Implications
Careteq’s strategic focus on integrating Embedded Health Solutions and shedding non-core assets like Sofihub aims to stabilize operations and improve profitability. Yet, the looming ATO dispute injects a layer of risk that investors will watch closely. The company’s ability to navigate this regulatory hurdle, maintain cash flow, and execute its growth strategy will be critical in shaping its near-term trajectory.
Bottom Line?
Careteq’s FY25 results show promise, but the unfolding ATO tax dispute could redefine its financial outlook.
Questions in the middle?
- How will the ATO dispute resolution timeline affect Careteq’s cash flow and capital strategy?
- What operational changes will Careteq implement to sustain profitability post-Sofihub divestment?
- Could further impairments or write-downs arise if key assumptions in goodwill valuation shift?
