Under Australian corporate law, private companies such as SafetyCulture must lodge audited accounts with ASIC if they are “large proprietary companies”, defined as those with at least two of the following: more than $50 million in consolidated revenue; more than $25 million in gross assets; or more than 100 employees.
A News Corporation journalist, who like anybody else was able to pay $44 to access SafetyCulture’s accounts from ASIC immediately following their lodgement, wrote on Thursday that the scale-up had “spiralled” to a $62 million net loss, from a $23 million loss the previous year.
Losses explained
SafetyCulture’s cash loss was, in fact, only $35.5 million, Mr Anear said, although he admitted this was not spelt out clearly in the accounts, which like those of most private companies do not contain any of the commentary and explanation typical of listed company reports.
The balance of the net loss reported was attributable to SafetyCulture’s equity being allocated to fund acquisitions, Mr Anear said, such as those it made this year of lone worker app SHEQSY and smart device networker Inauro.
“The word ‘spiralled’ implies everything’s going down. In fact, the result was pretty much in line with what we were expecting this year, which was about $2.7 million a month cash burn,” Mr Anear said.
“We can either build this business slowly through profit and traditional finance, or we accelerate it through venture capital. Zero cost distribution models like the app store mean we can capture a global market in just 10 or 20 years these days, but we need the support of investors to do it.”
Mr Anear said the potential for gaining that support was hurt by the out-of-context publication of what appeared to be a huge loss, but in fact reflected SafetyCulture spending money on growth.
“This lack of context fails to set expectations for upcoming Australian investors, making it more likely for Australian companies to accept overseas funding in future,” he said.
“We have no issue submitting audited financials to the government to ensure we are compliant, but making it available to our competitors damages Australian companies and doesn’t provide full context to anyone reading that information.”
US bound?
SafetyCulture has been lodging financial reports since 2016-17, when it first qualified as a large proprietary company. However, Mr Anear said the publicity around the latest result – SafetyCulture’s largest net loss – had made seeking a US domicile a higher priority.
“It’s something we would have looked at anyway, as it’s much easier to list in the US if you’re already domiciled there,” he said.
“But now I think, why stick around in Australia if we’re going to have all the drawbacks of being a public company with none of the benefits?”
Mr Anear admitted he could have written an explanation for the $62 million loss in the directors’ report preceding the financial statements. However, he said his investors already knew the context, and that such an essay would be “just another thing to do … we’d rather be serving our customers”.
If there are no changes to Australian corporate law, which would allow SafetyCulture to keep its financials private, Mr Anear said the company was seriously considering “flipping up” to being a US corporation “within the next month or two”.
He did not name a specific domicile, but it would most likely be Delaware – the state whose no-tax, low-touch and low-disclosure regime has attracted Canva, Amazon, Atlassian, Google and Tesla.
SafetyCulture’s existing 600-plus Australian employees in its Sydney and Townsville offices would not be affected by any shift, but Mr Anear said it would cost additional jobs in the future.
“We’re an export business. We bring a lot of US dollar income into Australia to pay for the jobs here,” he said.
“If we were to run everything from a US accounting point of view, then those dollars won’t flow through, and we will invest more in the US market. It definitely will cost Australian jobs.”
The requirement for large proprietary companies to lodge financial reports, introduced by the Keating government in the 1990s, has always been couched in the need for accountability and transparency, which can enhance investor confidence in the economy.
Even 1498 private companies which successfully lobbied to be exempted from the law in the 1990s will have to lodge financials from 2023, after parliament voted to close the loophole this year.
A spokesman for Assistant Treasurer Stephen Jones said no changes to financial reporting requirements were being contemplated, beyond those outlined in the budget aimed at multinational tax integrity.
