Tough period for ERP.com

By Iain Scott, ITWeb group consulting editor

Johannesburg, 05 Apr 2006

ERP.com Holdings` profit has dropped 22.5% in what CEO Dean Brazier describes as a challenging six months.

A R9.57 million net attributable profit for the half-year to end-January compares with a figure of R12.35 million for the same period a year earlier.

This was on revenue of R72.07 million, down from R75.78 million previously.

"As anticipated, the first six months of 2006 proved to be challenging," Brazier says. "The removal of all non-SAP-related activities from iServe and the refinement of the SBI business model to better reflect current realities created a once-off charge of R3.6 million.

"While profit from operations remained static, this non-recurring item resulted in the reduction of headline earnings by 19% to R9.6 million."

ERP.com operates in three areas, namely information security (SecureData), enterprise applications (iServe) and data and content management (SBI and Customised Solutions).

Brazier says SBI performed below expectations and continued to require financing, although he adds that the tweaks to the business model are bearing fruit and the operation is expected to make a small contribution in the second half of the fiscal year.

The balance sheet shows current assets of R63.12 million (2005: R78.95 million), of which cash accounts for R26.91 million (R49.1 million). This is against current liabilities of R31.1 million (R34.39 million).

During the period, ERP.com spent R19.6 million on buying its own shares in the open market and R14 million on payment of dividends.

Cash of R4.08 million was utilised in operations. In the year-earlier period, cash generated from operations amounted to R3.4 million.

"Historically the group has performed better in the second half of the year and this trend is expected to continue," Brazier says.

ERP.com is being courted by two potential bidders, the identity of which has so far been kept under wraps. The company announced in mid-February that it had been approached by a potential buyer and had entered into talks. Last month it said it would also enter into talks with a second suitor.

Market interest in the talks has resulted in sharp increases in the group`s share price. The share closed unchanged at 200c on the JSE yesterday, ahead of last night`s release of the results. This is 25% up on the 160c at which it opened at the beginning of the year.