Loss-making Ixchange restructures

By Iain Scott, ITWeb group consulting editor

Johannesburg, 04 Sept 2001

Ixchange Technology Holdings has reported a full-year headline loss of 170.54c per share, which it attributes to an economic slowdown, the launch of Ability`s international expansion programme and investments in FrontRange Solutions.

Chairman Dana Buys says the group has made an important transition in a "very tough global marketplace", which has seen it shed its non-core interests, leaving it with only its investment in FrontRange Solutions.

"Following a significant technology market collapse, the rationale for the group`s continued investment in start-up businesses housed in the incubator division was no longer justifiable," he says.

The launch of Ability`s international expansion programme on the back of the MasterPack acquisition and the aggressive investments made in FrontRange Solutions had a major impact on the company`s performance.

"Without the necessary support for the recapitalisation of the Ability business the company decided in May 2001 to restructure itself by disposing of all Ixchange`s interests outside of its core focus of FrontRange Solutions."

Ability has been sold for only R14 million, a move that has drawn fire from analysts. One analyst says the company was bought for more than R50 million, and the market had been led to believe the division was worth far more than R14 million.

Another says the Ixchange restructuring is a final admission that the company made a mistake in chasing after market share at the cost of profit.

Ixchange now effectively consists if its 84% stake in FrontRange Solutions and is planning to change its JSE-listed name to FrontRange Solutions.

The restructuring has also seen a board reshuffle. Chairman Dana Buys has taken over the post of CEO with immediate effect, with current CEO Derek Kreunen remaining as an executive director.

Once a non-executive chairman is recruited, Buys will resign as chairman to focus solely on the position of CEO, with further board restructuring expected next month.

Buys says FrontRange Solutions began the year as GoldMine Software, running as two divisions, with virtually all functions duplicated between Colorado and California, with no offices in continental Europe or Asia and with a skeleton management in place.

"A year and significant effort and investment later, the company is now completely integrated as FrontRange Solutions, with all duplication of effort eliminated and an organisational structure in place that will scale well going forward."

Offices have been opened in France, Germany, Italy and Singapore.

The company achieved record sales in the fourth quarter, which helped it achieve breakeven by the targeted June 2001.

Buys says that while Ixchange continues to have confidence in the long-term prospects of the sector, the company will "continue to be managed appropriately to market conditions".

The share closed 5c down at 115c on the JSE yesterday.