JSE-listed Brainware has reported an attributable loss for the six months to 31 December, which it attributes to the costs associated with its restructuring process as well as business conditions in the months preceding Y2K.
Operating profit plummeted 86% to R4.2 million from R29.8 million in the year-earlier period, on a 47% fall in turnover to R97.6 million (1998: R184.2 million).
Profit before tax fell to R962 000 (R29.3 million). An exceptional item of R1.4 million and tax of R2.6 million reduced this to an after-tax loss of almost R3 million (R21.4 million profit). An attributable loss of R3.98 million compared with an earnings figure of R16.7 million previously.
The exceptional item relates to a restructuring loss and the disposal of some of Brainware`s businesses.
CEO JC van Niekerk, appointed after the resignation of founder Piet den Boer, says the board is concerned about the group`s debt levels, and the matter is being addressed.
"Proceeds from the sale of international interest are expected to largely eliminate the group`s borrowings during the year," he says.
Accounts receivable of R51.7 million are down from the previous period (R81.4 million), but an analyst says the levels are still of concern because it means more than half of the turnover figure is still owed to the company, indicating a possible problem with debt collection.
He says turnover was down because of the disposals of a number of local and overseas companies. "These disposals, coupled with more stringent and conservative policies on provisions and the capitalisation of development costs, meant that operating profit was considerably down."
Brainware, whose share has been subject to a great deal of negative sentiment on the JSE, began its restructuring process in the 1998/99 financial year, after coming to grips with the fact that its acquisition strategy was not paying off.
Van Niekerk was appointed CEO and Retief Ueckermann financial director on 1 July last year. During the period under review, directors Willie Boshoff and Harry van den Berg resigned, and Christo Scholtz was appointed non-executive chairman.
"Management time, having been spent resolving many past mistakes, will now be focused on the delivery of results," says Van Niekerk. "The group has borne the cost of a massive restructuring exercise and is set to reap the benefits."
Brainware has restructured into four divisions - consulting, health, technology and applications.
"Management will focus its efforts on organic growth opportunities and the profitability of each operating company," says Van Niekerk.
He adds that while turnover is not expected to grow rapidly over the next six months, the board anticipates a return to profit for the year to 30 June 2000.
The Brainware share price was unchanged at 15c in mid-morning trade on Friday, having traded between 13c and 15c during the morning. This is well off its highest close of 570c, reached in March 1998. The lowest close - 12c - was recorded in November last year.
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