ERP.com reports challenging year

By Nicola Mawson, Contributing journalist

Johannesburg, 03 Oct 2006

JSE-listed ERP.com has seen a 4% decline in its revenue for the year ended July, but plans to refocus its energies.

The company, an investment-holding firm, yesterday reported a decline in revenue from R172 million to R164 million. Its net attributable profit was down 23% from R26 million to R20 million.

Commenting on the results, the company stated 2006 was a "challenging year for the group", which was anticipated.

However, the company has refocused its energy on the information risk management (IRM) division. ERP believes "the core strengths of the group lie in the provision of products and services that address IRM".

Its future strategy will be built on two companies, SecureData and Solutions for Business Intelligence, which it says are solid players in the industry. "Both these companies address IRM requirements and it is intended that they will form the foundation of the future strategy of the group."

ERP has already entered negotiations to dispose of operations that do not fit into its new strategy. "It is anticipated that a more focused strategy centred on IRM will enable the remaining operations to achieve organic growth more in line with historic trends and will, additionally, allow the group to be more aggressive in seeking acquisitions that will complement the group`s current competence within the strategic focus."

However, until these changes are made, the loss-making and non-strategic divisions will continue to place strain on its bottom line, it said.

Revenue constraints

Its revenue decline this year was attributed to contraction within its data and content management division. Its information security and enterprise application division saw "modest" revenue growth, it said.

Despite cost management in the security division, which saw improved pre-tax performance, losses in other divisions of R5.5 million reduced overall pre-tax profit and earnings per share.

The company, which spent R4.1 million on restructuring during the year, reported pre-tax profit of R31 million, a 20% decline. Earnings and headline earnings per share were down 19% to 12.6c.

Despite the fact that cash equivalents declined from R70 million to R40 million, the company says that its "balance sheet remains strong".

"The decline in cash may be attributed to the expenditure of R20 million on the purchase of the group`s shares in the open market, R16 million in payment of dividends and secondary tax on companies and an increase of R14 million in working capital."

ERP said the increase in working capital can mainly be attributed to a "significant" increase in contracts in process in its enterprise applications division.

On Monday, the company`s shares closed higher at R1.44, which was 4c up on Friday`s close. Its 12-month high is R2.07 and its 12-month low is R1.32.