FrontRange Solutions has met its promise to achieve an operating profit in the fourth quarter of its financial year.
The US-based customer management applications provider is 84%-owned by JSE-listed FrontRange and generates about 98% of the South African company`s revenue.
FrontRange said at the release of its interim results in February that it was budgeting to break even for the quarter to March this year and to make an operating profit for the fourth quarter, resulting in an overall operating profit for the second half.
FrontRange Solutions` unaudited results for the quarter to 30 June show that it has met that target, with an operating profit of $268 000, a $6.2 million improvement from the fourth quarter of the previous year.
For the six months to 30 June, an operating profit of $91 000 was achieved, compared with a loss of $12.9 million in the year-earlier period.
Patrick Bultema, FrontRange Solutions CEO and president, says the performance was particularly pleasing in the context of declining markets and continued uncertainty about the timing and extent of an economic recovery in the US.
"We`re pleased but realistic," he says. "This performance is really an early step in what we plan to be a steady process of consistently building sustainable profitability in the company.
"It`s taken a great deal of commitment and effort, and it will take still more to maintain the momentum we`re building up. We`re also starting to feel the benefits of the restructuring begun more than a year ago and this should stand us in good stead in the year ahead."
On a regional level, revenue in the US came close to target in the fourth quarter but Asia-Pacific, Europe, the Middle East and Africa were lower than expected.
Licence sales fell 28% but recurring maintenance revenue grew 10%. Service revenue fell 3% as a result of the continued shift of professional services to the company`s channel partners.
FrontRange says it is continuing to invest in research and development to build a solid base for growth. It is on track for the September release of the first version of its products based on the Microsoft .NET platform.
The company is to incur exceptional item restructuring charges of about $2.9 million in the period to 30 June. Of this, $2.3 million relates to provisions for future-term onerous contracts associated with excess office space, it says.
Bultema says the world economy is expected to remain tough, with no improvement until at least early next year. The company anticipates a small loss in the first quarter because of marketing costs related to new products.
However, Bultema expects FrontRange to be profitable thereafter and show a modest profit and positive cash flows overall for the full year.
The South African parent group, whose share rose 22c or 12.3% to close at 200c yesterday, is expected to announce its audited results on 22 August.
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