FrontRange Solutions CEO Michael McCloskey says an initial public offering (IPO) is one of the company`s goals, although he could not give a definite time when it will happen.
Speaking after the company`s year-end results announcement in Johannesburg yesterday, he said that once the company has finished looking at all the issues, it would consider a Nasdaq listing.
"The money flow into the Nasdaq is looking good at the moment and the market has seen some good IPOs recently," says McCloskey.
When the decision to make the listing is made, all the shares except the options will be held in SA, he notes. All the shares will be translated to Nasdaq shares and the company will probably sell 10% to raise capital.
Profitable
The company reported a $4.3 million profit for the 12 months to end-June, significantly up on the previous year`s $0.04 million. FrontRange boosted headline earnings to $6.9 million (2003: $3.1 million).
The group`s cash position continued improving, with operating cash inflows of $8.6 million for the period, compared to inflows of $6 million the previous year. FrontRange closed the year with $21.3 million in cash (2003: $14.7 million).
McCloskey says the improved profit performance can be attributed to strong cash flow and headline earnings that rose significantly in spite of receiving less of a fillip from exchange gains than in the prior year.
"What is particularly noteworthy, though, is the consistent improvement in both revenue and profit from quarter to quarter. And, for the first time in our history, FrontRange grew revenue in the seasonally weak March quarter over the traditionally strong December quarter," he says.
In spite of the stuttering recovery of the US technology sector, overall revenue for the year remained relatively stable at $73.9 million, 4.4% down on the previous period.
Customer retention saw FrontRange`s recurring maintenance revenue streams continue the trend of recent years, growing 13% to $36.7 million. Services revenue rose by 7% to $8.3 million.
Due to a lack of compelling new product launches until the second half of the financial year, overall licence revenue fell by 22% to $29 million. However, licence revenue did recover from the first quarter of the year to record consecutive quarter-on-quarter growth thereafter.
McCloskey says in recent months product development activity has been ramped up considerably, with development expenditure increasing by 37% from the first quarter to $3.4 million in the fourth quarter of the year.
Upgrades
"We did release two important upgrades to our HEAT and GoldMine applications midway through the year, while our Silicon Valley office has extended our capacity for product development to fast-track certain projects," says McCloskey.
As a result, FrontRange has made advances with its product and technology strategy. The group has refocused its development activities on delivering families of solutions developed specifically for market segments within the small and medium enterprise and distributed enterprise markets.
As part of the roll-out of this strategy, FrontRange recently released initial versions of IP Contact Center, using voice over Internet Protocol, and DiscoverNET, the first module of the new Infrastructure Management product range.
McCloskey says the product development pipeline remains full. Releases scheduled within the next few months include IT Service Management, an upgraded version of IP Contact Center, additional Infrastructure Management modules, and further enhancements to the HEAT and GoldMine products.
The group moved to expand its product development capability and to secure certain intellectual property by acquiring Cayo Communications with effect from 17 June. Cayo is a California corporation with a branch in Moscow that employs 25 software developers that produced technology that FrontRange had bundled under licence into IP Contact Center.
"This deal has several benefits for FrontRange," says McCloskey. "It has secured the intellectual property of a product in which we see tremendous potential, it enhances FrontRange`s product development capacity, and also provides us with an opportunity to grow our business in the rapidly expanding Eastern European market."
The acquisition was paid for with 2.2 million FrontRange shares and $350 800 in cash, giving an overall acquisition consideration of $1.6 million.
Share
