FrontRange, the JSE-listed customer relationship management and service and support solutions developer, says its US subsidiary, FrontRange Solutions, narrowly missed its breakeven target for the third quarter.
The 84%-owned subsidiary generated revenue of $20 million, but incurred an operating loss of $177 000 for the quarter. It had announced previously that it expected to break even.
The operating loss was a $4 million improvement on the second quarter operating loss on similar revenue, and a $6.8 million improvement on the third quarter to end-March 2001 on revenue which was $0.6 million lower.
FrontRange Solutions CEO and president Patrick Bultema says the performance was encouraging. "We have got to a situation where things are all pointing in the right direction, and look to build on our improvements to be profitable in the final quarter."
Bultema adds that although the third quarter is historically a weak one for FrontRange Solutions, the latest performance was in line with the revenue recorded in the second quarter of fiscal 2002, the three months to end-December.
Cash was managed ahead of projections and aggressive working capital management combined with the improved operating performance resulted in increased cash reserves of $12.9 million at 31 March 2002, compared with $10.1 million at 31 December 2001.
On the balance sheet, current assets exceeded current liabilities (excluding deferred revenue) by a factor of 2.2 times, and the company has no long-term debt.
Bultema says deferred revenue of $13.2 million at 31 March, compared with $11. 5 million at December 2001, is evidence of the continued loyalty of customers.
"We are managing the company conservatively. FrontRange Solutions has made progress towards becoming a highly efficient generator of returns for shareholders. However, it`s still early days. We have more hard work ahead of us to meet our objective of becoming profitable on a sustainable basis."
Dana Buys, MD of FrontRange Limited and chairman of FrontRange Solutions, says the results confirm the solid trajectory back to sustained profitability and the rand hedge nature of the company.
"In rand terms we note a 43% increase in revenue, a R53 million improvement in operating profitability and a R24 million increase in cash position for the quarter," he says. "The FrontRange Solutions team is continuing to outperform its peer group and is doing exceptionally well in a tough economy."
The US performed strongly and hit its revenue targets. The South African operation, which contributes less than 2% of total revenues, showed a continued improvement under its new management, beating its operating profit targets and generating healthy cash flows. But the rest of the Europe, Middle East and Africa region and the Asia-Pacific region fell slightly short of expectations.
Bultema says while FrontRange Solutions considers its cash reserves to be sufficient to see itself through to continued profitability, the company continues to investigate means of securing additional finance.
"While the world economy remains tough, FrontRange Solutions still expects to make a modest profit in the fourth quarter and overall for the second half of fiscal 2002 as revenue improves and expenses continue to be stringently managed," he adds.
The FrontRange share was trading 11.11% up at 110c on the JSE this morning.
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