FrontRange Solutions, the 84%-owned US subsidiary of JSE-listed FrontRange, reported a worse than forecast operating loss for its second quarter, but expects a profitable second half of the financial year.
A pro forma operating loss of $4.2 million (excluding one-time write-offs) for the October-December 2001 period is $3 million more than the revised forecast issued in September, due to a shortfall in revenue.
Revenue of $20 million for the quarter was $4 million below the revised forecast.
While the revenue figure is 6% up on the preceding quarter, it is 11% lower than revenue for the second quarter of 2000.
"It was a tough quarter with December not producing the normal bulk of quarterly revenue, due to sales slipping into the new year and a slower market in the US, UK and Australia," says chairman Dana Buys.
"The good news is that the company did make a pro forma profit of $900 000, or about R10 million, in December. This marks the first monthly profit in 21 months.
"Our recurring revenue streams grew by 27% in US dollar terms and we continued to perform better than our mid-market peers in the tough world economy."
Competitors` revenue slipped even further than that of FrontRange Solutions, with Delano down 55%, Pivotal 36%, Onyx 49%, Kana 44%, and Siebel 17% down.
Buys says markets have remained depressed following the 11 September terrorist attacks in the US, and the company believes indecision, not competition, has resulted in depressed sales.
"Since early December the company has further reduced its total workforce by about 10% and reduced discretionary marketing expenditure as well as any other expenses deemed non-vital in the near term," Buys adds.
The company has written off about $6 million from its December balance sheet, the bulk being prepaid licences that were part of the Peregrine transaction in 1999.
Buys says less than 6% of the write-down has cash implications and expects that about 60% will be treated as exceptional items on the income statement, with the balance recorded as "operational" at holding company level.
While conditions are expected to remain tough, FrontRange Solutions is expecting operational breakeven in the third quarter and a profitable fourth quarter, resulting in overall profitability for the second half of the year.
The company has decided to raise additional cash and has appointed a US investment banker to manage the process.
The FrontRange share closed 2c up at 75c on the JSE yesterday.
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