JSE-listed FrontRange has managed to report a small headline profit for the first half of its financial year, reversing the R155 million loss of the year-earlier period.
FrontRange`s sole operating asset is its 84% stake in US-based FrontRange Solutions.
The achievement of both operating and headline profit came sooner than the group had expected, says chairman Dana Buys.
<B>Salient figures</B>
FrontRange results for the six months to 31 December 2002.
Year-earlier figures in parentheses:
Revenue: R386.54m (R373.04m)
Profit from operations: R4.59m (-R144.4m)
Profit before tax: -R15.48m (-R205.33m)
Attributable profit: -R14.97m (R-R181.88m)
Headline earnings: R0.17m (-R155.31m)
HEPS: 0.1c (-98.7c)
Current liabilities: R239.86m (R366.51m)
Current assets: R280.27m (R418.71m)
Cash and equivalents: R122.9m (R132.11m)
The group said in October last year that it was targeting a "modest" profit for the full 2003 financial year.
A R4.6 million profit from operations for the six months to end-December compares with a loss of R144.4 million a year earlier. Headline earnings of R167 000 or 0.1c a share compare with a loss of R155.3 million or 98.7c a share previously.
Buys says this was achieved by managing costs, maintaining investment in research and development and by delivering a good product set.
New products released in the past six months are the company`s platform for growth and will sustain it in the future, he says.
The group is still incurring losses on the attributable level as a result of goodwill amortisation of R10.7 million.
However, it is now cash generative and has almost no long-term debt.
In dollar terms, revenue from continuing operations declined by 1% to $38.5 million. Revenue from licences was down 11% to $19.5 million while services revenue was flat at $3.4 million. Recurring maintenance revenue grew 18% to $15.5 million.
Of the total R386.5 million revenue, 2% was generated in SA, 68% in North America, 25% in Europe and 5% in Asia-Pacific.
Looking ahead
Financial director Julian Pienaar says the results indicate that progress has been made in building a more predictable company.
"We also believe that staying on the path to sustainable profitability is all the more significant because the achievement came against the background of a depressed IT market globally."
Buys says the performance is especially pleasing given the inclusion of the traditionally weak July-September quarter.
He says the group should continue to be profitable for the remainder of the financial year. "We are under no illusions that conditions in the tech sector will remain very tough. It`s also not possible to quantify the potential effects of a war in the Middle East. Overall, though, we believe FrontRange can stay on the path to sustained profitability."
The group`s share price was unchanged at 128c this morning.
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