Idion Technology Holdings` financial performance continued to improve in the six months to end-June, despite some softness in its market.
Headline earnings per share for the period increased to 0.3 US cents a share from 0.1c a share for the year-earlier period.
The JSE-listed group`s sole operating asset is US-headquartered Vision Solutions, a high availability software and services provider. As a result, Idion has changed its measurement currency to the US dollar.
Revenue of $14.15 million was 7% down on the $15.25 million of the same period a year before, with licence revenue down 24% to $5.01 million and services revenue down 23% at $1.02 million. Maintenance revenue increased by 11% to $8.12 million.
Idion CEO Nicolaas Vlok says the revenue decline is attributable to a slowdown of deal closure, in common with many other software vendors in the US, as well as product transitioning issues at IBM.
A delayed release of IBM`s 2004 i5 server models had prospective customers delaying buying decisions. "This specifically delayed medium and large orders for the new i5 servers, as managed availability software is usually purchased in conjunction with the purchase of a new server," he says.
Cost cutting
"Although most of the IBM shipment issues are expected to be addressed during the second half of 2004, it could have a temporary effect on Vision`s software licence orders leading into 2005."
Vlok says the company began educating the market two years ago to expect Idion to break even in the first half as a result of the seasonality of its business. "But not only have we achieved headline profitability - we have actually increased it," he adds.
Financial director Willem Richard says the balance sheet is strong, with a net cash position at $10.2 million and no significant debt. The bulk of liabilities on the balance sheet is deferred revenue, he says.
Although there has been a strong focus on cost cutting, the group has continued its investment in research and development to take later versions of its flagship product, Orion, to the market.
A net loss of $0.56 million compares with a prior-year loss of $0.85 million, while a net loss of $0.81 million was an improvement on the previous $0.91 million loss. The effective tax rate was higher than the statutory charge as a result of certain one-off expenses that were not tax deductible.
Vision CFO Tim Keithahn says the Asia Pacific region showed the most growth, followed by Europe, with most of the difficulties limited to North America, particularly the US. "The bigger deals that we`re used to aren`t happening because customers are buying more conservatively," he says. This is partly because of the IBM i5 issues.
Vlok says the future looks bright, with the company having built the foundations for future growth, and the high availability market beginning to take off. However, the board does expect economic conditions to remain challenging for the remainder of 2004.
"Given the historic business model of the group, revenue seasonality is expected to continue where more of the group`s licence revenue is expected to be recorded during the second half of 2004," he says.
"The long-term prospects for the group remain positive and Idion`s activities and decisions will continue to be driven by the pursuit of sustainable profit growth and improved shareholder value."
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