Losses fail to dent NetActive`s confidence

By Iain Scott, ITWeb group consulting editor

Johannesburg, 31 Jul 2001

Managed Internet services group NetActive is confident of future growth despite reporting a loss on continuing operations for the year to 30 April 2001.

CEO Lawrence Brick says that over the past year the group embarked on alternative exit strategies for its consumer-focused business units that did not form part of its core strategy.

NetActive disposed of NetParent, Teleflorist and discontinued its Virtual Internet services. The group also plans to dispose of NetFlorist to an appropriate investor.

Brick says the core business consists of connectivity solutions (virtual private network services, dedicated leased-line connectivity, shared dial access and single dial access) and hosting services (dedicated hosting, co-location hosting, shared hosting, domain name registration and e-commerce).

"These services have achieved strong growth in the past financial year, with annuity income increasing by more than 100%," he adds.

"Business growth will be achieved at NetActive through a combination of organic, partnership and acquisitive opportunities.

"The focus over the next year will be on growing our share of customer, and share of market, for managed Internet services."

He says that the growth strategy will affect short-term profitability, but will build the underlying value of the group by developing it to the extent that economies of scale can be realised.

Commenting on the financials, Brick says the loss incurred in continuing operations was the result of investments in training, systems development, and the strengthening of the sales and marketing team.

"These investments will enable NetActive to continue its growth strategy for the year ahead."

He notes that the balance sheet is sound, with no interest-bearing debt. Cash balances were lower at the year-end because of the repayment of VAT owing from the sale of the home user subscriber base to M-Web, the payment of the final instalment of the Netchauffer purchase price and capital expenditure.

"Resolution of amounts due in terms of the agreement between M-Web and NetActive has not been achieved. Discussions between the companies are taking place in order to resolve this issue, which has not been quantified."

Brick says the group expects solid organic growth, which will provide a solid platform to take advantage of acquisition opportunities in the future.

The NetActive share was trading 4c or 30.77% up at 17c on the JSE by midmorning today.