Market punishes Idion for headline loss

By Iain Scott for Idion Technology Holdings

Johannesburg, 07 Aug 2001

The market has punished Idion Technology Holdings for reporting a 13% drop in headline earnings per share, with the group`s share falling more than 18% this morning.

By late morning, the share was trading at 67c on the JSE, 15c lower than yesterday`s close.

Group CEO Nicolaas Vlok says while the results for the six months to 30 June 2001 reflect the weakness in the global economy, the figures are in line with the lower end of the group`s revised forecast range announced in June.

He adds that the group is cash generative from operations. He describes himself as "cautiously optimistic" going ahead.

Group finance director Willem Richard says the headline loss includes currency differentials. Excluding differentials, the headline loss per share (HEPS) would have shown a 0.2c improvement on the pro-forma loss for the same period last year.

Richard says although US subsidiary Vision Solutions incurred losses in the first half (contributing a 15.3c per share loss to HEPS), its performance is better than last year, when it contributed a 21.1c per share loss.

Idion Solutions, whose performance Vlok describes as disappointing, contributed a headline loss of 4.2c to the overall figure, compared with earnings of 3.8c per share last year.

Idion Solutions` revenue and earnings before interest, tax, depreciation and amortisation fell to R12.2 million (2000: R19.6 million) and a loss of R6.1 million respectively.

The group attributes this largely to weak sales combined with non-recurring project management difficulties.

"We have put decent project management disciplines in place, and we have established the structure and processes to ensure that we don`t make the same mistakes," says recently appointed Idion Solutions CEO Ken Jarvis.

Idion Solutions and MTN SA have entered into a strategic partnership around Idion`s Enterprise Information Portal solution.

MTN is to provide a telecommunications and wide-area network infrastructure to allow Idion to implement mobile information management through its Orchestrator project.

Jarvis says this is just the start, with another two announcements to follow soon.

The division has also entered into a partnership with IBM SA, in terms of which Idion Solutions` ISO 9000 certification management tool will be co-marketed with IBM providing the hardware platform.

Vision Solutions CFO Tim Keithahn says the US economy has experienced its toughest time in a decade.

While Vision experienced a strong fourth quarter last year, it was hit hard in the first quarter of this year. However, the second quarter was a record one for the division.

He says Vision`s business is a seasonal one, with the first half traditionally constituting 30% to 35% of annual revenue. This is unlikely to change in the short-term, until the division has less seasonal products.

"We are optimistic that we have hit bottom, although we won`t see a fast recovery," Keithahn says.

"Because of the seasonality, we are expecting to break even in the third quarter and have a moderate profit in the fourth quarter," Keithahn adds.

Richard expects the group to turn in a modest profit for the full year, with both Idion Solutions and Vision being profitable in the second half.

Revenue is expected to be towards the lower end of the revised forecast range. In June the group said it expected a return to profit for Idion Solutions and full-year revenue of $33 million to $35 million for Vision.

Vlok says the group`s deferred revenue increased 96% to R68.5 million, which bodes well for the company going ahead.

Maintenance revenue, which is annuity income, rose 58% to R36 million.