Ixchange deep in the red

By Iain Scott, ITWeb group consulting editor

Johannesburg, 27 Feb 2001

JSE-listed Ixchange has reported an operating loss of R161.01 million for the six months to end-December 2000.

The loss compares with an operating profit of R39.39 million for the same period in 1999. Revenue increased 38.6% to R351.34 million from a previous R253.44 million, with 90% of revenue earned from international operations.

CEO Derek Kreunen says although the loss was larger than expected, it is the result of anticipated further investment into the group, which coincided with weaker trading conditions causing revenues to be lower than expected.

He adds that the period was characterised by further investment in FrontRange Solutions` sales and marketing, with FrontRange`s expenditure on this accounting for 63% of revenue. Its expenditure on research and development accounted for 17% of revenue.

FrontRange, previously GoldMine, was rebranded and reduced from three divisions to one.

Ixchange incurred an attributable loss of R148.36 million (1999: R387.13 million profit) and a headline loss of R104.46 million (R22 400 earnings). A headline loss per share of 66.46c (15.19c earnings) was reported.

Kreunen says there is a shareholders` agreement between Ixchange and certain vendor minority shareholders and staff holding 17.5% of FrontRange Solutions that states that if FrontRange did not complete an initial public offering by 31 December last year, the shareholders would require FrontRange or Ixchange to buy their shares at a negotiated price.

"If the results of the negotiation are inconclusive, then the agreement provides for the shares to be independently valued. This put option expires on 31 March 2001," he says.

The Ixchange share plunged on 17 January, losing 40% from 450c to 270c when the group released a profit warning for FrontRange. The share closed at 208c yesterday. A little more than a year ago it closed as high as 3 015c.

Kreunen points out that the group`s cash position remains strong, with R480.1 million on hand at the end of the period, compared with R641.03 million in June last year.

"Following our higher investment into the group that we initiated at the beginning of 2000, we expect the company to be earnings growth-oriented by the end of the 2001 financial year," he adds.