JSE-listed Ixchange has issued a profit warning for the financial year to June, citing tough market conditions and high costs incurred in localising its software for international markets.
Ixchange reassured the local markets in May that both its FrontRange and Ability operations would reach break-even by June this year. The two companies account for 87% and 12% of Ixchange`s revenue respectively.
While FrontRange grew its revenue for the six months to June by 20% to $45.4 million, it finished the same period with an operating loss of $12.4 million.
Ixchange management says the losses were caused largely by higher than expected localisation costs for certain software, coupled with softer than anticipated quarter-end markets in the UK and Australia.
Added to this was higher than predicted operating expenses, running over the anticipated budget for the period.
Similar difficulties were experienced at Ability, reporting an operating loss of $3.2 million for the six months to June, of which $2.4 million was incurred in the third quarter to March.
Ixchange`s move to close Ability`s UK and Asian Pacific operations effective May, helped stem the tide, and an operating loss of $0.8 million was reported in the subsequent fourth quarter.
Management has initiated a reduction in staff at Ability`s South African and US operations, and Ixchange says the company is now set to return to profitability by June 2002.
Reactive measures at FrontRange have also been instituted with staff layoffs totalling 10% of the workforce effected in July, reducing expenses by around $500 000 per month. Various consolidation measures at the company will also take place, and are expected to help reduce expenses by a further $250 000 per month.
As part of Ixchange`s update in May, it announced JustEnough`s operations were closed in April 2001. Ixchange says it is in the final stages of negotiations for the disposals of Fraxion and NeuraTech, and these companies are not expected to be part of continuing operations going forward, and their disposal will culminate in the closure of this division.
Markets were not impressed with the news and the Ixchange counter dropped 20% or 29c shortly after the announcement to trade at 116c by noon today.
Related stories:
Ixchange to close Ability operations
Ixchange subsidiary to buy back shares for $16m
Changes afoot at Ixchange
Ixchange deep in the red
Share
