| Mon 26 Feb 2001, 0:00 | | Ixchange Technology Holdings Limited - Interim |
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INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2000
GROUP CONSOLIDATED Income Statement
HALF HALF % YEAR
YEAR YEAR
ENDED ENDED CHANGE ENDED
31 DEC 31 DEC 30 JUN
2000 1999 2000
REVIEWED REVIEWED AUDITED
REVENUE 351,343 253,443 38.6% 541,475
OPERATING (LOSS)/ PROFIT (161,011) 39,386 (508.8)% 1,395
EXCEPTIONAL ITEMS - 362,10 387,123
GOODWILL AMORTISATION (43,895) - -
NET FINANCE INCOME 19,437 2,268 757.0% 20,369
(LOSS)/ PROFIT BEFORE
TAXATION (185,469) 403,755 (145.9)% 408,887
TAXATION - (12,286) 34,168
(LOSS)/PROFIT AFTER TAXATION (185,469) 391,469 (147.4)% 443,055
INCOME FROM ASSOCIATES - - -
OUTSIDE SHAREHOLDERS' INTEREST 37,110 (4,338) (21,127)
(LOSS)/ INCOME ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS (148,359) 387,131 (138.3)% 421,928
LESS:
AMORTISATION OF GOODWILL 43,895 - -
CAPITAL GAIN ON REDUCTION OF
8% SHAREHOLDING IN GOLDMINE - (366,846) (366,846)
AFTER-TAX TRADING LOSS /
( GAIN ) ON DISPOSAL OF
INVESTMENTS - 2,115 (10,128)
OTHER - - 1,853
HEADLINE (LOSS)/ EARNINGS (104,464) 22,400 (566.4)% 46,807
NUMBER OF SHARES IN
ISSUE (000's) 157,265 147,680 156,651
WEIGHTED NUMBER OF SHARES
ON WHICH EPS & HEPS
IS BASED (000'S) 157,172 147,493 150,197
(LOSS)/ EARNINGS PER SHARE
(CENTS) "LPS" (94.39) 262.47 (136.0)% 280.92
HEADLINE (LOSS)/ EARNINGS
PER SHARE (CENTS) "HLPS" (66.46) 15.19 (537.6)% 31.16
WEIGHTED NUMBER OF SHARES
ON WHICH DILUTED HEADLINE LOSS
PER SHARE IS BASED (000'S) 167,419 158,976 5.3% 172,222
DILUTED HEADLINE (LOSS)/
EARNINGS PER SHARE (CENTS) (62.40) 14.09 (542.8)% 27.18
AMORTISATION AND DEPRECIATION
FOR THE PERIOD 62,651 6,255 901.6% 14,183
GROUP CONSOLIDATED Balance Sheet
HALF HALF
YEAR YEAR YEAR
ENDED ENDED ENDED
31 DEC 30 JUN 31 DEC
2000 2000 1999
REVIEWED AUDITED REVIEWED
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS' INTEREST 674,404 719,778 563,973
LESS INTANGIBLE ASSETS - - (1,245)
VENDORS FOR ACQUISITIONS - 488 1,461
OUTSIDE SHAREHOLDERS' INTEREST 238,503 184,868 155,199
DEFERRED TAXATION 23,102 17,051 676
LONG-TERM LIABILITIES 1,510 1,690 1,460
DEFERRED REVENUE 77,315 86,140 58,825
TRADE PAYABLES & SHORT TERM
LIABILITES 150,479 117,028 106,102
1,165,313 1,127,043 886,451
ASSETS
GOODWILL 124,100 - -
FIXED ASSETS 80,157 69,584 36,971
DEFERRED TAXATION ASSET 212,922 195,119 112,222
INVESTMENTS 2,554 3,473 6,555
OTHER RECEIVABLES 38,124 27,990 -
CURRENT ASSETS 707,456 830,877 730,703
INVENTORIES 5,093 3,811 5,281
TRADE AND SUNDRY RECEIVABLES 222,219 186,036 125,843
MARKETABLE SECURITIES - - 374,050
CASH & CASH EQUIVALENTS 480,144 641,030 225,529
1,165,313 1,127,043 886,451
GROUP CONSOLIDATED Cash Flow Statement
CASH FLOWS FROM OPERATING
ACTIVITIES CASH (UTILISED)/
GENERATED BY OPERATIONS (70,368) 368,796 375,769
CASH UTILISED FOR INVESTING
ACTIVITIES (80,391) (250,563) (404,049)
CASH FLOWS (UTILISED FOR)/
FROM FINANCING ACTIVITIES (10,127) 430,672 161,684
NET MOVEMENT IN CASH POSITION (160,886) 548,905 133,404
CASH & CASH EQUIVALENTS -
BEGINNING OF YEAR 641,030 92,125 92,125
ADD : NET MOVEMENT IN CASH
POSITION FOR THE PERIOD (160,886) 548,905 133,404
CASH & CASH EQUIVALENTS -
END OF PERIOD 480,144 641,030 225,529
Commentary on RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2000
The Board is pleased to present the audited-reviewed financial statements for
the group for the six months to 31 December 2000. The period under review
reflects the increased investment into the group as anticipated. This
investment, against a backdrop of overall weaker trading conditions where
revenues were less than expected, resulted in higher than anticipated losses.
Comments on financial statements INCOME STATEMENT
Revenue growth of 39%
Consolidated revenue for the six months ended 31 December 2000 increased by 39%
over the same period last year. FrontRange Solutions achieved an increase in
revenue of 37%. The Ability suite of products experienced an increase in
revenue of 86%, although this was primarily due to the acquisition of
MasterPack, which was effective from 1 June 2000. of the total revenue of
R351,3-million, 90% was earned from Ixchange's international operations.
Operating loss of R161m
This period was characterized by further investment in FrontRange Solutions'
sales and marketing, and research and development. FrontRange's expenditure on
these categories was respectively 63% and 17% of revenue, compared to 47% and
9% of revenue for the equivalent period last year. Ixchange's operations
incurred once-off costs of R41,0-million in the period. Of these, costs
associated with the acquisition and integration of MasterPack totalled
R4,4-million. Severance and relocation in divisions other than MasterPack was
R8,0-million, and professional and legal expenditure of R4,3-million was
incurred. FrontRange incurred costs of R4,3-million for a computer based
training project that was scrapped, and also expended R11,1-million on
re-branding and website development. Sundry other once-off costs identified
across the group total R8,9-million. Ixchange's Xponential Enterprises division
generated a loss of R19,7-million on revenue of R5,5-million. During the
period, four entities were discontinued or sold. These entities contributed
R4,7-million of revenue.
Development expenditure capitalized - nil
Ixchange's accounting policies allow for direct costs and overheads incurred in
bringing products to a marketable state to be capitalized. However, in line
with Ixchange's conservative accounting practice, no further capitalization was
made during the period.
Goodwill amortization of R43,9m
South African accounting standards require goodwill arising on the group's
acquisitions that occurred after 1 July 2000 to be capitalized and amortized to
income on a systematic basis over its estimated useful life. Of the goodwill
charge of R43,9-million, R19,1-million relates to Maestro and AVG, while
R24,8-million relates to CCC. CCC has subsequently been sold, so no further
goodwill write-offs will stem from that entity. Goodwill arising from Maestro
and AVG is being written off over a period of between three and five years.
Taxation - no credit
The losses made in the various companies gave rise to further taxation losses.
Ixchange management is satisfied that these companies will become profitable in
the foreseeable future and that as a result, economic benefits will flow to the
enterprises in future periods. However, in the light of Ixchange's
conservative accounting practice, no further tax was raised.
Headline loss per share ("HLPS") of 66,5 cents
Apportioning the R104,5-million headline loss over the 157,3-million weighted
average number of shares in issue over the period yields a HLPS figure of 66.5
cents.
BALANCE SHEET AND CASH FLOW STATEMENT
Cash at R480,1m
As at 31 December 2000, Ixchange had cash on hand of R480,1-million.
Fixed asset and capitalized development costs of R80,2m
The R80,2-million balance is comprised of tangible fixed assets of
R76,2-million and capitalized development costs of R4,0-million carried forward
from a prior year.
Deferred taxation asset
The movement in the deferred taxation asset from June to December 2000 is
attributable to exchange rate fluctuations.
Deferred revenue
The group recognizes invoiced maintenance revenue over the period of the
maintenance contract, with revenue invoiced but not yet earned being deferred
to later periods. Similarly, professional services billed to customers but not
yet rendered is deferred and recognized on delivery of the training and
consulting services. The deferred revenue of R77,3-million represents a 31%
growth over the balance at 31 December 1999.
Capital commitment
A Shareholders Agreement between Ixchange and certain vendor minority
shareholders and staff holding 9,942,655 shares (17,5%) of FrontRange Solutions
provided that, if FrontRange failed to consummate an Initial Public Offering on
or before 31 December 2000, these minority shareholders would have the right to
require either FrontRange or Ixchange to purchase their shares at a negotiated
purchase 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.
EXCHANGE RATE FOR CONVERSION
In line with South African generally accepted accounting practice, the results
and financial position of Ixchange's international operations have been
converted respectively at the average and closing exchange rates of the period.
These were R7.30 = $1 for the income statement and R7.60 = $1 for the balance
sheet.
ACCOUNTING POLICIES
The accounting policies used in the preparation of the interim results
announcement, with the exception of goodwill, are consistent with those applied
in the previous financial year ended 30 June 2000. The financial results and
position comply with South African generally accepted accounting practice.
INDEPENDENT REVIEW
The financial information set out in this report has been reviewed, but not
audited, by Deloitte & Touche, whose unqualified report is available to members
for inspection at Ixchange's registered office.
DIVIDEND
In line with Group policy, no interim dividend has been declared.
Business and financial highlights
FRONTRANGE SOLUTIONS (All calculations based on $USD)
Record sales of GoldMine FrontOffice
GoldMine FrontOffice, the company's Customer Relationship Management (CRM)
solution aimed at medium sized organizations has made strong inroads into the
global CRM mid-market. The company has sold the product to 1 849 new customers
during the six months under review, more than any other mid-market CRM vendor
in the world. Overall the company's CRM products grew revenue organically by
33% over the previous year's interim period.
International expansion producing solid growth
International sales grew by 41% over the same period last year to represent 28%
of FrontRange's sales for the period. Growth in the CRM markets internationally
was strongest, with Europe, Middle East and Africa recording a 280% growth in
sales, and Asia Pacific recording CRM growth of 292%. During this period
offices were established organically in France, Germany and Italy. French and
German language versions of HEAT and GoldMine were released.
Strong sequential quarter-on-quarter growth
The company's quarter to 31 December 2000 represented sequential growth of 22%
over the September quarter. This is the result of stronger contributions from
the international offices and greater capacity of value added resellers (VARs)
to resell the higher end products.
Slower growth for the HEAT HelpDesk market
HEAT sales for the period under review grew by 3% over the comparable period in
1999. The major disappointment was a decline of 10% in HEAT sales in the UK.
HEAT sales in the US grew by 7%. This growth rate can be ascribed to
accelerated sales in the run-up to Y2K during 1999, which had resulted in 42%
growth in that period over 1998. Post Y2K there was a definite slowdown in the
HelpDesk market and it is expected to resume normal growth levels during
calendar 2001.
Customer base continues to grow
For the period under review, GoldMine FrontOffice was sold to 1 364 new US
customers while 485 FrontOffice servers were sold internationally. HEAT was
sold to 404 new customers, 62,5% of them US based. The company added
approximately 200 value added resellers during the six-month period.
Latest version of HEAT released
FrontRange Solutions took another step in its drive to strengthen and extend
its global leadership position with the launch of a significantly enhanced
version of HEAT, its market leading helpdesk and customer service automation
solution. HEAT 6.0 includes a Web based client and dozens of improvements and
enhancements based on extensive customer feedback.
Maestro acquisition boosts eCommerce and ASP penetration
FrontRange Solutions acquired eBusiness solutions provider Maestro Commerce Inc
(Maestro) in August 2000. Maestro is ranked among the top 50 application
service providers (ASPs) in the US. The company develops and markets a suite of
eBusiness products and services that address the Internet commerce requirements
for small to medium sized companies. This capacity is central to the company's
future product strategy. Maestro recorded growth of 122% over the same period
in 1999.
Users give flagship products top marks
FrontRange Solutions' flagship products HEAT and GoldMine FrontOffice 2000 were
named Gold Users Choice Award winners in the second annual Users Choice Awards
sponsored by US-based Customer Support Management and RealMarket Research.
FrontRange Solutions was the only organization among more than 160 nominees to
win two gold awards in this prestigious competition that honors the most
effective CRM products and services.
FrontRange Solutions strengthens leadership team
FrontRange Solutions implemented a new management structure and extended its
executive committee to implement and drive its global expansion strategy. The
14-member executive team, now organized around functional responsibilities, is
chartered with rapidly deploying integrated solutions for the small to
medium-sized business market through a sales and service model that intensifies
the company's focus on intimate customer relationships.
ABILITY
Ability internationalization nears completion
Ability substantially completed its drive to "internationalize" its suite of
supply chain optimization solutions. All products in the Ability range are now
fully global in terms of their capacity to operate in different geographies. A
new corporate structure has been established. Corporate and product rebranding
has been completed. Extensive product training has taken place and the regions
are now self-sufficient in all products.
Fast integration of MasterPack acquisition
Integration of the MasterPack acquisition into the operations of Ability was
substantially completed. The company was acquired in June 2000. Masterpack, a
software developer and distributor, was focused on packaged applications for
the upper mid-range complex distribution market. The acquisition has provided
Ixchange with the platform from which to drive the international expansion of
the Ability division.
Ability moves HQ to Atlanta
Ability rounded off its globalization and moved to boost its penetration of the
North American market by moving its headquarters from South Africa to Atlanta.
Ability Chairman Johan Buys relocated to Atlanta during this period. He joins
in Atlanta Jim Byrnes, President of North American Operations and Cindy Cronin,
VP of eCommerce Fulfillment Product Strategy, and all US-based Ability
employees.
Breakthrough deals for Ability
Ability closed three breakthrough deals in the United States and Britain in the
second part of 2000. The deals were sealed for the e-commerce fulfillment
solution.
XPONENTIAL ENTERPRISES
Xponential Enterprises consolidates to focus on three entities
The period under review saw the implementation of several changes required to
transform what was previously known as the "Incubator" into a more focused
business unit. The division has been re-branded as Xponential Enterprises. The
transformation process involved reducing the number of businesses from seven to
three: Neuratech, JustEnough and Fraxion.
Transfer Secretaries: Computershare, 2nd Floor, Edura House, 41 Fox Street,
Johannesburg, PO Box 61051, Marshaltown, 2107
Directors: DJ Buys (Chairman); DC Kreunen (CEO); JV Buys; AE Gear; CN
DeNobrega*; FS Ladeira*; D Carruthers (Non-executive) (*Alternate)
REGISTERED OFFICE: IXCHANGE, SOUTH AFRICA, Belvedere Place, 5 Eglin Road,
Sunninghill, Sandton
PO Box 76080, Wendywood 2144, South Africa eMail: info@ixchange.com Tel: +27
11 808 6000 Fax: +27 11 808 6001
