| Tue 23 Jul 2002, 0:00 | | Frontrange Limited - Cautionary Announcement |
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FRONTRANGE LIMITED - Cautionary Announcement
(Incorporated in the Republic of South Africa)
(Registration number 1997/09928/06)
("FrontRange Limited")
Share code : FRO
ISIN code : ZAE000035325
FrontRange Solutions Inc.
Quarterly market update for April to June 2002
FrontRange Solutions Inc. ("FrontRange Solutions"), the 84%-owned, US-based
subsidiary of FrontRange Limited, is a global leader in customer management
applications for the mainstream business market. The company employs 517 people
in nine countries and has a user base of more than 1 million people at more than
120,000 companies worldwide.
The company`s core and integrated mid-market CRM products include HEATTM, a
leader in customer service and support software, and GoldMineTM, a leader in
business contact management and sales and marketing automation software. HEAT
and GoldMine are well-established and strong brands in their global markets.
Unaudited financial performance for the fourth quarter of fiscal 2002
FrontRange Solutions, Inc. reported at its interim results on 26 February 2002
that it was budgeting to break-even for the quarter to March 2002, and to make
an operating profit for the fourth quarter ending 30 June 2002 that results in
an overall operational profit for the second half of the fiscal year. At the
market update on 24 April, FrontRange Solutions reported its performance for the
quarter ended March 2002, indicating it was within reach of break-even with an
operating loss of $177 000 on revenue of $20,0-million for the quarter.
Unaudited results show that FrontRange Solutions managed to achieve its
operating profit goal in the fourth quarter by making R2,8-million ($268 000),
an improvement of R49,8-million ($6,2-million) over the equivalent quarter in
the prior year. Overall for the six months to June 2002, FrontRange Solutions
made an operating profit in the region of R1.0-million ($91 000), as compared to
an operating loss of R102,3-million ($12.9-million) in the six months to June
2001.
Encouragingly, this was achieved in the face of continued tough trading
conditions. FrontRange Solutions recorded revenue of R215,0-million ($20,5-
million) in its fourth quarter. In dollar terms, this was 16% below the
equivalent quarter in 2001, although in rand terms this reflects a 10% rise.
Cash continued to be managed tightly, with cash balances at 30 June 2002 of
R127,6-million ($12,3-million). This represented a $2,2-million increase from
December 2001, but a $0,6-million decrease from 31 March 2002, as cash funded
the $0,6-million growth in accounts receivable that resulted from high sales
volume at the end of the quarter and fixed asset purchases of $0,3-million.
FrontRange Solutions` balance sheet continues to be solid with no long-term
debt. Deferred revenue closed at R136,9-million ($13,2-million) at 30 June
2002, compared to $11,5-million at December 2001, evidence of the continued
loyalty of customers to FrontRange Solutions` products.
In terms of dollar revenue split, licence sales declined by 28%, but recurring
maintenance revenue grew by 10% compared with the fourth quarter of fiscal 2001.
As expected, service revenue fell by 3% due to the continued shift of
professional services to FrontRange Solutions` channel partners.
FrontRange Solutions has outperformed its peers over the past 18 months and
continued to gain market share during the quarter, albeit in very tight market
conditions.
Regionally, revenue in the United States operation came close to target, but
Asia-Pacific and Europe, Middle East and Africa came in lower than expected.
FrontRange Solutions` improved profitability is a result of slightly improved
revenue compared to Q3 and the continued strong focus on discretionary
expenditure.
However, FrontRange Solutions continues to invest in research and development to
build a solid base from which to grow. The company is on track for the September
2002 release of the first version of its products based on the Microsoft .NET
platform.
FrontRange Solutions will incur exceptional item restructuring charges of around
R32,0-million ($2,9-million) in the period ended 30 June 2002. Of this, $2,3-
million relates to provisions for future-term onerous contracts associated with
excess office space.
Product and customer highlights for Quarter 4 of fiscal 2002
- FrontRange Solutions further strengthened its senior management with the
appointment of Jerry Lumpkin to its executive team as Senior Vice President of
Marketing.
Lumpkin joined FrontRange Solutions from Ingram Micro, where he was Senior Vice
President of Marketing for North America. He brings to FrontRange more than 15
years of IT industry executive leadership in management, sales, marketing and
business development performance in both domestic and international markets.
International analyst firm, Gartner, listed FrontRange Solutions in the
"Challenger" section of its "2002 IT Service Desk Magic Quadrant" report.
Gartner`s Magic Quadrant positions vendors in a particular market segment based
on the vendors` completeness of vision and ability to execute. Major IT service
desk vendors are categorised and placed in one of four quadrants: Leaders,
Challengers, Visionaries or Niche Players. FrontRange Solutions` strength in the
small and medium-sized business sector has been acknowledged locally and abroad.
- FrontRange Solutions and HEAT were featured in the May issue of Customer
Interaction Solutions magazine, the primary source of comprehensive and unbiased
product information in the communications industry. In a review by TMC Labs,
HEAT was applauded for its rich features and won a Editors` Choice Award for its
customizability and modular approach.
"Overall, HEAT seemed to be a very complete support solution that`s easy to use,
easy to set up and easy to maintain. Its deep degree of customization and
automation make it powerful; its wizard-like interfaces provide a simple
approach to the mastery of some very mature capabilities. . . TMC Labs applauds
FrontRange`s HEAT."
- HEAT also scored top marks across the board in an independent customer
satisfaction survey. HEAT software received the highest marks for ease of use,
reliability and quality. The survey conducted by Strategies for GrowthSM, showed
that 100% of the HEAT customers surveyed believe the software to be "important",
with 62% believing it to be "absolutely essential" to their support operation.
- GoldMine Business Contact Manager was given an eight out of 10 rating by CNET,
a global source of information and commerce services for the technology
industry.
CNET also recommended GoldMine Business Contact Manager above competing
products. CNET reported that "GoldMine Business Contact Manager gets the basics
done right and includes so many features that small businesses will find almost
everything they need."
- GoldMine Business Contact Manager also found favour in the public relations
industry with PRWeek, the industry`s leading journal in the United States,
reporting that sales automation systems like GoldMine have emerged with
intelligence-gathering abilities that have excited the PR community.
- GoldMine Business Contact Manager was also named as an Editor`s Choice on
ZDNet, another IT information and news channel. ZDNet`s review says GoldMine
"offers a profusion of CRM tools powerful enough to suit most small businesses.
In addition, GoldMine is chock-full of effective sales and marketing tools,
including sales forecasting".
Additional capital
FrontRange Solutions considers its cash reserves sufficient to operate the
business with modest growth but, as previously reported, the company continues
to investigate means of securing additional finance to fund potentially higher
growth. Progress with this initiative will be communicated to FrontRange
shareholders when appropriate.
Outlook for fiscal 2003
Management expects the world economy to remain tough, with no improvement seen
at least until early in 2003. Fiscal 2003 will see further product releases,
including HEAT 7.0, HEAT Plus Call Center, HEAT Asset Tracker 2.0 and GoldMine
Plus Accounting OEM Edition.
Shareholders should note that the fourth quarter 2002 results for FrontRange
Solutions as released in this announcement are unaudited and shareholders are
accordingly advised to exercise caution when dealing in FrontRange Limited`s
shares until a reporting accountants report commenting on the results is
released, on or about 31 July 2002.
The audited, consolidated results of FrontRange Limited, 84% owner of FrontRange
Solutions, will be announced on 22 August 2002.
Date: 23/07/2002 05:47:00 PM Produced by the JSE SENS Department
