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FrontRange Limited - Reviewed results for the year ended 30 June 2002
FrontRange Limited
(formerly Ixchange Technology Holdings Limited)
Company registration number 1997/009928/06
ISIN No. ZAE000035325
Share code No. FRO
Reviewed results for the year ended 30 June 2002
FrontRange Limited, the JSE-listed holding company owning 84% of US-based
FrontRange Solutions, Inc., is a global leader in customer management
applications for the mainstream business market employing 517 people in nine
countries, with a base of more than 130,000 customers worldwide. Formerly
known as Ixchange Technology Holdings Limited, the company changed its name
to FrontRange Limited and has been trading under this name on the JSE
Securities Exchange South Africa since 14 January 2002. The name change
reflects the company`s total focus on the CRM solutions provided by
FrontRange Solutions, Inc.
The group`s core and integrated mid-market CRM product sets 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 products and strong brands in global
markets.
Financial highlights for the six months to June 2002
Resulting from concerted steps to restore the group to profitability,
FrontRange recorded significantly better results in the six months to June
2002 compared with the previous six months, the highlights being:
The FrontRange Solutions division recorded an operating profit of R5-million
compared with an operating loss of R133-million in the six months to December
2001;
The group operating loss from continuing operations reduced to R4-million
from R135-million in the previous six months;
Operating cash inflows of R26-million, compared to operating cash outflows of
R100-million in the six months to December 2001;
An ungeared balance sheet. Current assets at year-end exceeded current
liabilities (excluding deferred revenue) by more than 100%.
Financial performance for the year to June 2002
Discontinuing operations: During the early part of the financial year,
FrontRange Limited finalised agreements to dispose of its non-core
operations, ensuring that loss-making, non-core operations did not consume
any more resources from the operations of FrontRange Solutions, Inc.
Continuing operations: As a result of the discontinuing operations,
continuing operations are represented almost entirely by the results of
FrontRange Solutions, Inc. and various associated holding company expenses.
Revenue from continuing operations up 22% over the previous year to R807-
million:
In continued tough economic conditions, revenue from continuing operations
was R807-million ($79,3-million), representing a 22% increase in rand-terms
but an approximately 8% US dollar decline from the comparable period in the
prior year. Despite the small decline in revenues experienced, the company
continued to significantly outperform its peer group in the global markets.
As a testament to high levels of customer satisfaction and retention,
FrontRange`s recurring revenue streams grew by 21% in US dollar terms over
the prior year period to 34% of total revenue. Deferred revenue grew from
R76-million a year earlier to R124-million at June 2002.
Of the total R807-million in revenue, almost 98% was generated outside of
South Africa with 67% of revenue coming from North America and 31% from
Europe and the Asia-Pacific region.
FrontRange Solutions moves into profitability: The FrontRange Solutions
division made an operating profit of R5-million in the six months to June
2002 after having lost R133-million in the previous six months. This
turnaround came on the back of strong focus and the cutting of certain
discretionary expenditure. Importantly, FrontRange Solutions continues to
invest in research and development to build a solid base from which to grow
and is on track for the September 2002 release of the first version of its
next generation products, architected for the Microsoft .NET platform.
Operating loss from continuing operations of R139-million: Continued focus on
cost control resulted in an operating loss from continuing operations for the
group in the six months to June 2002 of R4-million. This followed an
operating loss from continuing operations of R135-million in the six months
to December 2001, giving a loss of R139-million for the year overall.
Exceptional items: Following detailed scrutiny, FrontRange has written off
approximately R83-million in the period as exceptional items. Of this,
around R32-million relates to provisions for future-term onerous contracts
associated with excess office space (mainly in the USA), and a further R27-
million was the write-off in the USA of certain pre-paid royalties, with
severance charges of R18-million making up the majority of the remainder of
the balance
Cash: Cash flow was managed ahead of the original cash management plan`s best-
case scenario. Group operating cash inflows of R26-million for the six
months to June 2002 helped boost cash reserves to R123-million ($11,9-
million) at the end of June 2002.
Exchange rate for conversion: FrontRange`s results and financial position
have been converted respectively at the average and closing exchange rates of
the period. These were R9,28 = $1 and R11,03 = $1 for the first and second
six months of the income statement, and R10,37 for the balance sheet.
Accounting policies
The accounting policies used in the preparation of the interim results
announcement are consistent with those applied in the previous year ended 30
June 2001, and comply with South African statements of Generally Accepted
Accounting Practice.
Independent review
The financial information has been reviewed by Deloitte and Touche, whose
report is available to members for inspection at FrontRange`s registered
office. It is anticipated that an unqualified audit report will be released
once FrontRange`s detailed annual financial statements have been finalised.
Going concern
The Board has continued to take steps to restore the group to profitability,
resulting in the significantly improved result for the six months to June
2002 compared with the six months to December 2001 and the previous financial
year. Based on the improved results, expense savings, the R123-million cash
on hand at June 2002 and the plan, detailed below, to raise additional funds
to boost its currently ungeared balance sheet, the board is satisfied that
FrontRange will continue as a going concern for the foreseeable future.
Raising additional capital
FrontRange considers its cash reserves sufficient to operate the business per
the Fiscal Year 2003 business plan, but, as previously reported, 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
Profits expected: FrontRange management expects the world economy to remain
tough, with no improvement seen until at least 2003. The company expects to
make a small loss in the quarter to end-September 2002 due to the launch of
the next generation products and GoldMine 6.0. However, FrontRange
anticipates it will be profitable after the first quarter and show a modest
profit and positive cash flows overall for the year ahead.
Fiscal 2003 will also see further product releases, including HEAT 7.0, HEAT
Plus Call Center, HEAT Asset Tracker 2.0 and GoldMine Plus Accounting OEM
Edition.
Renewal of cautionary announcement
On 22 July 2002, FrontRange Limited issued a cautionary announcement,
advising shareholders that it had entered into discussions which, if
successfully concluded, could have a material effect on the price of
FrontRange Limited`s shares. Discussions to this effect are still
continuing, and shareholders are accordingly advised to continue to exercise
caution when dealing in FrontRange Limited`s shares until a further
announcement is made.
Christo Nel Dana Buys
Chairman, FrontRange Limited Chief Executive Officer, FrontRange
Limited
22 August 2002
FrontRange Limited
(formerly Ixchange
Technology Holdings
Limited)
As at As at As at
30 June 31 December 30 June
Consolidated Balance 2002 2001 2001
Sheet
R`000 Reviewed Reviewed Audited
Equities & Liabilities
Ordinary shareholders`
interest 180,178 243,551 345,969
Outside shareholders`
interest 26,904 34,145 51,107
Long-term liabilities
1,697 442 768
Current Liabilities
279,285 366,508 250,006
Deferred revenue
123,960 145,327 76,361
Trade payables
31,463 39,593 52,962
Accruals & other payables
123,862 181,588 120,683
488,064 644,646 647,850
Assets
Non-current assets
Goodwill
78,757 101,390 102,248
Property, plant and
equipment 87,783 119,119 91,295
Other long-term assets
5,237 5,430 23,385
Investments
- - 1,324
Current assets
316,287 418,707 429,598
Inventories
2,577 2,992 10,011
Accounts receivable
170,615 231,886 163,401
Prepayments and other
current assets 16,751 50,386 46,720
Deferred costs
918 828 734
Taxes receivable
2,304 508 42,500
Cash & cash equivalents
123,122 132,107 166,232
488,064 644,646 647,850
FrontRange Limited 6 months 6 months Year to Year to
to to
Consolidated Income 30 June 31 30 June 30 June Change
Statement 2002 December 2002 2001
2001
R`000 Reviewed Reviewed Reviewed Audited %
Revenue 9.2%
446,261 373,040 819,301 750,532
- Continuing 22.0%
operations 446,396 360,511 806,907 661,625
- Discontinuing
operations (135) 12,529 12,394 88,907
Loss from operations -54.0%
(5,017) (144,401) (149,418) (324,489)
- Continuing
operations (4,119) (135,205) (139,324) (206,428)
- Discontinuing
operations (898) (9,196) (10,094) (118,061)
Goodwill
amortisation (19,006) (15,261) (34,267) (38,893)
Net finance income
8,184 8,210 16,394 23,768
Exceptional items
(29,543) (53,879) (83,422) (138,420)
- Capital
(15,078) (12,672) (27,750) (113,824)
- Non-capital
(14,465) (41,207) (55,672) (24,596)
Loss before taxation -47.6%
(45,382) (205,331) (250,713) (478,034)
Taxation credit/
(charge) 2,834 (4,213) (1,379) (129,419)
Loss after taxation -58.5%
(42,548) (209,544) (252,092) (607,453)
Outside
shareholders` 3,864 27,663 31,527 142,763
interest
Loss attributable to -52.5%
ordinary (38,684) (181,881) (220,565) (464,690)
shareholders
Add:
Headline adjustments
(after outside 29,528 26,571 56,098 196,604
shareholders`
interest)
- Goodwill
amortisation 17,827 14,124 31,950 27,448
- Write-off of
deferred tax asset - - - 85,687
- Exceptional
items - capital 11,701 12,447 24,148 83,469
Headline loss -38.7%
(9,156) (155,310) (164,467) (268,086)
Number of shares in
issue (000`s) 157,704 157,590 157,704 157,401
Weighted average
number of shares on
which
LPS & HLPS is based
(000`s) 157,621 157,323 157,354 157,198
Loss per share (295.61)
(cents) "LPS" (24.54) (115.61) (140.17)
Headline loss per (170.54)
share (cents) "HLPS" (5.81) (98.72) (104.52)
Weighted average
number of shares on
which diluted
headline earnings
per share is based 168,986 167,759 168,719 163,881
(000`s)
Diluted headline (163.59)
loss per share (5.42) (92.58) (97.48)
(cents)
Amortisation and 45,802 30,657 76,459 69,578
depreciation for the
period
FrontRange Limited
6 months to 6 months to Year to Year to
Consolidated Cash Flow 30 June 2002 31 December 30 June 30 June
Statement 2001 2002 2001
R`000 Reviewed Reviewed Reviewed Audited
Cash flows from operating
activities
Operating loss before
finance income and (24,023) (159,662) (183,685) (324,489)
exceptional items
Exceptional items
(29,543) (53,879) (83,422) (30,717)
Reclassification -profit
from disposals 548 (7,060) (6,512) -
Depreciation, amortisation
and other non-cash items 65,650 23,343 88,993 100,439
Decrease/ (increase) in net
working capital 4,107 51,275 55,382 (7,674)
Net finance income
8,184 8,210 16,394 23,768
Taxation received/ (paid)
1,096 37,779 38,875 (3,019)
Cash generated/ (utilised)
by operations 26,019 (99,994) (73,975) (241,692)
- Continuing operations
24,236 (82,424) (58,188) (113,249)
- Discontinuing
operations 1,783 (17,570) (15,787) (128,443)
Net acquisition of
subsidiaries, trading (129,073)
operations & associates
Net proceeds on disposal of
subsidiaries 4,100 7,060 11,160 672
Net (increase)/ decrease in
investments and intangibles 5,914 (13,079) (7,165) 2,148
(Decrease)/ increase in
long-term receivables 192 17,956 18,148 172
Net sale/ (acquisition) of
property, plant and (27,472) 1,022 (26,450) (54,855)
equipment
Cash (utilised for)/
generated by investing (17,266) 12,959 (4,307) (180,936)
activities
- Continuing operations
(17,796) 10,228 (7,568) (180,248)
- Discontinuing
operations 530 2,731 3,261 (688)
(Decrease)/ increase in
share capital, NDR and 40 (74) (34) (68,864)
other
(Decrease)/ increase in
long term loans 1,255 (325) 930 (1,136)
Increase/ (decrease) in
amounts due to minorities (3,377) 10,701 7,324 (5,721)
Decrease in amounts due to
vendors - - - (488)
Cash (utilised for)/
generated by financing (2,082) 10,302 8,220 (76,209)
activities
- Continuing operations
(2,082) 10,368 8,286 (75,159)
- Discontinuing
operations - (66) (66) (1,050)
Net movement in cash
position for the period 6,671 (76,733) (70,062) (498,837)
Cash & cash equivalents -
beginning of the period 132,107 166,232 166,232 641,029
add : Net movement in cash
position for the period 6,671 (76,733) (70,062) (498,837)
(subtract)/ add: Foreign
exchange effect on cash (15,656) 42,608 26,952 24,040
equivalents
Cash & cash equivalents -
end of the period 123,122 132,107 123,122 166,232
FrontRange Limited
6 months to 6 months Year to Year to
to
Statement of changes in 30 June 31 30 June 30 June 2001
equity 2002 December 2002
2001
R`000 Reviewed Reviewed Reviewed Audited
Balance at beginning of
period 243,551 345,969 345,969 719,778
Issue of shares
39 (73) (34) 1,323
Net loss attributable to
ordinary shareholders (38,684) (181,881) (220,565) (464,690)
(Decrease)/ increase in
foreign currency (24,728) 79,536 54,808 97,860
translation reserve
Movement in other non
distributable reserves - - - (8,302)
Closing balance at end of
period 180,178 243,551 180,178 345,969
Date: 22/08/2002 05:05:00 PM Produced by the JSE SENS Department
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