| Tue 19 Aug 2003, 9:12 | | REVIEWED RESULTS FOR THE year ended 30 JUNE 2003 |
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FrontRange -
FRONTRANGE LIMITED
Company registration number 1997/009928/06
ISIN code ZAE000035325
Share code FRO
- R140-million turnaround in operating profit
- Headline earnings up to 16,0 cents a share
- Operating cash inflows of R53-million
- Cash balances of R109-million
REVIEWED RESULTS FOR THE year ended 30 JUNE 2003
CONSOLIDATED BALANCE SHEET 30 June 2003 30 June 2002
R"000 Reviewed Audited
Equities and liabilities
Ordinary shareholders" interest 122 218 180 178
Outside shareholders" interest - 26 904
Long-term liabilities - 1 697
Current liabilities 186 138 279 285
Deferred revenue 102 257 123 960
Trade payables 17 353 31 463
Accruals and other payables 66 528 123 862
308 356 488 064
Assets
Non-current assets
Goodwill 56 457 78 757
Property and equipment 41 767 87 783
Other long-term assets 1 289 5 237
Current assets 208 843 316 287
Inventories 1 503 2 577
Accounts receivable 70 820 171 533
Prepayments and other current assets 26 618 19 055
Cash and cash equivalents 109 902 123 122
308 356 488 064
Net tangible asset value per
share (cents) 42,3 64,3
CONSOLIDATED INCOME STATEMENT Year ended Year ended
30 June 2003 30 June 2002
R"000 Reviewed Audited
Revenue 689 571 819 301
- Continuing operations 689 571 806 907
- Discontinued operations - 12 394
Profit/(loss) from operations 361 (150 165)
- Continuing operations 361 (140 071)
- Discontinued operations - (10 094)
Exchange gains 31 404 12 956
Net finance (expense)/income (249) 4 185
Profit/(loss) after exchange gains
and interest 31 516 (133 024)
Goodwill amortisation (21 310) (34 267)
Exceptional loss (8 936) (83 422)
- Capital (4 076) (27 750)
- Non-capital (4 860) (55 672)
Profit/(loss) before taxation 1 270 (250 713)
Taxation credit/(charge) 4 (1 379)
Profit/(loss) after taxation 1 274 (252 092)
Outside shareholders" interest (154) 31 527
Profit/(loss) attributable to
ordinary shareholders 1 120 (220 565)
Profit/(loss) attributable to
Oridnarey shareholders 1120 (220 565)
Headline adjustments (after tax and
outside shareholders" interest) 24 203 56 098
- Goodwill amortisation 20 771 31 950
- Net capital exceptional items 3 432 24 148
Headline earnings/(loss) 25 323 (164 467)
Number of shares in issue (000"s) 155 607 157 705
Weighted average number of shares on
which EPS and HEPS is based (000"s) 157 135 157 557
Earnings/(loss) per share (cents) "EPS" 0,7 (140,0)
Headline earnings/(loss) per share
(cents) "HEPS" 16,1 (104,4)
Weighted average number of shares on
which diluted earnings per share
is based (000"s) 176 329 168 923
Diluted earnings/(loss) per share
(cents) 0,6 (130,6)
Diluted headline earnings/(loss)
per share (cents) 14,4 (97,4)
Amortisation and depreciation for
the year 51 612 76 459
CONSOLIDATED CASH FLOW STATEMENT Year ended Year ended
30 June 2003 30 June 2002
R"000 Reviewed Audited
Cash generated/(utilised) by operations 53 355 (73 975)
- Continuing operations 53 355 (54 437)
- Discontinued operations - (19 538)
Cash utilised for investing activities (19 526) (4 307)
- Continuing operations (19 526) (6 855)
- Discontinued operations - 2 548
Cash (utilised for)/generated from
financing activities (5 385) 8 220
- Continuing operations (5 385) 8 286
- Discontinued operations - (66)
Net movement in cash position for
the year 28 444 (70 062)
Cash and cash equivalents - beginning
of the year 123 122 166 232
(Subtract)/add: Foreign exchange
effect on cash and cash equivalents (41 664) 26 952
Cash and cash equivalents - end
of the year 109 902 123 122
STATEMENT OF CHANGES IN EQUITY - REVIEWED
Share Foreign
capital currency
and Accumulated translation
R"000 premium loss reserve Total
Balance at 30 June 2001 192 838 (523) 153 654 345 969
Issue of shares during
the year (net of issue
expenses) (35) - - (35)
Write-off of share
issue expenses 38 - (38) -
Foreign currency
translation reserve - - 54 809 54 809
Net loss attributable
to ordinary
shareholders - (220 565) - (220 565)
Balance at 30 June 2002 192 841 (221 088) 208 425 180 178
Issue of shares during
the year (net of
issue expenses) 5 - - 5
FrontRange Solutions,
Inc. share buy-back - - - -
Write-off of share
issue expenses (88) - - (88)
Repurchase of shares (3 644) - - (3 644)
Foreign currency
translation reserve - - (55 353) (55 353)
Net profit attributable
to ordinary
shareholders - 1 120 - 1 120
Balance at 30 June 2003 189 114 (219 968) 153 072 122 218
Primary Segmental Report - reviewed*
Europe, Total Corporate
Middle-East Asia operating head
R"000 Americas and Africa Pacific companies office Total
Revenue -
year ended
30 June 2003 461 245 189 139 39 187 689 571 - 689 571
Revenue -
year ended
30 June 2002 541 821 219 314 45 772 806 907 - 806 907
Operating
profit/(loss)
- year ended
30 June 2003 (31 958) 31 990 4 178 4 210 (3 849) 361
Operating
loss - year
ended
30 June 2002 (82 519) (26 803) (19 408)(128 730) (11 341) (140 071)
*From continuing operations.
TRANSLATED US DOLLAR CONSOLIDATED INCOME STATEMENT:
CONTINUING OPERATIONS+ Year ended Year ended
30 June 2003 30 June 2002
US$"000 Unaudited Unaudited
Revenue
- Licences 37 036 45 302
- Services 6 518 7 022
- Maintenance 32 246 26 969
75 800 79 316
Cost of sales (16 643) (22 000)
Gross profit 59 157 57 293
78,0% 72,3%
Expenses
- Sales and marketing (38 007) (45 034)
- Research and development (12 331) (14 621
- General and administrative (8 779) (11 411)
Operating profit/(loss) 40 (13 773)
TRANSLATED US DOLLAR CONSOLIDATED balance sheet+
Year ended Year ended
30 June 2003 30 June 2002
US$"000 Unaudited Unaudited
Equities and liabilities
Ordinary shareholders" interest 16 361 17 375
Outside shareholders" interest - 2 594
Long-term liabilities - 164
Current liabilities 24 918 26 932
Deferred revenue 13 689 11 954
Other current liabilities 11 229 14 978
41 279 47 065
Assets
Non-current assets
Goodwill 7 558 7 595
Property and equipment 5 591 8 465
Other long-term assets 173 505
Current assets 27 957 30 500
Accounts receivable 9 480 16 541
Other current assets 3 765 2 086
Cash and cash equivalents 14 712 11 873
41 279 47 065
+These schedules have been provided for convenience purposes only. The
measurement currency used for the financial statements and notes is SA rands.
COMMENTS
FrontRange Limited, the JSE-listed holding company owning 100% of US-based
FrontRange Solutions, Inc., is a global leader in business relationship software
for the mainstream business market employing 429 people in ten countries, with a
base of more than 150000 customers worldwide.
The group"s core and integrated mid-market business relationship management
product sets include HEATTM, a leader in Customer Service & Support software and
GoldMineTM, a leader in Business Contact Management and Sales & Marketing
Automation software. HEAT and GoldMine are well-established products and strong
brands in their global markets. In addition, the company launched the first
industry specific solutions developed on top of its CustomerIQ architecture
during November 2002.
Financial highlights for the year ended 30 June 2003
FrontRange continued to improve significantly on the financial results seen in
previous periods. Compared with the equivalent period ended June 2002, it
generated:
- a modest operating profit of R0,4-million compared with an operating loss from
continuing operations of R140,1-million;
- headline earnings of R25,3-million compared with a headline loss of R164,5-
million; and
- operating cash inflows of R53,4-million compared with operating cash outflows
from continuing operations of R54,4-million.
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 R9,10 = US$1
for the income statement, and R7,47 for the balance sheet. The comparable period
income statement was converted at R10,17 = US$1 while the comparable balance
sheet was converted at R10,37 = US$1, resulting in material variances when
comparing the Rand results with the prior year. Accordingly, a translated dollar
based income statement and balance sheet has been presented for the convenience
of users. The exchange rate movement, particularly the recent weakness of the US
dollar, resulted in exchange gains in the income statement of R31,4-million.
Financial performance for the 12 months to June 2003
The overall trading performance was a continuation of the improvement that has
been seen in the results since January 2002. This has been achieved not only by
managing costs, but more positively by maintaining investment in research and
development and by continuing to deliver a compelling product set that has a
fine balance between complexity, functionality and price.
Revenue from continuing operations - down 15% over the previous period to R690-
million: As a result of the operations discontinued in the previous financial
year, continuing operations are represented entirely by the results of
FrontRange Solutions, Inc. and various associated holding company expenses.
The market for software and other technology solutions remains tough worldwide,
and in those conditions, total revenue for the year was R689,6-million (US$75,8-
million), representing an approximate 4% US dollar decline from the comparable
period ended June 2002. Despite the slight decline in revenues, the company
continued to outperform the bulk of its peer group in the global markets.
Revenue from licences was R336,9-million (18% down in dollars to US$37,0-
million) and services revenue was R59,3-million (down 7% in dollars to US$6,5-
million). However as a testament to high levels of customer satisfaction and
retention, FrontRange"s recurring maintenance revenue streams grew to R293,4-
million (up 20% in dollars to US$32,3-million).
Of the total R689,6-million in revenue, only 3% was generated in South Africa
with 66% of revenue coming from North America, 25% from Europe and 6% from the
Asia Pacific region. Although a small component of the total result,
FrontRange"s South African operations had a record revenue and profitability
year.
FrontRange moves into profitability: The group overall made a modest operating
profit of R0,4-million, after losing R150,2-million in the prior year. Exchange
gains, largely unrealised, of R31,4-million emanated from the dollar"s recent
slide against other world currencies.
Exceptional items: FrontRange wrote off R8,9-million in the period as
exceptional items. Of this, R1,5-million relates to residual restructuring of
the South African head office infrastructure and R2,3-million was impairment of
goodwill. A gain of R2,1-million was realised in closing out early a term loan
linked to a preference share investment. R1,0-million was incurred in moving the
Australian office to smaller premises. Severance costs associated with bringing
the group"s cost base in line with market conditions were R4,6-million and other
net capital and non-capital exceptional items totalled R1,6-million.
Key customer wins: FrontRange continues to sell strongly to a diverse customer
base, and is pleased to announce significant licence sales were concluded during
the year with numerous key new customers, including Daimler-Chrysler Africa,
ABSA Direct, City Power, Clover and Gauteng Shared Services in South Africa;
Malaysia Telekom, Ministry of Defence, Singapore, The Economist, Cap Gemini
Ernst & Young and Smorgon Steel in the Australia Pacific region; Option One
Mortgage, Turner Construction, Washington Mutual and US Freightways in America;
and Motorola, Kellogs and The Bank of England in Europe.
Balance sheet
FrontRange"s balance sheet remains clean with no long-term debt. Property and
equipment consists entirely of tangible assets; no development costs are
capitalised. Current assets at period end exceeded current liabilities
(excluding the non-cash deferred revenue liability) by more than 148%.
Deferred revenue, primarily representing maintenance revenue received in
advance, amounted to R102,3-million (US$13,7-million). This compares favourably
with the prior year comparative US dollar balance of R124,0-million (US$11,9-
million), in line with the increase seen in FrontRange"s customer base and its
high customer retention rate.
Cash
Cash flow continued to be managed ahead of the cash management plan"s best-case
scenario. Stringent working capital management resulted in FrontRange generating
operating cash inflows of R53,4-million (US$5,9-million) in the period, to
result in closing cash balances of R109,9-million (US$14,7-million). This is an
improvement on the US$11,9-million held at June 2002, despite US$2,7-million
having been utilised to buy out minorities and R3,6-million being used to
perform a small share buyback at FrontRange Limited.
In addition to generating positive operating cash flows, FrontRange secured a
US$6,0-million unsecured revolving line of credit from Silicon Valley Bank to
support its growth and overall business strategy.
Buy-out of FrontRange Solutions, Inc. minority shareholders
FrontRange Limited began the year owning 84% of FrontRange Solutions, Inc., but
this was increased to 100% as FrontRange Solutions, Inc. utilised US$2,7-million
(R22,3-million) of its existing cash resources to buy out its minority
shareholders between March and April 2003.
Accounting policies and independent review
These financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and have been reviewed but
not audited by Deloitte & Touche, whose report is available for inspection at
the company"s registered office. The accounting policies used in the preparation
of the results announcement, except for the adoption of AC133, are consistent
with those applied in the annual financial statements for the year ended 30 June
2002.
New products released
Despite weak market conditions, FrontRange continued to develop its product
sets, and released several significant new products in the period, including
HEAT 7.0, HEAT Plus Knowledge, GoldMine 6.0, HEAT Asset Tracker 2.0 and GoldMine
Plus Accounting OEM Edition. Significant was the first and limited release of
CustomerIQ, the next generation solutions framework designed and developed
entirely on the Microsoft .NET platform. The CustomerIQ technology is expected
to serve the company"s product set for the next decade. These products will
provide a strong base for FrontRange"s growth going forward.
Board changes
During the year several changes were made to the FrontRange Limited board. Edwin
Gear, Dave Carruthers and Patrick Bultema resigned as directors, while Edward
Ekstrom, Gary Heil and Michael McCloskey joined as independent non-executives.
Outlook for fiscal 2004
Economic projections in the United States and other major world economies
continue to be mixed, and FrontRange will continue to manage the business on the
assumption that little or no improvement will be seen during the year ahead.
FrontRange does, however, expect to be able to build on the profits that it made
during the year ended 30 June 2003, with short-term prospects expected to be
driven largely by a concerted leverage of the existing customer base, expansion
in Asia and specifically China, and the releases of HEAT 8.0 and GoldMine 6.5,
both on track to be released towards the end of calendar year 2003.
Christo Nel Dana Buys
Chairman, FrontRange Limited Chief Executive Officer, FrontRange Limited
Johannesburg
19 August 2003
Directors: C Nel (non-executive chairman); DJ Buys (CEO); E Ekstrom (non-
executive)*; G Heil (non-executive)*, JW Hillyard*; DC Kreunen (non-executive);
M McCloskey (non-executive)*; AJ Pienaar. *US citizen
Company secretary: AJ Pienaar
Date: 19/08/2003 08:13:40 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
