| Tue 17 Feb 2004, 8:42 | | RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003 |
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FRONTRANGE LIMITED - REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
FRONTRANGE LIMITED
Registration number 1997/009928/06
ISIN: ZAE000035325
JSE Share code: FRO
- Operating profit of $0,8-million
- Headline earnings of $0,4-million
- Cash generated by operations of $3,0-million
- Sequential quarterly revenue growth achieved
REVIEWED RESULTS FOR THE SIX MONTHS ENDED31 DECEMBER 2003
CONSOLIDATED BALANCE SHEET
31 Dec 2003 31 Dec 2002 30 June 2003
R"000 Reviewed Reviewed Audited
Equities and liabilities
Ordinary shareholders"
Interest 93 778 143 196 122 218
Outside shareholders"
Interest - 22 232 -
Long-term liabilities - 3 184 -
Current liabilities 174 579 239 864 186 138
Trade and other payables 50 583 78 926 62 754
Provisions 23 012 35 279 21 127
Deferred revenue 100 984 125 659 102 257
268 357 408 476 308 356
Assets
Non-current assets
Goodwill 46 987 64 215 56 457
Deferred tax asset 4 403 - -
Property and equipment 33 920 58 752 41 767
Other long-term assets 2 446 5 238 1 289
Current assets 180 601 280 271 208 843
Inventories - merchandise
for resale 968 2 066 1 503
Trade and other receivables 67 748 155 307 97 438
Cash and cash equivalents 111 885 122 898 109 902
268 357 408 476 308 356
Net tangible asset value
per share (cents) 27,3 50,0 42,3
CONSOLIDATED INCOME STATEMENT Restated* Restated*
6 months 6 months Year
ended ended ended
31 Dec 2003 31 Dec 2002 30 June 2003
R"000 Reviewed Reviewed Audited
Revenue 249 114 391 080 699 976
Profit/(loss) from
Operations 5 531 (921) 361
Exchange gains 12 652 5 513 31 404
Net finance income/(expense) 731 (890) (249)
Profit after exchange gains
and interest 18 914 3 702 31 516
Goodwill amortisation (9 043) (10 707) (21 310)
Exceptional loss (24 195) (8 470) (8 936)
- Onerous contracts in
discontinued operations (4 016) (5 366) (4 076)
- Other (20 179) (3 104) (4 860)
(Loss)/profit before
taxation (14 324) (15 475) 1 270
Taxation credit 4 403 - 4
(Loss)/profit after taxation (9 921) (15 475) 1 274
Outside shareholders"
Interest - 509 (154)
(Loss)/profit attributable
to ordinary shareholders (9 921) (14 966) 1 120
* - Refer to"Accounting policies and independent review" note contained in the
commentary.
(Loss)/profit attributable to
ordinary shareholders (9 921) (14 966) 1 120
Add: Headline adjustments
(after tax and outside
shareholders" interest) 13 059 15 133 24 203
- Goodwill amortisation 9 043 10 333 20 771
- Onerous contracts in
discontinued operations 4 016 4 800 3 432
Headline earnings 3 138 167 25 323
Number of shares in
issue (000"s) 155 489 157 988 155 607
Weighted average number of
shares on which EPS and HEPS
is based (000"s) 155 352 157 776 157 485
(Loss)/earnings per share
(cents) "EPS" (6,4) (9,5) 0,7
Headline earnings per share
(cents) "HEPS" 2,0 0,1 16,1
Weighted average number of
shares on which diluted
earnings per share is
based (000"s) 181 068 167 873 176 329
Diluted (loss)/earnings
per share (cents) (5,5) (8,9) 0,6
Diluted headline earnings
per share (cents) 1,7 0,1 14,4
Amortisation and depreciation
for the year 16 833 32 400 51 612
CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months Year
ended ended ended
31 Dec 2003 31 Dec 2002 30 June 2003
R"000 Reviewed Reviewed Audited
Cash generated by operations 21 354 29 123 53 355
Cash utilised for investing
Activities (5 759) (3 113) (19 526)
Cash utilised for financing
Activities (116) (2 688) (5 385)
Net movement in cash position
for the period 15 479 23 322 28 444
Cash and cash equivalents -
beginning of the year 109 902 123 122 123 122
Subtract: Foreign exchange
effect on cash and cash
equivalents (13 496) (23 546) (41 664)
Cash and cash equivalents -
end of the year 111 885 122 898 109 902
STATEMENT OF CHANGES IN EQUITY - REVIEWED
Share Non-
capital and Accumulated distributable
R"000 premium loss reserve Total
Balance at 30 June 2002 192 841 (221 088) 208 425 180 178
Issue of shares during
the year (net of share
issue expenses) (45) - - (45)
Write-off of share
issue expenses 50 - (50) -
Treasury shares held in
FrontRange Share Trust (3 644) - - (3 644)
Foreign currency
translation reserve - - (55 391) (55 391)
Net profit attributable
to ordinary
shareholders - 1 120 - 1 120
Balance at 30 June 2003 189 202 (219 968) 152 984 122 218
Issue of shares during
the year (net of issue
expenses) (114) - - (114)
Write-off of share
issue expenses 118 - (118) -
Treasury shares held in
FrontRange Share Trust (1 525) - - (1 525)
Foreign currency
translation reserve - - (18 315) (18 315)
NDR arising on
consolidation of
FrontRange Share Trust - - 1 435 1 435
Net loss attributable
to ordinary
shareholders - (9 921) - (9 921)
Balance at
31 December 2003 187 681 (229 889) 135 986 93 778
PRIMARY SEGMENTAL REPORT - REVIEWED
Europe,
Middle-East Asia
R"000 Americas and Africa Pacific
Revenue - half year ended
31 December 2003 156 667 74 384 18 063
Revenue - half year ended
31 December 2002 264 593 105 590 20 897
Operating profit/(loss)
- half year ended
31 December 2003 32 430 10 466 1 203
Operating profit/(loss)
- half year ended
31 December 2002 45 355 20 162 1 778
PRIMARY SEGMENTAL REPORT - REVIEWED
Total Research
Operating and Corporate
R"000 companies* development office Total
Revenue - half year ended
31 December 2003 249 114 - - 249 114
Revenue - half year ended
31 December 2002 391 080 - - 391 080
Operating profit/(loss)
- half year ended
31 December 2003 44 099 (36 112) (2 456) 5 531
Operating profit/(loss)
- half year ended
31 December 2002 67 295 (65 964) (2 252) (921)
*Before research and development, R36,0-million of which was incurred in the
Americas (2002: R62,7-million).
PROFORMA US DOLLAR CONSOLIDATED
INCOME STATEMENT* Restated Restated
6 months 6 months Year
ended ended ended
31 Dec 2003 31 Dec 2002 30 June 2003
US$"000 Reviewed Reviewed Audited
Revenue
- Licences 12 946 19 619 37 036
- Services 4 231 3 827 7 662
- Maintenance 17 909 15 467 32 246
35 086 38 913 76 944
Cost of sales (8 470) (8 487) (17 325)
Gross profit 26 616 30 426 59 619
75,9% 78,2% 77,5%
Expenses
- Sales and marketing (16 803) (19 695) (38 469)
- Research and development (5 087) (6 563) (12 331)
- General and administrative (3 947) (4 259) (8 779)
Operating profit/(loss) 779 (91) 40
PROFORMA US DOLLAR
CONSOLIDATED BALANCE SHEET* 31 Dec 2003 31 Dec 2002 30 June 2003
US$"000 Unaudited Unaudited Audited
Equities and liabilities
Ordinary shareholders"
Interest 14 102 16 535 16 361
Outside shareholders"
Interest - 2 567 -
Long-term liabilities - 368 -
Current liabilities 26 253 27 697 24 917
Trade and other payables 7 606 9 114 8 400
Provisions 3 461 4 073 2 828
Deferred revenue 15 186 14 510 13 689
40 355 47 167 41 278
Assets
Non-current assets
Goodwill 7 066 7 415 7 558
Deferred tax asset 662 - -
Property and equipment 5 101 6 784 5 591
Other long-term assets 368 605 173
Current assets 27 158 32 363 27 956
Inventories - merchandise
for resale 146 239 201
Trade and other receivables 10 187 17 933 13 043
Cash and cash equivalents 16 825 14 191 14 712
40 355 47 167 41 278
*These schedules are provided for convenience purposes only.
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 377 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 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 their global markets.
FINANCIAL HIGHLIGHTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
FrontRange continued to improve significantly on the financial results seen in
previous periods. Compared with the equivalent period ended December 2002, it
generated:
* operating profit of $0,8-million (R5,5-million) compared with an operating
loss of $0,1-million (R0,9-million);
* headline earnings of $0,4-million (R3,1-million) compared with $17000 (R0,2
million); and
* operating cash inflows of $3,0-million (R21,4-million) compared with $2,9-
million (R29,1-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 R7,1 = $1 for
the income statement, and R6,65 for the balance sheet. The comparable period
income statement was converted at R10,05 = $1 while the comparable balance sheet
was converted at R7,67 = $1, resulting in material variances when comparing the
rand results with the prior year. As only 4% of the group"s operations occur in
South Africa, a translated dollar-based income statement and balance sheet has
been presented for the convenience of users, and prime reference in this
analysis is given to the dollar numbers.
FINANCIAL PERFORMANCE FOR THE SIX MONTHS TO DECEMBER 2003
The overall trading performance was a continuation of the improvement that has
been seen in the results over the last two years.
Revenue: Total revenue for the period was $35,1-million (R249,1-million),
representing an approximate 10% US dollar decline from the comparable period
ended December 2002.
As a testament to high levels of customer satisfaction and retention,
FrontRange"s recurring maintenance revenue streams continued the trend shown
over recent years, growing 16% to $17,9-million (R127,2-million). Services
revenue rose by 11% to $4,2-million (R29,8-million). Market conditions and a
lack of compelling new product launches until late in the period resulted in
revenue from licences falling by 34% to $12,9-million (R91,9-million).
Only 4% of the revenue was generated in South Africa with 63% of revenue coming
from North America, 26% from Europe and 7% from the Asia-Pacific region.
Although a small component of the total result, FrontRange"s South African
operations continued to perform exceptionally well.
Operating profit: The group overall made an operating profit of $0,8-million
(R5,5-million), after an operating loss of $0,1-million (R0,9-million) in the
prior year comparable period. On top of this, FrontRange benefited from exchange
gains, largely unrealised, of $1,8-million (R12,7-million), which stemmed from
the dollar"s decline against other world currencies.
Quarterly revenue growth achieved: The September quarter is traditionally
FrontRange"s weakest quarter and this year was no exception. The FrontRange
group overall in the September quarter achieved revenue of $16,7-million
resulting in an operating loss of $0,5-million. Revenue in the December quarter
grew to $18,3-million, generating operating profit of $1,3-million.
Exceptional items: Stemming from a continued drive to generate maximum operating
efficiencies, FrontRange wrote off $3,4-million (R24,2-million) in the period as
exceptional items. Of this, $1,4-million relates to provisions for onerous lease
contracts at the group"s Los Angeles, Colorado Springs and Reading offices. An
additional $0,6-million has been written off relating to onerous leases in
Maestro Commerce, a discontinued operation in Chicago. $0,7-million was incurred
in the closure of FrontRange"s French office. Severance costs associated with
bringing the group"s cost base in line with market conditions were $0,6-million
and other exceptional items totalled $0,1-million.
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 145%.
Deferred revenue, primarily representing maintenance revenue received in
advance, amounted to $15,2-million (R101,0-million). This compares favourably
with the June 2003 balance of $13,7-million (R102,3-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 $3,0-million (R21,4-million) in the period, to result
in closing cash balances of $16,8-million (R111,9-million).
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, with the exception of the classification of
rebillable expenses and the consolidation of the FrontRange Share Trust, are
consistent with those applied in the annual financial statements for the year
ended 30 June 2003.
The impact of the Share Trust consolidation is not material and therefore no
adjustments have been made to the comparative figures in that regard. The
reclassification of rebillable expenses had no impact on overall operating
profit as it increased both revenue and operating expenses by $0,7-million.
Revenue and operating expenses for the comparable period ended 31 December 2002
were both increased by $0,5-million.
NEW PRODUCTS RELEASED AND DEVELOPMENT INITIATIVES
FrontRange continued to develop its product sets, and released two significant
new products towards the end of the period, being HEAT 8.0 and GoldMine 6.5.
FrontRange also extended its product development capacity with the opening of an
office in Silicon Valley in order to fast track certain initiatives. The product
development pipeline remains full, with releases scheduled towards June 2004
including the release of HEAT Customer IQ and a new Contact Centre Solution,
although is expected that these products" benefits will begin to be realised
only in the next financial year.
SIGNIFICANT NEW MANAGEMENT RECRUITS
FrontRange in the period has made some significant new management recruits.
FrontRange Solutions, Inc. is being headed up by Michael McCloskey, who
previously ran Genesys Telecom and Kana Communications. Dave Smith, the new
Vice President of US Sales, joined FrontRange from 3Com, where he was Vice
President of US Sales. Keith Barr, the new VP of Product Development, is a
software development veteran, having been the co-founder of Echopass, a hosted
call centre solutions provider. Patrice Tollenaere, the new Senior Director of
Development, joined FrontRange from Network Associates, where he was CTO and VP
of Engineering of its Magic Solutions Business Unit.
OUTLOOK FOR THE REMAINDER OF FISCAL 2004
Cost-cutting initiatives already executed have resulted in FrontRange having an
expense base in the region of $17-million per quarter and FrontRange does not
anticipate having to take any significant additional restructuring charges in
the period ending June 2004. Economic projections in the United States and other
major world economies seem to be improving, and FrontRange is cautiously
confident that it will be able to build on the incremental quarterly revenue
achieved in the previous two quarters.
Christo Nel Dana Buys
Chairman, Chief Executive Officer,
FrontRange Limited FrontRange Limited
Johannesburg
17 February 2004
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*;
AJ Pienaar.
*US citizen
Company secretary:
AJ Pienaar
Date: 17/02/2004 08:00:42 AM Produced by the JSE SENS Department
