| Tue 12 Jul 2005, 14:43 | | Results for the 10 months ended 30 April 2005 |
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FrontRange - Reviewed results for the 10 months ended 30 April 2005
FRONTRANGE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/009928/06)
Share code: FRO ISIN: ZAE000035325
(`FrontRange`)
REVIEWED RESULTS FOR THE 10 MONTHS ENDED 30 APRIL 2005
Headline earnings up 104% to $6,7-million
Trading profit up 77% to $4,3-million
Licence revenue up 25% to $27,6-million
Six consecutive quarters of growth
CONSOLIDATED BALANCE SHEET 30 April 2005 30 June 2004
US$`000 Reviewed Audited
Assets
Non-current assets
Goodwill and other intangibles 7 989 7 516
Deferred tax asset 7 206 3 819
Property and equipment 3 865 4 188
Other long-term assets 581 530
Current assets 35 997 30 486
Inventories - merchandise
for resale 22 127
Trade and other receivables 11 508 9 029
Cash and cash equivalents 24 467 21 330
55 638 46 539
Equities and liabilities
Ordinary shareholders` interest 26 611 18 359
Current liabilities 29 027 28 180
Trade and other payables 9 634 9 565
Taxation owing 123 219
Provisions 1 591 2 705
Vendors for acquisition - 1 198
Deferred revenue 17 679 14 493
55 638 46 539
Net tangible asset value
per share (US cents) 7,1 4,5
CONSOLIDATED INCOME STATEMENT
10 months 10 months ended
ended Year ended
30 April 30 April % 30 June
2005 2004 Increase/ 2004
US$`000 Reviewed Unaudited (decrease) Audited
Revenue
- Licences 27 647 22 143 24,9 28 950
- Services 6 389 6 859 (6,9) 8 256
- Maintenance 32 620 30 367 7,4 36 675
66 656 59 369 12,3 73 881
Cost of sales (14 550) (14 149) (16 976)
Gross profit 52 106 45 220 15,2 56 905
Operational expenditure
- Sales and marketing (28 135) (27 115) (32 884)
- Research and
development (12 451) (8 857) 40,6 (11 325)
- General and
administrative (7 205) (6 816) (8 385)
Trading profit 4 315 2 432 77,4 4 311
Amortisation of
intangibles (424) (2 259) (2 755)
Operating profit 3 891 173 1 556
Foreign exchange
gains 308 1 455 2 159
Net finance income 118 166 185
Profit after exchange
gains and interest 4 317 1 794 3 900
Exceptional loss (753) (3 587) (4 072)
- Onerous contracts
in discontinued
operations - (564) (564)
- Onerous contracts
in continued
operations - (1 785) (1 785)
- Other (753) (1 238) (1 723)
Profit/(loss) before
taxation 3 564 (1 793) (172)
Deferred taxation
credit 3 243 2 275 3 547
Taxation charge (29) - (98)
Profit attributable to
ordinary shareholders 6 778 482 3 277
Profit attributable to
ordinary shareholders 6 778 482 3 277
Add: Headline
adjustments (after
tax) (65) 2 817 3 574
- Profit on disposal
of fixed assets (65) (6) (166)
- Amortisation of
goodwill - 2 259 2 755
- Onerous contracts
in discontinued
operations - 564 564
- Other - - 421
Headline earnings 6 713 3 299 103,5 6 851
Number of shares in
issue (000`s) 159 794 155 170 155 294
Weighted average
number of shares on
which EPS and HEPS
is based (000`s) 157 496 155 570 155 654
Earnings per share
(US cents) (`EPS`) 4,3 0,3 2,1
Headline earnings per
share (US cents)
(`HEPS`) 4,3 2,1 101,0 4,4
Weighted average
number of shares on
which diluted earnings
per share is based
(000`s) 186 439 176 612 171 462
Diluted earnings per
share (US cents) 3,6 0,3 1,9
Diluted headline
earnings per share
(US cents) 3,6 1,9 92,8 4,0
Amortisation and
depreciation for
the period 2 484 3 920 4 749
CONSOLIDATED CASH FLOW STATEMENT
10 months Year
ended ended
30 April 30 June
2005 2004
US$`000 Reviewed Audited
Cash generated by operations 4 239 8 585
Cash utilised for investing activities (1 898) (1 496)
Cash generated/(utilised) by financing
activities 410 (555)
Net movement in cash position for the period 2 751 6 534
Cash and cash equivalents - beginning
of the year 21 330 14 712
Add: Foreign exchange effect on cash
and cash equivalents 386 84
Cash and cash equivalents - end of
the period 24 467 21 330
STATEMENT OF CHANGES IN EQUITY
Share Accumu- Non-
capital lated distri-
and profit/ butable
US$`000 premium (loss) reserve Total
Balance at
30 June 2003 25 328 (8 027) (940) 16 361
Issue of shares during
the year (net of
issue expenses) 350 - - 350
Treasury shares held in
FrontRange Share Trust (1 109) - - (1 109)
Share premium arising
on consolidation of
FrontRange Share Trust 204 - - 204
Foreign exchange
effect on share capital
and share premium 4 751 - - 4 751
Foreign currency
translation reserve - - (5 475) (5 475)
Net loss attributable
to ordinary
shareholders - 3 277 - 3 277
Audited balance at
30 June 2004 29 524 (4 750) (6 415) 18 359
Issue of shares
during the period 1 917 - - 1 917
Treasury shares held
in FrontRange
Share Trust (298) - - (298)
Foreign exchange
effect on share capital
and share premium 821 - - 821
Foreign currency
translation reserve - - (966) (966)
Net profit attributable
to ordinary
shareholders - 6 778 - 6 778
Reviewed balance at
30 April 2005 31 964 2 028 (7 381) 26 611
PRIMARY SEGMENTAL REPORT
10 months 10 months
ended ended Year ended
30 April 30 April % 30 June
2005 2004 Increase/ 2004
US$`000 Reviewed Reviewed (decrease) Audited
Revenue
Americas 43 211 37 061 16,6 45 421
Europe, Middle-East
and Africa 19 333 17 962 7,6 22 967
Asia Pacific 4 112 4 346 (5,4) 5 493
Total 66 656 59 369 12,3 73 881
Trading profit
Americas 14 539 7 560 92,3 9 824
Europe, Middle-East
and Africa 2 352 3 461 (32,0) 5 191
Asia Pacific (125) 268 (146,6) 621
Sub-total 16 766 11 289 48,5 15 636
Less:
Research and
development (12 451) (8 857) 40,6 (11 325)
Total 4 315 2 432 77,4 4 311
COMMENTS
FrontRange Limited, the JSE-listed holding company owning 100% of US-based
FrontRange Solutions, Inc., is the leading independent provider of service
management, CRM and communication applications designed specifically for the SME
and distributed enterprise markets. It employs 417 people in 14 countries, with
a base of more than 150000 customers worldwide.
The group`s core and integrated product sets include GoldMine for business
relationship management, team-based contact management and sales forces
automation solutions; IT Service Management with HEAT and ITIL standards-based
modules for complete service management; Communication Management including IP
Contact Centre for reduced telephony costs and increased agent productivity,
streamlined customer service and communications; and Infrastructure Management,
which provides the ability to optimise the full lifecycle of a company`s assets.
Financial highlights for the 10 months ended 30 April 2005
Compared with the 10 months ended April 2004, FrontRange generated:
- licence revenue of $27,6-million, 25% up on $22,1-million;
- total revenue of $66,7-million, 12% up on $59,4-million;
- trading profit (profit before amortisation, exchange gains, finance income
and exceptional loss) of $4,3-million, 77% up on $2,4-million;
- headline earnings of $6,7-million, 104% up on $3,3-million.
Financial performance for the 10 months ended 30 April 2005
The figures are for a ten-month period as FrontRange changed its year end from
June to April.
Revenue: Total revenue for the period was $66,7-million, representing a 12%
increase from the comparable period ended April 2004.
Continued solid sales of FrontRange`s GoldMine and HEAT products combined with
some significant wins in its new IT Service Management and IP Contact Centre
products resulted in strong licence revenue growth of 25% to $27,6-million.
FrontRange`s recurring maintenance revenue streams grew by 7% to $32,6-million.
Whilst services revenue declined by 7% to $6,4-million, it accelerated in the
final quarter as the new products rolled out, with the April 2005 quarter
showing growth of 17% when compared to the comparable quarter in the prior year.
Sequential quarterly revenue growth achieved: Revenue in the software industry
tends to increase in the last month of each quarter. FrontRange changed its year
end away from a calendar quarter end in an attempt to mitigate this.
In order to show a basis of comparison with the trend shown in fiscal 2004, the
results for the last seven fiscal quarters are presented below. These exclude
the month of July 2004 due to the change in year end. FrontRange has generated
six consecutive fiscal quarters of improvement in licences and total revenue as
follows:
Quarter Licence Total Trading
ended revenue revenue profit/(loss)
September 2003 $6,0-million $16,9-million $(0,5)-million
December 2003 $6,9-million $18,2-million $1,3-million
March 2004 $7,5-million $18,9-million $1,7-million
June 2004 $8,5-million $19,9-million $1,9-million
October 2004 $8,7-million $20,2-million $2,1-million
January 2005 $9,1-million $20,7-million $2,1-million
April 2005 $9,2-million $21,6-million $2,2-million*
*Pro-forma number after adding back $0,4-million relating to a one-off non-cash
charge for amortisation of leasehold improvements
Significant increase in research and development investment: Consistent with
FrontRange`s strategy to develop the leading mid-market service management, CRM
and communication management software solutions, FrontRange significantly
increased its investment in research and development in the period to $12,5-
million, a 41% increase over the prior year comparable period.
Exceptional loss: FrontRange incurred an exceptional loss of $0,8-million in the
period, of which $0,5-million related to severance costs in the group`s United
Kingdom and Italian operations.
Profit attributable to shareholders: For the 10 months ended April 2005, the
group made a trading profit of $4,3-million, compared with $2,4-million in the
prior year comparable period.
Due to an improvement in trading conditions and operating results, FrontRange,
as required by the accounting statement on Income Taxes (AC 102), continued to
re-assess deferred tax assets, and recognised in the period an additional $3,2-
million of deferred tax assets. These relate to a portion of the assessed losses
in several of the group`s territories.
Total attributable profit improved to $6,8-million compared to $0,5-million in
the previous year.
Balance sheet
FrontRange`s balance sheet remains liquid with no long-term debt. Current assets
at period end exceeded current liabilities (excluding the non-cash deferred
revenue liability) by more than 217%.
Goodwill and intangible assets include $0,7-million of capitalised research and
development costs associated with product localisations. These costs were
incurred in the April quarter after the technical feasibility of the associated
products had been demonstrated, and will be amortised over an 18-month period.
Deferred revenue, primarily representing maintenance revenue received in
advance, amounted to $17,7-million. This compares favourably with the June 2004
balance of $14,5-million.
The $1,2-million liability to the vendors of Cayo Communications owing at June
2004 was settled by the delivery of 2,2-million FrontRange Limited shares. The
shares had been bought back in the market prior to the acquisition.
The group continues to manage its cash tightly, and increased its overall cash
balance to $24,5-million at year end.
Accounting policies and independent review
These abridged financial statements have been prepared in accordance with the
South African statement on interim financial reporting (AC127), and have been
reviewed but not audited by Deloitte & Touche, whose unqualified review 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 amortisation of goodwill (due to the adoption of AC140: Business
Combinations), are consistent with South African statements of Generally
Accepted Accounting Practice and those applied in the annual financial
statements for the year ended 30 June 2004. The Business Combination Standard is
applied prospectively and therefore has no impact on opening balances or prior
year comparatives.
New products released and development initiatives
FrontRange`s goal is to become the leading provider of service management, CRM
and communication management software solutions for the small, medium and
distributed enterprise markets. In order to achieve this goal, FrontRange has
undertaken an aggressive product strategy of building families of solutions for
unique market segments within these markets. FrontRange has focused its product
development on high growth markets and aims to leverage opportunities within the
group`s large installed base by selling applications with adjacent functionality
on a single platform.
During the period the group released several significant updates to its
GoldMine, HEAT and FrontRange Contact Centre products. Its major new product
release in the fiscal year was IT Service Management, which was released at the
end of January 2005. The group has had some significant early wins with this
product, and by 30 April 2005 had booked deals for 38 different customers.
Key releases scheduled for the next six months include GoldMine Enterprise
Edition and several Infrastructure Management modules, including Inventory,
Asset and Patch Management.
Key customer wins
New customers during the six months to April 2005 include:
North America - AC Nielsen, American Medical Association, NYC Department of
Education, Sitel Corporation, Minolta, El Pollo Loco, First National Technology
Solutions and Life Touch.
Europe, Middle East and Africa - Open Text, Bank of England, Essex Police,
Uganda Telecom, Afrox Healthcare, Limpopo Legislature and Rhino Surveillance
Solutions.
Asia Pacific - Queensland Rail, New Zealand Ministry of Foreign and Trade
Affairs, APN Newspaper, Australian Nuclear Science and Technology, Kotak
Mahindra Bank and PT Asuransi Adira Dinamika.
Board structure
The FrontRange board has adopted a board structure in line with those commonly
seen in American companies, with the chief executive officer being the only
executive director appointed to the main board. Accordingly, John Hillyard and
Julian Pienaar will step down from the FrontRange Limited board effective from
12 July 2005 although both will in all other respects continue in their current
roles in the group.
FrontRange expects to make further non-executive appointments to the board
during the course of the current fiscal year.
Outlook for fiscal 2006
FrontRange continues to view its outlook with confidence. The increased
investment in research and development and ramp up in sales and marketing
initiatives are expected to fuel licence revenue growth and the group,
accordingly, expects that it will be able to continue to build on the revenue
momentum generated over the past 18 months.
Dana Buys
Chairman, FrontRange Limited
Michael McCloskey
Chief Executive Officer, FrontRange Limited
Johannesburg
12 July 2005
Directors: DJ Buys (non-executive chairman); M McCloskey (CEO)*;
E Ekstrom (non-executive)*; G Heil (non-executive)*; DC Kreunen (non-executive).
*US citizen
Company secretary: AJ Pienaar
