MForthright
So, what do you think? Did they do the right thing by dropping off the Y2K stuff? What do you project for the company now? By focusing on the ASP "theme", have they chosen a good one for rapid growth? Share price appreciation?
GROUP WEST SYSTEMS LTD. ANNOUNCES THIRD QUARTER RESULTS
BURNABY, BRITISH COLUMBIA – August 27, 1999 – Group West Systems Ltd. (TSE:GPW), an Application Service Provider (ASP), announced today the financial results of the Company for the third quarter ended June 30, 1999.
Revenues for the third quarter ended June 30, 1999 were $3,707,699 down from $4,085,624 for the third quarter of the previous year. This is a decrease of $377,925 from the third quarter of the previous year.
The Company experienced a loss of $1,793,921 for the third quarter, compared with a profit of $210,890 for the third quarter of the previous year. Much of the current quarter's loss is attributable to the closing of Aaski Technologies Ltd., Group West's wholly owned subsidiary that was the largest component of Year 2000 Conversion (Y2K) business over the past two years. Year 2000 related business dropped off much quicker than the industry had anticipated, necessitating a faster transition to other business than was planned for. This transition of Aaski's revenue sources to other lines of business proved to be much more than budgeted for. The loss recorded in the current quarter associated with the writing down of goodwill, fixed and current assets, and the payment of severance due to the closing of Aaski amounted to $1,422,837.
Sales, marketing, general and administrative expenses increased from $775,529 for the third quarter of 1998 to $1,674,999 for the same period this year. This resulted from the inclusion of the operations of acquisitions that occurred after the June 30, 1998 period, and additional sales and travel costs associated with focusing the company as an Application Service Provider.
The Company has not only taken aggressive measures to eliminate unprofitable business areas, it has proceeded quickly to channel both human and financial resources into the midrange outsourcing marketplace and has successfully positioned itself as a leading Application Service Provider (ASP). Industry analysts are predicting the ASP market to grow at an annualized rate of 100 percent over the next several years. The Company has added infrastructure, acquired software, and established strategic partnerships that has put it in an enviable position on a go forward basis to take advantage of this rapidly growing market. The Company has signed a formal agreement to provide system support services and managed operations to BC Rail, announced an ASP solution for the publishing industry, completed the acquisition of Wescom Computer Services Ltd., and has completed a $750,000 private placement.
FINANCIAL HIGHLIGHT
Third Quarter Ended June 30, 1999
(Unaudited)
1999 1998
Revenues $ 3,707,699 $ 4,085,624
Cost of Sales $ 3,026,600 $ 2,863,431
Operating Expenses $ 1,769,383 $ 818,309
Loss on Discontinued Operations $ 1,422,837 -
Income (Loss) Before Tax $ (2,511,121) $ 403,884
Income Tax Recovery (Expense) $ 717,200 $ (192,994)
Income (Loss) After Tax $ (1,793,921) $ 210,890
Earnings per Share $ (0.282) $ 0.036
Earnings per Share (fully diluted) $ (0.245) $ 0.032
FINANCIAL HIGHLIGHT
Nine Months Ended June 30, 1999
(Unaudited)
1999 1998
Revenues $ 13,484,030 $ 7,262,627
Cost of Sales $ 9,966,445 $ 5,121,960
Operating Expenses $ 4,234,243 $ 1,696,020
Loss on Discontinued Operations $ 1,422,837 -
Income (Loss) Before Tax $ (2,139,495) $ 444,647
Income Tax Recovery (Expense) $ 550,000 $ (192,994)
Income (Loss) After Tax $ (1,589,495) $ 251,653
Earnings per Share $ (0.249) $ 0.043
Earnings per Share (fully diluted) $ (0.217) $ 0.038
Founded in 1976, Group West is in the business of providing midrange outsourcing and supplying computer technology products and services to commercial organizations and government agencies located primarily in North America. The Company currently employs over 120 professionals in Canada and the United States to deliver these products and services to its customer base. The Company is an Application Service Provider (ASP), outsourcing business applications over the Internet. Group West services allow companies to quickly deploy applications for a flat monthly fee, without the cost of implementing and managing the applications or underlying infrastructure. According to Forrester Research Inc., this industry is projected to reach US$21 billion by 2001. Giga Information Group has predicted that network-based rentals will be the most popular way to get desktop computing software by 2002.
Murray
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