4Front Technologies, Inc. Announces Third Quarter and Nine Months Results
4Front Posts Another Record Quarter
LONDON--(BUSINESS WIRE)--Dec. 1, 1999-- 4Front Technologies, Inc. (''4Front'') (NASDAQ NM/ EASDAQ Symbol: FFTI) announced its results for the third quarter and nine months ended October 31, 1999.
HIGHLIGHTS(a)
(in $'000's, except share and per share data)
Third Quarter Ended October 31, 1999
------------------------------------
1999 1998 % Increase
---- ---- ----------
(unaudited) (unaudited)
Service revenues $ 46,142 $ 22,982 101%
Product revenues $ 19,926 $ 14,664 36%
------ ------
Total revenues $ 66,068 $ 37,646 75%
Operating income $ 4,612 $ 2,392 93%
Net income $ 2,442 $ 1,618 51%
Net income
per share (basic) $ 0.22 $ 0.15 47%
Net income
per share (diluted) $ 0.20 $ 0.14 43%
Diluted shares
outstanding 12,334,483 11,817,022
Nine Months Ended October 31, 1999
----------------------------------
1999 1998 % Increase
---- ---- ----------
(unaudited) (unaudited)
Service revenues $ 123,737 $ 56,096 121%
Product revenues $ 57,973 $ 35,669 63%
------ ------
Total revenues $ 181,710 $ 91,765 98%
Operating income $ 11,614 $ 6,243 86%
Net income $ 6,477 $ 3,946 64%
Net income
per share (basic) $ 0.60 $ 0.46 30%
Net income
per share (diluted) $ 0.55 $ 0.39 41%
Diluted shares
outstanding 11,819,788 9,993,299
(a) A substantial part of the company's growth in the past three
years has been achieved through acquisition. Accordingly, the
results of operations from period to period are not necessarily
comparable.
For the third quarter ended October 31, 1999, total revenues
increased 75% to $66.1 million versus $37.6 million reported for the
comparable year-ago quarter. Net income for the quarter increased 51%
to $2.4 million, or $0.20 per share diluted (based on 12,334,483
shares), versus net income of $1.6 million, or $0.14 per share diluted
(based on 11,817,022 shares), for the comparable year-ago quarter.
For the nine months ended October 31, 1999, total revenues
increased 98% to $181.7 million versus $91.8 million for the
comparable year-ago period. Net income for the period increased 64% to
$6.5 million, or $0.55 per share diluted (based on 11,819,788 shares),
versus net income of $3.9 million or $0.39 per share diluted (based on
9,993,299 shares) for the comparable year-ago period.
Anil Doshi, Chairman and Chief Executive of 4Front, said:
Overall Performance
"The third quarter was another record quarter in terms of both
revenues and earnings. Pre-tax income for the quarter was well ahead
of our target. Due to strong performances in the higher tax-base
Continental European markets, 4Front's overall tax charge was higher
than anticipated, yet net income was still in line with our target.
Again, we continued to see strong margin improvement. The EBITDA
margin for the quarter rose to 9% from 8.3% reported for the preceding
quarter. The operating margin for the quarter rose to 7% from 6.2%
reported for the preceding quarter.
4Front's Strategy
Following further operational growth and the recent acquisitions
of SIL and CVSI, 4Front has exceeded its calendar 2000 revenue
run-rate and service/product mix targets of $250 million and 75/25,
respectively, well ahead of schedule and now aims to achieve an
annualized revenue run-rate of $1 billion by 2004.
Our strategic aim continues to be the establishment of 4Front as
a leading player in the European IT services market. We aim to fulfill
our strategy by accelerating our status as a pure IT services
provider, including strengthening our stable of value-added services,
such as consulting, education and e-business services and software,
all of which are in increasing demand with our customers as the Y2K
issue ebbs.
Pan-European Strategy
Following the recent SIL and CVSI acquisitions, we now have
operating locations in the UK, France, Italy, Belgium, Germany,
Holland, Sweden, Spain and the Czech Republic, which countries account
for over 90% of the European IT services market, as well as the USA
and Japan. We are well-positioned to continue the roll-out of 4Front's
solutions and services offerings on a pan-European basis.
Balance Sheet and Cash
4Front's overall balance sheet and cash position remains strong.
Net book value at quarter end was $5.91 per share, and total cash was
$23 million, or $1.99 per share. Since the quarter-end, 4Front has
completed the acquisition of CVSI for which it received bank financing
of approximately $25 million."
Mark Ellis, Vice Chairman and President of 4Front, said:
Operating Performance and Outlook
"The significant operating margin improvement reflects 4Front's
continuing focus on providing higher-margin services and solid
progress with the integration of acquisitions. Although some market
sectors have seen some slow-down due to Y2K concerns, we continue to
see good demand for 4Front's services in the European IT services
market. In the coming year, with the Y2K issue becoming an event of
the past, we believe the European IT services market will see
accelerated growth in many areas where we are currently active and
plan to be active.
Highlights during the quarter and subsequently included:
Contracts
- The number of contracts worth over $1 million annually to 4Front
rose to over 50 and the average contract size continued to rise.
- 4Front continued to build its managed service business with
significant help-desk and network service wins not only in the
UK, but also in other European markets.
Acquisitions
- SIL Group, a leading European provider of IT services was
acquired.
- CVSI Inc., a leading provider of IT services on a worldwide
basis, was acquired.
Market Positioning
- With the acquisition of several new country operations, 4Front
developed a truly pan-European offering and global reach.
- 4Front continued to successfully develop its close relationship
with leading industry partners, such as Siemens and IBM, and
acquired important new industry partnerships with companies
including Sun, Vignette, Checkpoint, Veritas and Citrix.
- 4Front strengthened its operational capabilities in a number of
areas, such as help-desk services, where support is now provided
in 6 languages on a "follow-the-sun" 24-hour basis.
Over the coming months, a key task for management is the
integration of the recently acquired CVSI operation, which was
4Front's largest acquisition to date. 4Front management is currently
reviewing with CVSI management the optimum basis for the companies'
integration, which we expect to get fully under way shortly. The key
elements of the integration plan relate to the detailed identification
of potential economies of scale arising from integration, to issues of
systems, logistics and rebranding, and to the co-ordination and
expansion of joint activities in those countries, such as the UK,
France, Italy and Germany, where 4Front and CVSI have significant dual
presences. The plan will focus not only on the appropriate
organisational adjustments necessary for the development of existing
business activities, but also on the planned expansion of managed
services, e-business and other value-added operations in Europe, the
U.S and Japan."
About 4Front Technologies, Inc.:
4Front Technologies, Inc., is a leading provider of information
technology and outsourcing solutions, which consist of specialized
computer services and complementary products, primarily to blue-chip
corporations throughout Europe. 4Front's services and solutions
include help-desk support, education services, product-related
services, network services, systems integration, specialized software
services and products and the supply of high-end storage systems.
4Front's customers include British Petroleum, British Telecom, Telecom
Italia, Computer Sciences Corp., IBM, Phillips, Nokia, Siemens, Sony,
Cegedim, Renault, Energis, Pfizer, Cariplo, Societe Generale and the
UK Ministry of Defence. Additional information on 4Front can be found
on the Company's website at www.4fti.com.
The above statements include forward-looking statements based on
current management expectations. Factors that could cause future
results to differ from these expectations include: risks associated
with acquisitions, competition and seasonality. Additional factors are
described in the Company's reports filed with the Securities and
Exchange Commission.
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For The Nine Months Ended
Oct 31, 1999 Oct 31, 1998 Oct 31, 1999 Oct 31, 1998
$ '000's $ '000's $ '000's $ '000's
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Services $ 46,142 $ 22,982 $ 123,737 $ 56,096
Products 19,926 14,664 57,973 35,669
------ ------ -------- ------
66,068 37,646 181,710 91,765
------ ------ -------- ------
Cost of Services 21,880 10,423 59,025 25,723
Cost of Products 17,353 12,332 50,179 29,786
------ ------ -------- ------
39,233 22,755 109,204 55,509
------ ------ -------- ------
GROSS PROFIT
Services 24,262 12,559 64,712 30,373
Products 2,573 2,332 7,794 5,883
------ ------ -------- ------
26,835 14,891 72,506 36,256
------ ------ -------- ------
OPERATING EXPENSES
Selling, general
and administrative
expenses 20,898 11,550 57,171 27,628
Depreciation 451 411 1,289 997
Amortization 874 538 2,432 1,388
------ ------ -------- ------
Total operating
expenses 22,223 12,499 60,892 30,013
------ ------ -------- ------
INCOME BEFORE
INTEREST AND
INCOME TAXES: 4,612 2,392 11,614 6,243
Interest income 199 351 683 527
Interest expense (278) (186) (746) (605)
------ ------ -------- ------
INCOME BEFORE
INCOME TAXES: 4,533 2,557 11,551 6,165
INCOME TAXES 2,091 939 5,074 2,219
------ ------ -------- ------
NET INCOME $ 2,442 $ 1,618 $ 6,477 $ 3,946
------ ------ -------- ------
NET INCOME PER
COMMON SHARE
(Basic) $ 0.22 $ 0.15 $ 0.60 $ 0.46
NET INCOME PER
COMMON SHARE
(Diluted) $ 0.20 $ 0.14 $ 0.55 $ 0.39
4FRONT TECHNOLOGIES, INC. SELECTED BALANCE SHEET INFORMATION
October 31, 1999 January 31, 1999
(unaudited) (audited)
$ '000's $ '000's
Current assets $ 126,010 $ 109,596
Current liabilities 96,463 86,815
Total assets 166,015 146,272
Long-term debt 1,308 780
Stockholders' equity $ 68,244 $ 58,677
------------------------------------------------------------------------
Contact:
4Front Technologies
Mark Ellis / Ken Newell
Tel: 011-44-171-269-5800
or
Shandwick
UK Investor Relations
David Hothersall
Tel: 011-44-171-329-0096
or
Abernathy MacGregor & Frank
US Investor Relations
Jason Thompson
Tel: 212/371-5999 |
