Fronde annual sales fall for second year, restates 2016 earnings
By Jonathan Underhill
June 19 (BusinessDesk) – Fronde Systems Group posted a 13 percent fall in full-year revenue, the third straight annual decline, but was able to record a gain in earnings before tax after restating its 2016 results following a change in the accounting treatment of its investment in its Australian business.
Revenue dropped to $50 million in the 12 months ended March 31 from $57.4 million a year earlier, the Wellington-based company said. Profit before tax was $1.43 million from a restated $860,000 a year earlier.
It had previously reported 2016 pretax profit of $1.42 million and the change reflected the company's decision to change the treatment of foreign exchange gains and losses related to its "net investment in Fronde Australia".
"Unrealised forex gains relating to our net investment in Fronde Australia recorded in profit before tax for the prior period, are now treated as a movement in the foreign currency translation reserve," the company said.
On that basis, “as a percentage of revenue, profit before tax has doubled to 2.9 percent, driven by improvements in gross margins,” it said. Gross margin rose to 31 percent from 27 percent, it said. Cash was positive from April last year, with no debt at the end of the full year.
Fronde's shares trade on the Unlisted platform, which has fewer disclosure requirements than for companies listed on the NZX main board. It published a two-page media release with highlights of its full-year results ahead of its annual report. The company fell into the red in 2015 after a slump in revenue from its Wellington-based business, which offset improved sales in Australia and at its Auckland business. It recovered last year after cutting costs and staff, and focusing on more profitable parts of its business.
“Fronde continues to undergo substantial change. This past year we’ve focused on company transformation and customer success while improving profitability," chief executive Anthony Belsham said in the statement. "Fronde’s revenue is increasingly less reliant on large one-off projects, and despite the overall reduction of 13 percent versus the same period last year, gross margin has increased. Improving margins has enabled us to invest in sales and marketing initiatives, particularly to support growth in Australia."
Chairman David Bartlett said the board was "encouraged by the results, and that the investment in building a differentiated market position in New Zealand and Australia is gaining traction."
Fronde declared a fully-imputed dividend of 4 cents a share, payable on June 30, with a record date of June 23. That's the first dividend payment since March 31, 2013.
The shares last traded at $1, giving Fronde a market value of $7.6 million.