AFA cuts back as losses deepen
28 August 2002 | 3032 views | 0
AFA Systems, the Techmark-listed provider of banking and asset management software, is to cut 20 staff and streamline its operations in London and South Africa after reporting an operating loss of £1.2 million for the first six months of 2002.
The £1.2 million operating loss compares with £48,000 profits in H1 2002. Group revenues for the six months to 30 June 2002 decreased to £3.14 million (2001: £4.08 million). Pre-tax losses almost doubled to £2.16 million from £1.42 million a year earlier.
The company says tough market conditions and a £0.5m investment in its international asset management sales team impacted first half results.
Mike Hart, chairman and chief executive, comments: "Market conditions in the first half have been extremely difficult and our industry has seen a lengthening of the sales cycle and a number of project delays."
He says the outlook for the second half is still unclear.
Shares in AFA slipped slightly by 2.7% on the news to a new year low of 35.5 pence. The company has lost almost a quarter of its value over the year and is now considered by analysts to be a prime target for a bid by a larger competitor.
AFA is belatedly moving to reduce its cost base, cutting staff numbers from 155 to approximately 135, in a bid to deliver annualised savings of £1 million beginning in 2003. The cuts will be felt in London and South Africa, where the company is merging its two offices into one base in Cape Town.
While the company succeeded in squeezing an additional 5% revenue growth from its existing clients, new license sales - particularly for the Dart product - have fared badly. AFA has responded to the sales slowdown by looking beyond its traditional markets in the US, UK and Germany and selling into new territories, such as South Africa, Greece, Israel, Namibia and the Middle East.
The company says that development of the new asset management front, middle and back-office system, Aims, is now complete and that three new contracts have been signed in the period, one of which is now live. Two of these were in South Africa and the third was with a new customer in Greece.