JOHANNESBURG (01/27/2004) - Transactions technology and services company, Prism Holdings Ltd., has weathered the impact of the strengthening rand on its dollar-based earnings, as well as global pricing pressure on SIM cards, to end the six-month reporting period to December 31, 2003 profitable, and with cash in the bank.
CEO, Alvin Els, attributes these favorable conditions to the sustainability of the turnaround measures implemented over the past 18 months and the increased contribution of rand-based operations to half-year revenues.
"With 55 percent of Prism's revenue for the six months under review denominated in U.S. dollars, the stronger rand placed significant pressure on the group's earnings. The average exchange rate of 7.06 rand to the dollar that prevailed during the period was 29 percent lower than the average rate that prevailed during the six months to December 2002. If one adjusts for the impact of the strengthened rand, turnover declined by only 6 percent.
"The 6 percent decline is attributable to excess international SIM card manufacturing capacity and resultant downward pressure on global SIM prices. Even with our SIM volumes up, the depressed selling prices had a negative impact on the group's half-year earnings," Els explains.
While the numbers show a decline in turnover, Prism's gross profit margin for the six-month period increased from 51 percent to 60 percent. This is as a result of the group's increased focus on higher-margin business opportunities, including software sales and services.
Looking forward Els anticipates a stabilizing in SIM prices during the next reporting period.
"There is clear evidence that the SIM market is starting to turn, and that SIM prices will stabilize during the next reporting period. Wireless service providers are showing renewed interest in the delivery of advanced applications and data services to their subscribers. The demand for higher-end SIM cards with increased memory capacity and improved Over-The-Air (OTA) application download and management functionality is growing steadily."
"We are also moving into new territories, increasing our focus on high-margin software and services opportunities, and continuing to invest in our IP. Cost containment measures previously implemented are bearing fruit, and we will keep our expansionary plans on hold until market conditions stabilize. Barring any major external factors, such as a significant and sustained decline in the value of the dollar, I believe that Prism will at least be able to deliver on the previous year's 40/60 profit split over the next six months," he concludes.