Revenues plummet but Prophecy looks to future

ASX-listed Adelaide ISV Prophecy International revenues have plunged 29 percent to $6.5 million in the year to 30 June 2003, due mainly to a 48 percent fall in sales from its overseas operations.

Prophecy CEO Alan Greig told the company's annual general meeting on Thursday 30 October that Australian revenues stayed similar to those in the 2001-02 financial year, but 'challenging conditions' in the US and UK had meant a 29 percent fall overall.

The company had cut costs 76 percent in the third and fourth quarters to $374,000 after tax, excluding writedowns, but still suffered an overall loss for the 2002-03 fiscal year of $1.35 million after tax, including redundancy costs.

However, that was 55 percent less than the previous year's losses and the company remained optimistic for 2003-04, Greig told the meeting.

Greig told CRN that a combination of factors had caused the revenue shrinkage. 'We had some product that we were trying to push into the market and demand for that was low. And, generally we found the whole year very difficult for IT spend,' he said.

Greig said products from the company's basis2 acquisition in March had not sold as well as expected. However, orders for the customer information system were expected to pick up, with several companies still scheduled to replace their ageing systems soon.

'We know where our customers stand in terms of replacing their customer information systems. Particularly in the US but in other regions, there is a clear need for people to come out and do that,' he said. 'It's the Y2K rain-shadow. That's what it feels like.'

He said the financial year had been slower than expected. Yet orders were still in the pipeline and would eventually reap rewards - although it was difficult to say when.

'There were several deals we wanted to close in June that haven't happened but could still come through,' Greig added.

Greig said IBM's highly-publicised acquisition of Rational Software early in 2003 had caused problems for Prophecy's Velatte rapid application development environment. In the 2001-02 financial year, Prophecy had signed with IBM to market Java-based Velatte software through Big Blue's partner network.

However, IBM's Rational acquisition meant the giant vendor was now pushing a highly-visible rival through the same channels and Prophecy had 'suspended' its involvement with IBM's alliance program, he said.

'They're not exactly the same sort of products but [Rational] is a product we find in the same space, so it might make it difficult to push ours through the IT channel. So we realised it won't be as valuable,' Greig said.

Prophecy had not pulled out of the IBM alliance but would sit tight and see how things played out. Overall, the company outlook remained optimistic, he said, and no additional cost-cutting exercises were on the cards.

'We've got a good product, we're in good shape, we've got money in the bank and it's a bright sunny day in Adelaide. We've got a positive outlook,' Greig said.