Growth stalls for cloud service provider Fronde

Fronde finds the going tough in its home base of Wellington, New Zealand, and in Australia, but makes progress among Auckland enterprises.

Wellington-based cloud service provider Fronde increased its revenue by 4.6% in the year to 31 March 2014 but experienced a drop in profit to just NZ$0.8 million, compared with NZ$2.7 million for 2013.

Ian Clarke

In accounts lodged with the Unlisted market in New Zealand, chairman Jon Mayson also revealed the integration of Australian NetSuite specialist OnlineOne, acquired last year, has proved more difficult than expected. 

Total revenue for the period was NZ$62.6 million, up from NZ$59.9 million. That 4.6% growth was well below the average 34% achieved over the past three years, Mayson said.

The accounts also reveal OnlineOne was bought for NZ$1.3 million in cash and that Fronde sold its mobile messaging platform, Message Direct, for NZ$1.7 million to Sydney-based Soprano Design. Both sale prices were previously undisclosed.

"Integration of OnlineOne, the company Fronde acquired in Australia in May last year, has taken more time, effort and cost than expected, creating a substantially lower performance in our Australian business than last year," Mayson told shareholders.

"This business generated a loss (including the non‐cash unrealised foreign exchange loss) of NZ$1.8 million against a profit of NZ$0.1 million in the prior period."

CEO Ian Clarke shed further light on those Australian problems:

"Key factors [were] the loss of two thirds of the sales team in the first few months as well as the complexity of our large Australian customers and some problematic projects," he said.

However, the monthly performance and trends of the Australian business in the last few months of the financial year now show it is on target to support the investment case, Mayson said. Therefore the board decided not to impair the asset in the financial statements.

MessageDirect was described as a "valuable and performing asset" but also a "non‐strategic" part of the business. 

Meanwhile, investments in rebuilding the sales team in Australia, market development in the enterprise sector in Auckland and the launch of a new product called Cloud Workspace are expected to generate improved returns in the new financial year.

Cloud Workspace, which integrates AWS, Citrix and Google products, helps clients deliver computing to staff anywhere, anytime and on any device for substantial cost savings, Clarke said. 

Fronde joined the Citrix Partner Programme as a consequence developing Cloud Workspace, and Citrix  is helping to market the product in New Zealand and Australia.

Mayson said the board continues to explore avenues to secure further growth capital.