CR2 cuts losses to €6 million, predicts profits in 12 months

CR2, a Dublin-based technology firm which develops software for banks, more than halved its annual loss to €6 million in the year to the end of June 2002, down from €15 million a year ago

Chief financial officer Mr Conor Walsh attributed the improved performance to success in cutting costs and raising turnover to €16.4 million in the 12 months to the end of June from €14 million last year.

Mr Walsh, who joined CR2 from ABN Amro in 2000, said the firm should be profitable within the next 12 months following belt-tightening measures which began as early as February 2001. The firm currently employs 180 staff, down from a high of 250 in 2001.

"We are now at an inflection point and are close to profit," said Mr Walsh. "In our plan, we have no need to raise money within the next 12 months."

CR2, which operates almost exclusively in developing markets such as Africa, Asia and the Middle East, has raised $34 million (€34.5 million) since it was founded in 1997. Its list of investors include ACT venture capital, Enterprise Ireland, Alpinet - a venture arm of NIB Capital - Belgian firm GIMV, AIB and Goodbody Stockbrokers.

The current volatile market makes it difficult to plan but CR2's focus on developing markets is helping the firm weather the storm, according to Mr Walsh.

"It is a tough market and you just don't know what is coming next but we have a company here that can be profitable on previously attained sales," he said.

"We have a standard recurring licence fee of 18 per cent. This means every year existing customers pay 18 per cent of their first licence payment for maintenance, services and product upgrades."

Mr Walsh disclosed CR2's results in an interview with The Irish Times this week, which coincided with the announcement that CR2 founder and joint chief executive, Mr Ron Downey, had stood down from his post to become non-executive chairman.

Mr Cian Kinsella, co-founder of CR2 with Mr Downey in 1997, has been appointed sole chief executive of the firm after several years sharing the position with Mr Downey.

CR2 develops software that allows banks to deploy different channels to enable their customers to carry out transactions.

Two years ago, it acquired a UK firm, Interlink, which develops technology for ATMs and had scores of existing customers throughout Asia and Africa.

CR2 added these products to its own software portfolio, which enables credit card transactions, internet/mobile banking and more complicated software for integrating back-office banking systems.

It is using Interlink's existing customer base to sell on these other, high-margin products, according to Mr Walsh.

The company recently sold its flagship Bankworld channel manager product in a $1 million plus deal to BankMuscat, the largest bank in the Sultanate of Oman.

The software supplied by CR2 will deliver internet and mobile banking, an upgrade of its ATM system and a flexible facility for back-office system integration.

The company has grown revenues in a tight market, with 70 per cent of sales coming from its existing customers.

Most of the firm's revenues are generated from smaller deals worth about $50,000-$100,000, according to Mr Walsh

"A lot of people are frightened of making decisions on discretionary spending and upgrades at the minute but the financial software market is strong and probably hasn't suffered as much as some other markets."

Mr Walsh believes the initial public offering market is out of the question for the next few years as a method of returning value to investors. And, although the firm would be able to achieve a reasonably good valuation if it were sold, it has no plans to go down this route at present.

CR2 is seeking to expand in new developing markets in Eastern Europe and South America. Mr Walsh believes it is likely to use partnerships with other firms to reduce the cost of this.

The company's most recent annual return to the Companies Office shows that amortisation of goodwill from its acquisition of Interlink accounted for €4.3 million of its losses in the year to June 2001.