Zergo upbeat on future prospects as its reports £5.5m loss

Zergo Holdings, which acquired Irish company Baltimore Technologies for $60 million (€52.1 million) last December, has reported a £4.8 million sterling (€7.19 million or £5.5 million) loss - before tax and writing off of goodwill - for the eight months to December 31st, 1998. The group says the results are in line with expectations and it is on target with its policy of strategic investment. The figures show turnover of £9.9 million (€14.84), compared to £6.9 million for the same period the previous year or £13.18 million for the full year to last April.

Pre-tax profits will continue to be affected by the accounting treatment of the goodwill write-off relating to Zergo's acquisitions of Baltimore and of Australian company, Security Domain. For this reason the company said the pre-tax profit figure before the goodwill write-off was the best measure. A write-off of £402,907 was made in the eight months to December, after which pre-tax profits rose to £5.17 million.

According to Mr Fran Rooney, chief operating officer of Zergo, the company expects to make another loss this year, possibly breaking even next year. "Our key driver at the moment is market share, not profitability. If you look at key US technology companies, they have not shown profits yet."

Mr Rooney says the group will move to a US Nasdaq stock market listing once the market conditions are right.

The Zergo board recently opted to change the operating name of the company to Baltimore, based on the US Internet security market's familiarity with the brand name. The name was officially changed at the company annual general meeting yesterday.

Investors reacted nervously to the results, as shares fell by as much as 110p at one stage during the day, finally closing down 85p at 760p. However, Mr Rooney says Zergo will continue with its plan of further investment. Zergo's two main competitors are US based Nasdaq companies, VeriSign and Entrust. They are currently moving into the European market, while Zergo begins its push into the US. Industry analysts have predicted this market will be worth between $4 billion and $5 billion by 2001.

Mr Rooney says the Baltimore acquisition would have added about £2.5 million to Zergo's revenues in the year to the end of December, indicating strong growth in Zergo's sales. Since the deal, Baltimore has managed to successfully integrate Zergo's technology with its own.