Metropolis Transactive Holdings, the JSE-listed media and electronic content group focused on e-commerce, sustained an attributable loss of R5.6 million and a headline loss of 5.4c a share in its maiden nine months to 30 June.
"The figure was as a result of the accelerated community roll-out during the year, and is in line with the expectations of the directors," says CEO Jason Xenopoulos.
Turnover, which Xenopoulos says is "universally regarded as the best indication of a developing Internet media company`s ability to attract customers", came in above prospectus forecasts at R26.1 million.
"Substantial and consistent top line growth was established during the year," he adds.
Strategic planning director Dave Shackleton says the company ended the period with a strong balance sheet, showing cash and near cash resources of R64.7 million, and current assets of R77.3 million.
However, Xenopoulos says the company has been careful to build a strategy to fund growth internally.
During the financial year Metropolis entered into a strategic alliance with US-based VerticalNet, which also runs business-to-business trading communities that bring together buyers and sellers in niche industries.
Metropolis paid $1 million for the intellectual property rights and technologies behind VerticalNet`s e-commerce communities.
"This alliance provides Metropolis with a springboard into the global e-commerce arena and allows the company to leapfrog its developmental process," the company says.
"This relationship, together with a series of acquisitions, joint ventures and new product developments, have contributed to us expanding the company`s three existing vertical communities into a fully-fledged network of 11 online communities which span a range of industries from medical equipment and design to financial services," says Xenopoulos.
The iafrica.com consumer portal was relaunched during the period after a revamp of the site`s structure, functionality and design, he says.
As a result, iafrica.com served a record-breaking average of more than 14.5 million pages a month, according to the Audit Bureau of Internet Standards (ABIS) report for the first quarter of this year.
"This represented over 12 million more accesses than its closest audited competitor and an increase in traffic of 30% on the previous quarter - the highest rate of growth ever achieved by an ABIS-audited site."
Xenopoulos says while the company is positioned for sustainable growth into the future, the continued acceleration of the Metropolis strategy to grow its existing communities while expanding its network of online communities into new markets will result in increased losses the coming financial year. Turnover is expected to show "significant" growth as additional layers of e-commerce functionality are introduced.
Among the divisions, he expects turnover of about R10 million for central data warehousing facility The Knowledge Factory, more than R50 million for shared resource The Community Factory and more than R10 million for iafrica.com.
However, while The Knowledge Factory is expected to post a profit, the other two divisions are expected to report losses, with the greatest loss (almost R30 million) arising among shared costs, including marketing, business development and shared resources.
Analysts polled on Wednesday are hesitant to make forecasts for the company, although most say they expect it to reach profitability in about three years. Some are concerned that the e-commerce market in SA is a tough one because of its small size.
However, ABN Amro analyst Wayne Gunn says although the loss was larger than he expected, it does not worry him as Metropolis has made good progress in laying its foundations. He says e-commerce has "infinite" potential in SA.
The problem the company faces is in keeping its large customers satisfied and ensuring their loyalty, which is essential to achieving growth.
While Metropolis expects to become profitable in 2001, Gunn expects this to happen only in three or four years. He says the question is whether it will be a meaningful profit. Looking at it from the point of view of Datatec, which has a 20.8% stake in Metropolis, a R5 million profit is nothing to a company with an expected operating profit of about R1 billion in 2001.
By late morning on Wednesday the Metropolis share, which is listed on the JSE`s development capital sector, had fallen 16.67% or 30c to 150c.
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