Baltimore sees pre-tax losses fall 90% with restructuring

Troubled internet security firm, Baltimore Technologies, has emerged from a radical restructuring with a 90 per cent reduction in pre-tax losses and a 50 per cent drop in turnover.

The company, which has shed hundreds of staff and disposed of several businesses accumulated during the technology boom, cut its losses from £659.7 million in 2001 to £65.3 million (€96.41 million) last year.

Revenues were halved to reach £35 million over the same period, reflecting both Baltimore's reduced size and a difficult market for the company's products.

Analysts were disappointed by the results, suggesting that break-even remained a distant prospect for the company as long as revenues failed to display real growth.

The full-year results showed that turnover within continuing operations fell by 21 per cent to £26.5 million in 2002.

Baltimore management declined to offer detailed guidance on the company's future yesterday, describing the current market for its products as "uncertain, difficult to predict and slow-moving".

In a statement, company chairman, Mr Peter Morgan, said the company was expecting the overall IT environment to remain "sluggish". He added that Baltimore hoped to benefit from increasingly "selective and focused" IT budgets, particularly within the public sector.

Baltimore chief executive, Mr Bijan Khezri, acknowledged that the company's "challenge" was to grow revenues rather than drive profitability through cost reduction.

Baltimore reduced its monthly "cash burn" to £1.1 million in the second half of 2002 from £5.1 million in the previous year.

At the end of December, it retained cash balances of £17.9 million, boosted in the main by a gross receipt of £19.5 million from the sale of its Content Technologies business.

Goodbody analyst Mr Gerry Hennigan said it was crucial for Baltimore to continue completing new deals if its balance sheet was to reach "stability".

The company has highlighted Central and Eastern Europe, the Middle East and Asia as prospective sources of new business in 2003, and has announced a new $2.8 million (€2.6 million) contract to supply security technology to the Saudi Arabian Monetary Agency.

Observers have expressed some concern about a slight drop on margins, however, pointing to a decline in gross margins from 54 per cent to 53 per cent between 2001 and 2002. Ms Bernie Lardner, analyst with Davy Stockbrokers, said the latest numbers suggested Baltimore would find it difficult to break even before the end of 2004. Questions remained about the company's future viability as an independent company, she said.

Shares in Baltimore closed 2 per cent lower at 22p in London last night.