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Good news for Solution 6 shareholders

  1. 3,567 Posts.
    Solution 6 to divest loss-making IT services division
    Jun 7
    Lachlan Johnston

    Technology group Solution 6 is believed to be close to divesting most of its loss-making IT services division as the company moves to pare back its operations to its core software business.

    The group, backed by the Packers and Sir Ron Brierley, is understood to be in final negotiations with a party to purchase its Alpha West business, which has been hit hard by the downturn in demand for IT services.

    The sale is likely to coincide with an announcement on further software acquisition intentions by Solution 6, with technology stock analysts believing chief executive Neil Gamble has a US purchase in mind.

    Solution 6 has just completed the acquisition of UK-based legal practice management software house Keystone for $36 million in cash.

    The Keystone deal, which was financed with a placement of stock to Kerry Packer's CPH Investment Corp and Sir Ron's MEM Group, has received a mixed reaction from analysts, with many criticising the high price.

    However, Mr Gamble is believed to have identified global software sales as the key growth area for the group.

    Solution 6's IT services division, which derives the bulk of its revenues from Alpha West, posted a pre-tax loss of $7.3 million for the six months to December 31, 2001.

    Despite the downturn in demand for IT services, the division still posted $71 million of revenues for the half, but carried large overhead costs.



    Mr Gamble blamed the division for Solution 6's overall half-year loss of $14.6 million, after its software and professional services division posted a modest profit.

    He indicated at the time that he hoped to merge the business with another services group, but is believed to have since decided to sell it altogether.

    A strong sale price is likely to prompt analysts to lift Solution 6's forecasts. Solution 6 shares have been languishing below 70¢ for several months and closed yesterday at 62¢.

    Perth-based Alpha West was purchased by Mr Gamble's predecessor, Chris Tyler, in late 1999 for $64 million in cash and shares from then owner, Richard Pratt's Thorney Investments.

    Thorney was one of Solution 6's biggest shareholders at the time.

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