SOH unknown

Solution 6 - Open briefing - Time to buy

  1. 3,567 Posts.
    We should have a close look at SOH at these levels. They seem to have bottomed and with a string of positive announcements it looks unlikely to drop below 60c with the upside above $1.

    ASX Code: SOH
    Announcement: Open Briefing Solution 6 Holdings CEO on US$12.5m Acq

    Date: 11 June 2002 - 12:11:35
    Market Sensitive: Yes

    SOLUTION 6 HOLDINGS LIMITED 2002-06-11 ASX-SIGNAL-G

    HOMEX - Sydney

    +++++++++++++++++++++++++
    CORPORATEFILE.COM.AU

    Solution 6 Holdings Limited today announced a US$12.5 million
    acquisition of US based software solutions company, Novient Inc. Will
    the Novient acquisition be earnings accretive to Solution 6?

    CEO NEIL GAMBLE

    Novient is on the cusp of profitability and strong growth. Our
    acquisition is very timely.

    Since formation in 1995, Novient has invested over US$50 million in
    developing its software and service capability. Recently, Novient's
    cost base has been reduced substantially and customer acceptance of
    Novient's software has been established. It has a very healthy
    pipeline of sales potential and it will benefit from our
    international credentials.

    We expect Novient to be EBITDA positive in its first six months and
    earnings enhancing overall in 2003.

    Novient meets all our acquisition criteria. It fits the strategic
    direction of the group announced in the last annual report and AGM.
    We have undertaken a lot of research in the Professional Services
    Automation market. We reviewed and rejected a number of other
    companies in this space. The best fit of all companies in this market
    is undoubtedly Novient, given its leadership position and its blue
    chip customer base including names such as Accenture, KPMG, SAP,
    Compaq and the United Health Group. It has a quality management team
    who are committed to the company and determined to leverage the sales
    capability of other Solutions 6 products in the professional services
    and software arena.

    This deal is a significant step in implementing our strategy. The
    Novient acquisition and the earlier acquisition of Keystone in London
    strengthen our long-term strategic position and add value to our core
    business.

    CORPORATEFILE.COM.AU

    What are your expectations for Novient sales and growth?

    CEO NEIL GAMBLE

    In 2001, Novient recorded sales of US$12.5 million and our forecasts
    are conservatively expecting 10 to 20 percent growth in 2002. In
    2000, Novient achieved revenue of US$15 million.

    CORPORATEFILE.COM.AU

    Why do you consider 10 to 20 percent growth conservative?

    CEO NEIL GAMBLE

    Like many software companies in the US, Novient experienced a soft
    market in the latter part of 2001. There are clear indications,
    however, that market conditions are beginning to improve and Novient
    has identified a US$60 million pipeline of sales potential with
    nearly a third of that pipeline from established customers.

    Our acquisition of Novient will enhance Novient's ability to convert
    a larger proportion of this pipeline. Our balance sheet strength is
    an advantage in an industry that is fragmented and under capitalised.
    The Solution 6 global reach will immediately take the Novient product
    to the Asia Pacific and European regions - a significant opportunity.
    The Solution 6 group has over 1,000 employees capable of implementing
    and supporting the Novient customer sites world wide. We retain
    available cash reserves of around $35 million.

    A 10 to 20 percent sales growth target on US$12.5 million is well
    within reach. Longer term, with our established distribution channels
    in Europe, Asia and North America, sales will grow well beyond
    current levels.

    CORPORATEFILE.COM.AU

    What scope is there for cost reductions within Novient?

    CEO NEIL GAMBLE

    The hard work on costs has been done. Reflecting the advanced stage
    of product development, the Novient head count has been substantially
    reduced and costs are where they need to be. The emphasis going
    forward will be on growth. This is a very timely acquisition.

    CORPORATEFILE.COM.AU

    What have you identified as growth markets for your Professional
    Services and Software business?

    CEO NEIL GAMBLE

    In addition to our traditional base of accountants and lawyers, there
    is a significant opportunity to penetrate the wider professional
    services market. Evidence of this already exists with a number of key
    consultancy clients. Potential customers of our software include
    consultants, professional firms, internal corporate departments such
    as IT functions and any resource pool in an organization that needs
    to be managed and or monitored. This is where the overlap between
    Novient and Solution 6 is again a good fit.

    In the short term, however, I will not allow customer satisfaction to
    be sacrificed nor allow us to be distracted from our existing core
    products and services. We will remain focused on our existing
    customers and ensure that they benefit from the enhanced capabilities
    and development capital we can now offer.

    CORPORATEFILE.COM.AU

    What progress have you made with the acquisition of Keystone in
    London?

    CEO NEIL GAMBLE

    At the time of buying Keystone, there was concern among some stock
    market analysts that the price was too high. That is not the case.
    There are a number of factors already in place that increase my
    confidence that the Keystone acquisition will be a success.

    On acquisition, Keystone had free cash reserves approaching A$10
    million. We are implementing cost savings in excess of A$3 million
    identified from our integration planning. Keystone executives have
    filled important management positions in the Solution 6 Group.

    Since completion, Keystone has finalised a contract with the world's
    largest law firm, Clifford Chance. The contract is worth over A$20
    million in new licence fees and services. Keystone complements our
    very strong position in Europe and enhances our ability to service
    the legal fraternity.

    When you add these factors to Keystone's existing revenue it is
    clearer Keystone will add value in the short term and has significant
    long term potential.

    CORPORATEFILE.COM.AU

    What synergies will you look to exploit between Solution 6, Novient
    and Keystone?

    CEO NEIL GAMBLE

    Key synergies will come from product integration and future
    development and in sales and marketing of our products. "Go to
    market" strategies are already being developed in anticipation that
    the Novient merger will be approved by shareholders.

    CORPORATEFILE.COM.AU

    Do you have the management strength to ensure these acquisitions
    fulfill expectations and what management structure have you devised?

    CEO NEIL GAMBLE

    Yes, both Novient and Keystone have quality executives who can add
    value to Solution 6 and ensure that our acquisitions are successful.
    We will continue to operate with a regional structure for the sale
    and delivery of our products and services. The regions are supported
    by product "Centres of Excellence", the global coordination of which
    is the responsibility of a recently formed position filled by a
    former Keystone executive, Kaye Sycamore.

    CORPORATEFILE.COM.AU

    Some analysts are suggesting you may sell your IT services division
    given you've advanced your position in the Professional Services and
    Software arena. What is the future strategy?

    CEO NEIL GAMBLE

    The strategic combination of Professional Software and an IT Services
    business does not make sense and so we are seeking to divest the IT
    Services business to a party who might better realise its potential.
    We are in discussions with a party and, if all goes according to
    plan, we would hope to complete a transaction in July. We will
    announce details as soon as possible.

    CORPORATEFILE.COM.AU

    Thank you Neil.

    For previous Open Briefings by Solution 6 visit
    www.corporatefile.com.au

    For more information on Solution 6 visit www.solution6.com
 
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