While there was no shortage of frustration amongst Solution 6 shareholders at its annual general meeting last week, many were reduced to making fun of the company's prospects as board members attempted to convince investors of an imminent turnaround.
"To say the least, it's been an eventful time," began acting Solution 6 chairman, John Burrows. For the year in which former chief financial officer Tom Montgomery predicted $400 million in revenues and $40 million profit, Solution 6 has fallen well short of every prediction, and losing CEO Chris Tyler, CFO Tom Montgomery, interim CEO Lindsay Yelland and long-standing chairman Brendan Redden in the process. Shareholders have watched their investments dwindle by the day, and are now having to place a great deal of faith in a new executive team who are on a cost-cutting frenzy.
One of the most significant issues raised at the AGM was the shady performance of the board, particularly of those members such as Tyler and Montgomery who have since fled the company. The current board refused to speculate on the Australian Security and Investment Commission (ASIC) investigation into the over-optimistic forecasts of the previous CFO, and would not tell their shareholders whether the board endorsed the figures against their own doubts, which could be seen as misleading to shareholders.
In a move to gain shareholder confidence, new CEO Neil Gamble and the Solution 6 board decided against a planned resolution that would have seen Gamble issued with a number of stock options, largely on the basis of the company's poor share price. The board said it would revisit these options at a later date.
Gamble announced several strategies aimed at turning Solution 6 around. His first priority is to reverse the company's negative cashflow by March 31, 2001. He has already begun a streamlining that will see the cost of operations reduced by $10 million before the end of the year, including the recent 10 per cent reduction in staff (150 people), which he claims were mostly management positions. Positions such as chief operating officer, global research and development manager, general manager for the Asia-Pacific region and managing director of UK operations were all made redundant, costing around $4 million in remuneration packages.
Another of Gamble's high priorities was to form a reputable and efficient executive team, touting the recent appointment of former One.Tel chairman John Grieves as an addition of considerable finance experience to the company. Acting chairman John Burrows said the board was considering giving Grieves as a directorship position, considering his experience with the likes of Fairfax as a major bonus to the company. One shareholder expressed less optimism, pointing out that Grieves had also been involved with "some of the more notable dog-bombs" in the IT industry, such as Spike, Reckon and One.Tel.
Gamble believes the company needs to focus its reduction of costs on the Australian and UK divisions, and reaffirmed his commitment to making managers of business units accountable for their division's return on investments.
While he blames much of Solution 6's woes on the aftermath of the market downturn, particularly considering the company's aggressive acquisition strategy which involved the purchase of companies at premium prices well above their current market valuations, Gamble admitted he was disappointed with the company's operations.
"Your company is going through extensive changes," he told shareholders. "There is no sacred cow. Everything is under scrutiny. It is simply about getting back to basics."