Solution 6 catches exo-net

Solution 6 came out of self-imposed media hiding last week to announce it had spent $30 million to acquire New Zealand business software developer exo-net, despite also reporting an operating loss of $79.5 million for the 1999/2000 financial year.

Solution 6 has maintained a low profile since former CEO Chris Tyler resigned after past drug misdemeanours and business failures were exposed following a dramatic share price slump earlier this year.

Prior to telling the ASX of losses last financial year, the company announced it would acquire 100 per cent of exo-net's intellectual property, technology, software products and business operations in Australia, New Zealand and Singapore. The deal is made up of $10 million in cash and $20 million in scrip.

The result will not encourage embattled investors who would have expected improvement on the $3.2 million net profit it recorded for the previous financial year (1998-99).

In a statement issued last week, the company attributed $67.5 million of its losses to "abnormal" expenses from restructuring and redundancy, research and development, application service provider (ASP) and Web portal development, as well as the write-off of previously capitalised SSDN (software, systems and distribution networks).

Despite running at an overall operating loss, there were some encouraging signs. The 1999/2000 financial year saw Solution 6 increase its revenues by over $100 million, representing growth of 142 per cent.

According to the statement, the company acquired 11 business software, consulting and e-commerce platform companies during the fiscal year. The acquisitions included online legal information provider Lawpoint for $40 million and accounting software group CMS/Data for $46 million.

In buying exo-net, Solution 6's acquisition and integration drive shows no signs of slowing soon, with the company starting the new financial year with its $30 million bid for exo-net.

As a business, exo-net was developed two years ago and now includes more than 2500 end users. Prior to the acquisition, it had planned to expand into the UK and Hong Kong later this year.

Its founders, David McKee-Wright, Mark Loveys and Maurice Bryham and staff will stay on under the new owners, which will run as an independent division of Solution 6.

"Most importantly, its [exo-net's] financial plan is on track to be cashflow positive," said Solution 6 vice president for acquisitions and marketing, Graham Mirabito. "It will be delivering a significant operating profit this financial year."Solution 6 will utilise exo-net's server-based B2B software, delivered through an ASP in a trial with St George Bank, to integrate SMEs, accountants and the bank into a realtime e-business environment.