US-based SVI Solutions, of which JSE-listed Softline is the largest shareholder, attributes a large decline in its full-year financial results to an understaffed sales force.
The company, which saw declines in revenue and gross margins, reported a net loss of more than $28 million for the year to end-March 2001, a substantial plunge from the $4 million loss for last year.
Figures at a glance
SVI financial results for the year to 31 March 2001
(current year, with previous year in parentheses):
Net sales: $32.67m ($36.11m)
Gross profit: $21m ($25.14m)
Net income: -$28.95m (-$4.05m)
Basic and diluted eps: -$0.83 (-$0.12)
Softline no longer consolidates SVI's results in its own figures, since it now owns less than 50% of the US company and no longer has control.
"I believe that the principal factor negatively affecting our operating performance worldwide has been a lack of sales of our application software suite, which was mainly due to an understaffed sales force," says president and CEO Tom Dorosewicz.
"I have made it a top priority since joining the company in January 2001 to significantly expand and strengthen our sales team and to make sales and a customer-centric focus the cornerstone of our business strategy."
The decline in revenue was blamed on declines in the UK and Australian operations, as well as the inclusion of $1.1 million in the previous year's revenue from a discontinued foreign operation.
Dorosewicz adds that during the fourth quarter the company implemented a number of new initiatives aimed at ensuring future success. These included the establishment of a new management team, the expansion of the sales team and the establishment of a new marketing team.
Other steps included broadening the focus on professional services offerings and restructuring the organisation around a customer-centric model.
The group has also taken steps to improve its capital and liquidity position, including the negotiation of an extension of its senior loan facility with Union Bank of California to 1 May 2002 and an extension of its subordinated debt facility with Softline to 1 November 2002.
It is also seeking additional working capital via a private equity placement.
"Given all these activities, I am confident that we have laid the groundwork for what will be a turnaround and growth year for SVI," Dorosewicz adds.
Softline announced in May that it had signed a letter of intent for a proposed transaction with SVI Solutions and European investment group Shmulik Stein International Investments.
In terms of that deal, a series of transactions would see Softline dispose of the majority of its shareholding in SVI in return for SVI's interest in Integrity, equating to an 11% equity interest in Integrity.
Softline's loan to SVI of $11.5 million, including capital and interest accrued, would be converted into $7 million worth of new SVI shares, which would in turn be sold to Shmulik Stein for $7 million cash.
The balance of the loan, $4.5 million, would remain as a convertible instrument in SVI, and would carry the right to be converted, at Softline's option, into SVI shares at $1 per share.
Softline's share was trading 3c or 2.07% down at 142c on the JSE this morning.
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