Markets nervous after Softline, SVI split

By Bronwen Kausch, Media strategist, Innovative Media Productions

Johannesburg, 18 Oct 2000

JSE-listed accounting software developer Softline will be parting company with its American Stock Exchange-listed US subsidiary SVI. Proceeds from Softline's split from the US company, in which it has a 60% stake, will be used to further its offshore plans.

Markets have bolted at the news; the Softline share price dropped to R3.95 at close of trade yesterday after a R4.35 opening and was trading in heavy volume at R3.70 by noon today.

The share price has a 12-month high of R12.80 and today's trading saw it dip below its previous 12-month low of R3.75 on intra day trading.

Softline says the parting of ways will in no way impeach its original plan of seeking a primary London listing.

"Using SVI as a means of securing an offshore listing was just one of many possibilities we were looking into," says Lara Jawitz, director of group investor relations. "We are pursuing the listing and are expecting to meet with government within a few weeks."

The parting comes as a result of the shift of core focus of the two businesses. Softline will aggressively pursue domination in the small and medium enterprise and midrange accounting software packages market, while SVI will continue with enterprise software solutions for the retail market.

In March, the accounting and payroll software division contributed 77% of the group's headline earnings - 55% from South African operations and 22% from operations in Australia and the US. The retail software division, SVI, contributed 23% to headline earnings. The accounting and payroll software division is expected to contribute in excess of 80% of headline earnings in fiscal 2001.

Pursuant to the decision for Softline and SVI to focus on their respective core businesses and in order to focus his time on SVI's growth strategy, Barry Schechter, CEO of SVI Holdings, will resign from Softline's board of directors. The SVI board will be reconstituted in due course.

Jawitz points out that although the companies will be parting ways, Softline will still derive a healthy revenue stream from its remaining international operations and will extend its offshore reach with the additional capital from SVI.