Delayed contract hits TechnologyOne

TechnologyOne downgraded its guidance today, flagging decreased growth in total revenues due to the delay of a major contract.

"In recent days a large multimillion dollar licence fee contract for which TechnologyOne had been the selected supplier since early 2009, and which TechnologyOne had confidently expected to finalise before 30 September, has now been delayed," TechnologyOne executive chairman Adrian Di Marco said in a statement.

The business case for the project was being re-evaluated, he continued, meaning that the finalisation of the contract would be delayed into the next financial year. "Clearly this is a disappointing situation," he said.

The company didn't mention which contract had caused the pain. In May it announced deals with the Queensland Department of Premier and Cabinet, the City of Melbourne, Seqwater, the Children's Medical Research Institute (CMRI), Future Flow, Barwon Water, Reliance Petroleum, and VicTrack. It also recently announced wins in New Zealand.

This case was by no means a one off, according to Di Marco. "We are now seeing signs that contract finalisation time frames for large projects may take longer than in the past, as boards take a more conservative approach, requiring additional due diligence and further justification before proceeding to finalise contracts."

Contracts were still going ahead, the executive said, but were taking longer, leading TechnologyOne to reassess its guidance.

The expenses were also higher than the company had forecast, despite cost cutting measures. Di Marco had decided not to cut R&D headcount, only freezing it to keep the company's talent. "Unfortunately, the decision not to reduce our R&D expenditure has impacted our short-term results, but I am confident it was the right decision and will deliver significant long-term benefits," he said.

Di Marco believed the cost initiatives and the R&D would stand the company in good stead for next year.