​TechnologyOne confident Brisbane Council 'event' will not impact business

Enterprise software firm TechnologyOne has told shareholders it is not expecting any change to its yearly financial results, despite what it described as a "detrimental media statement" by Brisbane Lord Mayor Graham Quirk last week for causing a potential AU$60 million cost blowout on a AU$122 million, 10-year, IT systems replacement contract.

The Australian Securities Exchange (ASX)-listed company released a statement on Monday that said it was confident the Brisbane City Council event would not impact its sales pipeline.

"Our sales pipeline remains strong. The company has an unblemished track record over 30 years and over 1,000 successful implementations, and a strong reputation in the market," TechnologyOne said.

Quirk directed council officers on Wednesday to renegotiate the contract that was awarded to TechnologyOne back in June 2015, after a review that began in November alleged there were a number of issues plaguing the systems upgrade.

"[The review] has recommended that council renegotiate the contract with a six-month deadline for TechnologyOne to provide an acceptable IT system to council, appoint a systems integrator to assist in the system's implementation into council's existing systems, and plan a viable alternate option to ensure existing IT systems remain available where necessary," the mayor said.

The council already stopped making payments to TechnologyOne in October after it was decided the company needed to deliver "significant" milestones first, and although the review is still ongoing, the mayor said he was recently made aware of "looming" problems that caused him to take decisive and immediate action.

TechnologyOne executive chairman Adrian Di Marco said on Monday that the Brisbane City Council "event" should be viewed by the market as unique, as it was made public by the council without initiating the normal contracted remediation processes.

"In my 30 years in business I have never seen this before. We have had challenging and contentious projects in the past, but because there are dispute resolution and mediation processes built into all contracts that can be initiated by a client if necessary, including the ability to issue a breach notice, this has allowed for the orderly and professional resolution of disputes, without going public, which is normally in both party's interest," Di Marco said.

"To date BCC [Brisbane City Council] has not initiated any of these contractual mechanisms so TechnologyOne was not aware of a contract dispute until the detrimental media statement made by BCC."

Di Marco said he was confident the issues would be resolved and have no impact on the company's earnings.

Brisbane City Council wishes to continue working with TechnologyOne to complete the project, which the company has agreed to do in "good faith".

"Having said this, TechnologyOne has notified council that it cannot continue to frustrate our ability to complete the project," the company said. "For bureaucratic reasons council is not engaging with TechnologyOne during the time-critical configuration stage by not providing the business input we require to configure their new business processes in our software."

"This bureaucratic approach will delay the project needlessly and contribute significantly to a blowout in cost."

In terms of litigation, TechnologyOne said it remains confident of its legal and commercial position, noting the company also has total and comprehensive insurance cover for all its projects.

For the 2016 financial year, TechnologyOne reported a 16 percent year-on-year increase in net profit after tax to AU$41.3 million, and experienced its 17th consecutive year of record revenues with FY16 revenue totalling AU$249 million.