Patsystems Management Stays After Shareholder Vote

LONDON--The shareholders of Patsystems, a London-based independent software vendor, voted decisively to keep CEO David Jones and non-executive director Stewart Douglas-Mann in their jobs and on the board in an extraordinary general meeting (EGM) held on March 26.

The EGM was called after disgruntled shareholders led a campaign to dislodge Jones and Douglas-Mann (TTW, March 4). Former president and shareholder Thomas Theys, a 14 percent shareholder of Patsystems, and William Starbuck, the designer of Patsystems’ core technology, were among the 20 petitioners. The rebel shareholders had proposed replacing the two with their own choices, Gary Becker and Joe Solari. No information was ever released about the two mooted board members, says a spokesperson for Patsystems.

In Patsystems’ March 26 earnings release, Jones says, "[It] is an unwelcome distraction and is currently causing disruption to the business. We anticipate that there will be substantial costs relating to the management of this issue." The document did not specify amounts.

The resolutions to remove Jones and Douglas-Mann and replace them with Becker and Solari as directors of the company were defeated with 33.5 million shares in favor and 51.9 million against.

Jones tells TTW, "We can now clear away all the debris resulting from the EGM and really get stuck in. We expect to announce two new contracts in the next month, but the timeframe will be dependent on how quickly the lawyers will be able to complete the paperwork."

Jones is anxious to move on now that the EGM is finished. "The EGM has taken a significant amount of time for the full management team including myself. We can now concentrate on the next stage of developing the business, which entails continuing the delivery of good quality contracts but also to move forward with our longer-term development plans." Patsystems is spending around £1.1 million to redevelop its IT platform this year.

He says there are a lot of changes due in the industry and a lot of restructuring will take place. "Patsystems, if it’s well managed and well directed, is in a very strong position to capitalize on that and could well end up as one of the forces that shapes the industry."

Although Patsystems only signed three new clients last year (for a total of 32), it has six clients who do not yet have billable users, one of which is still in acceptance testing.

Patsystems’ results for Q4 2001 came out the day before the EGM, showing a loss before tax of £6.5 million, reflecting the cost of restructuring and renegotiation of contracts. Also, about £6.9 million was invested in the year ending Dec. 31, 2000 and Patsystems took a £3.1 million provision in 2001 because these investments were "substantially impaired."

Overall revenues were up, however, with gross profit of £1.552 million a 137 percent improvement year on year. Also, the number of billable end users increased to 3,313, from 1,129 the previous year, leading to a 150 percent increase in lots traded. There were 23,152 lots traded in Q4 2001, compared with 8,213 lots in Q4 2000.

Patsystems’ share price has taken a beating as a result of the looming EGM, as well as tough trading conditions. Shares started to dive well before Patsystems’ announcement in February that the rebels were pushing for an EGM. Just under £90 was seen last June before falling to the £10 area at the end of 2001, where it still hovers.