By Byron Connolly
June 8, 2017
TechnologyOne has taken a $2 million hit to its profit for the six months ending March 31 following a troubled project with Brisbane City Council.
The ASX-listed Australian software company said its consulting profit is down by $4.1 million compared to the same period last year due to the dispute.
Brisbane City Council (BCC) awarded a $50 million, 10-year contract to replace 13 outdated customer service systems to TechnologyOne in June 2015. Earlier this year, Brisbane Lord Mayor said he was seeking to have the contract with Technology One renegotiated since the rollout could end up 18 months behind schedule and $60 million more expensive than anticipated.
Technology One responded, slamming the council for "frustrating" its ability to complete the project and for going public with its concerns.
On May 2, BCC issued TechnologyOne with a notice to show cause regarding the project. It is believed that this notice is the initial step taken when a party wishes to pursue legal action.
TechnologyOne said today that this was a unique event in the company's "unblemished 30-year history as BCC were the development partners of TechnologyOne for its new generation, digitally-enabled local government rating and property solution."
"This is the first time the company has ever allowed a customer to fulfill this role. BCC found it increasingly difficult to fulfill their obligations."
TechnologyOne said today that given the lack of progress, attempted termination of the contract by BCC is now probable.
"Litigation would be a good way forward, allowing TNE to pursue legal remedies, seek compensation and put this behind us. Had BCC been commercially sensitive and not been driven to improve their negotiating position, BCC would be on track for a new digitally-enabled system by January 2018," the company said.
TechnologyOne expects it total consulting profit for the full year to be down by $1.5 million.
Meanwhile, revenues were up by 13 per cent to $113.9 million for the period and after tax profit was up by 10 per cent to $8 million.