Anite exits Australia whipped and $34 million poorer

Stan Beer
Monday, 03 July 2006 20:20

IT Industry - Deals

It was supposed to be the ultimate win-win contract for UK housing management software specialist Anite Group plc. Instead the company, which had established a development centre with 200 staff in early 2004 to service a .NET project it had won with the Victorian State Government, has been forced to close its operations at a cost of $10 million, pay a $24 million settlement to the Government and leave Australia with the project uncompleted.

The $30 million .NET development project was supposed to enable Anite to replace its ageing housing management product developed in the Power Builder 4GL, while developing a new housing management system for the Victorian State Government to replace its ancient in-house developed Ingres-based system.

Anite has signed a deed of settlement and release in relation to its contract with the Department of Human Services of the State of Victoria, based in Melbourne.  The setllement removes any further liabilities to Anite in return for a one off payment of $24 million.

According to Anite, on 7 April 2006, the Board of Anite announced that it was in detailed negotiations regarding options to finish the final stages of the project on the most efficient basis with least cost and risk.  However, it was expected that Group would have no option but to incur further one off costs in relation to the contract, at a likely additional cost of several million pounds sterling over the next couple of years.

A full and final settlement between Anite and the Victorian Government has now been agreed to allow Anite go home without finishing the job it was contracted to do.

A payment will be made from Anite’s existing cash resources of approximately $24 million to be made on 10 July 2006. The payment will remove all obligations and liabilities of Anite in respect of the performance of the contract. Anite will hand over Stage One of the project software, associated source code and a licence to operate it.

The Anite closure of its Australian business will lead to additional costs estimated to be in the region of £4 million (A$10 million).

Steve Rowley, Anite’s Chief Executive, attempted to put a positive spin on the failed project saying: “Today’s settlement represents a significant milestone providing shareholders with complete certainty. This removes the risks and ongoing losses relating to the State of Victoria contract. Whilst the costs relating to the settlement and restructuring are high, the compelling logic of withdrawing from this troubled contract and relationship, compared to the costs and risks of continuing until completion, was clear. 

“The removal of this significant distraction, which has been ongoing since 2002, will now enable management to focus on Anite’s core businesses.”

Damien Kenny, who was regional manager public sector at Anite in Australia during the height of the contract said in an email: "The company had 130 staff when I left in September 2005.  This reduced to around 65 staff by April 2006 through natural attrition.  Then on 7 April the local operation made 35 or so staff redundant, and then today made the majority of the remaining staff redundant too...It's a shame as it will scare other UK firms from entering the market and it will scare Australian Government too."