I listened to the conference call this morning, and came out with a very positive impression on the progress of Geac to return to profitability and growth.
The announcement this morning that it has called off selling the company is good news. As I mentioned in a previous post, it does not benefit shareholders to sell the company when the stock price is at dirt cheap level. With this mantle removed, the company can now gain the confidence of existing customers and go after new ones. It also free up the company to negotiate in earnest with the banks and finalize the financing facility.
From the dip in stock price today, it seems that some investors don't understand the implication of the news this morning. IT IS A VERY POSITIVE STEP. When there was the threat that the company will be broken apart, existing and potential customers could not make commitments, banks cannot provide financing, and shareholders cannot realize the full worth of the business assets. Now that the company is no longer for sale, management can focus on making the business adequately profitable, serve existing customers better, and woo new ones.
I was also pleased by some other points mentioned in today's conference call, and would suggest all shareholders to listen to the call (go to geac.com).
1. Company will be focusing on profitability and there will be more cuts in general and administrative expenses. The restructuring is targetted to be completed by end of Q4 (April 30/01).
2. Certain subsidiaries will be sold off when the market is right. Geac has many subsidiaries, and management intends to downsize to core operations.
3. Company will be focusing on serving customers. Visits will be made to "stablize" customers and remove their concerns that the company will be sold off.
4. The bank facility discussion will begin this week. The CEO does not see this issue as problematic. The company currently has $55 million in cash, and owes $55 million. The goal is to obtain long term debt financing. Since the software business is a long term cycle, it makes good sense to obtain term debt financing.
5. The company will be issuing guidance in the new fiscal year, after it has completed its planning and budgeting process for the new fiscal year (starting May1/01).
In summary, I see much better days ahead: Operations would become more productive and profitable, cash flows would increase, some subsidiaries will be sold, and the company become more focused for future growth. |
