Patsystems, the struggling UK futures trading technology vendor, is seeking to renegotiate unprofitable contracts with customers. The company's board is also under pressure from a major investor to replace newly-installed CEO David Jones, following a disappointing third quarter which saw both losses and costs widening.
The company is billing the renegotiation of certain customer contracts as a priority for a return to profitability. The board blames "certain members of the senior executive management team", who have now left the company, for entering into "poorly constructed or uneconomic contracts" in an effort to grow customer and user numbers.
In a statement, the company alleges: "Certain customers appear to have been offered use of patsystems’ products at a rate that created unfair competitive advantage over other patsystems’ customers or prospects. This has impeded development of patsystems’ marketing plans. In many cases, such arrangements were agreed by previous executive directors of patsystems, without the knowledge or approval of the full board."
Patsystem says it wants to renegotiate a "substantial" number of customer contracts to better protect the interests of the company and to improve revenues.
The company is also looking to exit from uneconomic third party relationships.
"Around 20 third party relationships were entered into at the instigation of members of the previous executive management team and these have caused a considerable drain on management resource, including the commitment of substantial operating or capital expense," the statement continues.
The company has additionally earmarked £1.1 million to redevelop its current technology platform, with a view to increasing sales prospects through a modified product range. Over and above this, the board says it has begun to investigate a number of new opportunities for longer term growth. These plans, if approved, will involve incremental development and planning expense of around £2 million over the remainder of this year and into 2003.
In the meantime, the company says it has become aware of moves by a shareholder purporting to represent 11.7% of the existing issued share capital to convene an extraordinary general meeting to oust CEO Jones and non-executive director Stewart Douglas-Mann and to appoint three new directors to the board in their place.
The board says it has received limited information on the proposed directors and their plans for the company. Unless more information is forthcoming, the board has determined to oppose the motion and recommend shareholders to vote against the resolution.