SkillSoft losses mount up

11 Sep 2003

SkillSoft, which acquired leading Irish e-learning firm, has reported a net loss of US$53.2m in its fiscal second quarter results.

The troubled e-learning firm, which is currently embroiled in litigation over misreported sales bookings at SmartForce, reported a total revenue of US$45.1m for the quartered ended 31 July, a modest increase on the previous quarter and a 193pc increase from US$15.4m a year ago.

The net loss of US$53.2m included merger-related R&D costs of US$4.2m and a US$5m charge for restructuring activities and the pending restatement of SmartForce’s financial statements. A further charge of US$44m was incurred for the settlement of litigation related to NETg as well as US$3m for amortisation of accounts and US$2.5m for depreciation.

For its fiscal 2004 first quarter, SkillSoft reported a net loss of US$12.6m and a net profit of US$1m.

The company said that it still retained a cash balance of US$81.8m after paying NETg a settlement of US$44m over product related litigation. The company will have to pay NETg a further US$44m next year as part of its settlement agreement.

During the quarter, SkillSoft invested US$25m with a bank to secure a line of credit going forward.

Despite the precarious nature of the company’s finances, president and CEO Chuck Moran was upbeat about the results. He said: “Our results this quarter reflect the strong focus on steadying our business model while we continue to emphasise increasing customer retention to historical levels.

“We are starting to benefit from the leverage and scale that we have created – the largest direct sales and support organisation in the e-learning industry selling the broadest technology-based e-learning content offering. Additionally, we will continue to invest in learning assets for our business, further positioning us as an industry leader.”

In relation to the litigation surrounding its acquisition of SmartForce, three US law firms have filed class-action law suits against SmartForce and two of its executives, Greg Priest and Bill McCabe, on behalf of investors who lost money on shares they acquired between 19 October 1999 and 22 November 2002. The three firms allege that SmartForce’s failure to supply investors with correct financial details over the previous three-year period was fraudulent, insofar as they allege that untrue statements about the company’s finances were made in order to induce the plaintiffs to buy SmartForce shares.

By John Kennedy