Talks aimed at raising an emergency loan to keep JSE-listed Faritec afloat are taking longer than expected, the IT group warned shareholders on Thursday evening.
Faritec is hoping to secure about R60m to implement its “turnaround and growth strategies, normalise trading conditions with trade creditors and ensure adequate working capital to execute its business plan”.
The group says the transaction had been expected to be concluded this month but finalisation of the agreement is “taking longer than anticipated”. It has not disclosed with whom it is negotiating the finance, nor has it explained the reason for the delay.
Because Faritec has not yet been able to raise the funds, its auditing firm, Charles Orbach & Company, has included what is called an “emphasis of matter” modification in its annual report. The report, which Faritec had to publish by the end of this month to avoid a potential forced delisting from the JSE, states that the group’s financial troubles have cast doubt on its ability to continue as a going concern.
“The financial statements are prepared on the basis of accounting policies applicable to a going concern. This basis presumes that the group will be able to continue servicing its debts within the current cash flow-restrictive environment, will return to profitability in the short term, and that the realisation of assets and settlement of liabilities will occur in the ordinary course of business.”
Faritec says a deferred tax asset of R37m it raised in the financial year to 30 June 2009, arising from a reported tax loss, and which it offset against future taxable profits, has been reversed.
This is because the inclusion by the auditors of the “emphasis of matter” modification means the tax asset no longer meets accounting policy recognition requirements. It says that once the funding transaction has been realised, the deferred tax assets will be recognised again.
In the 2009 financial year, Faritec reported a net loss of R159,5m.
Management says Faritec should return to profitability in the financial year to June 2010. CEO Fanie van Rensburg (pictured) says management is “confident” that the R60m in funding will be raised and finalised “within the next few weeks”.
“I am convinced that this transaction, combined with our focus on executing the basics in our core areas, and our continued drive to improve efficiencies and grow market share, will allow the group to return to profitability over the course of the coming year.” — Duncan McLeod, TechCentral