Supply chain group Siltek says its financial results for the year to end-June, which it will release at the end of next month, are expected to show a substantial loss.
It says in a notice published this morning that this is despite a second-half improvement in the gross margin for the South African operations as well as a reduction in costs.
The loss is being attributed to, among other things, excess capacity and an unsuitable cost structure, which the group says is a legacy of the expansion of the business in prior years.
It says a new accounting system for the SDD division was implemented in November 1999, and this led to poor operating controls, resulting in stock losses.
The cost of the system had to be written off in full in March this year when a new system was implemented.
Other factors include the problems experienced with the Australian operation and its subsequent closure, and the high level of gearing and associated interest costs.
The group announced last month that it had decided to place its loss-making Australian operation under voluntary administration. It blamed the situation there on a downturn in demand for IT products in Australia.
In addition to these factors, the results have been dented by a change in the method of accounting for certain contracts, the group adds.
"A detailed review of the business has been undertaken and the board has proposed a capital restructuring plan that is currently being negotiated with Siltek's major stakeholders," it says.
It adds that it will make a more detailed announcement once more information is available.
The Siltek share, which closed 2c down at 28c on the JSE yesterday, was trading another 2c or 7.14% lower early this morning.
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