After yet another abysmal period, the board of the slimmed down ConvergeNet group is considering options to deal with the company's performance, and has advised shareholders to deal cautiously with its stock.
The group, which has seen a change in leadership, reported a R48.7 million loss for the six months to February. This is about double its year-ago loss, although an improvement on the R84 million it lost at the end of August.
Its growing loss comes as revenue also slows, dropping to R119 million from R132.2 million year-on-year. ConvergeNet has recently slimmed down and now only comprises Andrews Kit, trading as Contract Kitting, and Structured Connectivity Solutions.
However, CK Solutions units DC Power and System Integration had an especially challenging period, leading to the drop-off in revenue, says ConvergeNet. It also took a R34.8 million impairment charge on CK Solutions.
"The loss of a key battery supply tender and the cessation of the mobile build programme of a major client resulted in a significant earnings gap versus budget, which is expected to persist during the medium-term."
Challenges remain
ConvergeNet adds the impairment charge, declining financial performance and an operating loss led to its increased trading loss. "Unless trading conditions improve, further impairment of the investment in CK Solutions is likely in the medium-term."
The group notes it "is carefully considering the options that are available to address [its] continued underperformance. It points to the high cost-base and difficult trading conditions its two units are experiencing, a situation it does not expect to change in the next financial year.
ConvergeNet says the options under consideration could have a material effect on its stock, and urges shareholders to trade with caution. Its share price lost 1.04%, or 1c, on Friday to trade at 95c, giving it a market capitalisation of R95.9 million.
In November, it issued 38.5 million shares at 9c to settle operating expenses, and then bought back 34 447 shares at 12c in December.
The group has also been through management changes, with CFO and interim CEO Danie Bisschoff resigning in October, and then holding both roles on a contract basis until the end of the year. He was replaced by Peter van Zyl, who now handles both positions.
Share