Crux Technologies, hit by key resignations, bad debts and a breach of contract, among other things, has reconsidered its strategic direction and decided to rationalise its operations.
"The financial year thus far has been an extremely difficult one for the company," says CEO Titi Kekana, commenting on the company`s results for the six months to end-November 2001.
"A number of events have occurred that have caused significant problems and these, together with difficult trading conditions, have forced management to reconsider its strategic direction."
<B>Salient figures</B>
Crux Technologies results for the six months to 30 November 2001
Figures for the year-earlier period in parentheses:
Revenue: R52.41m (R54.41m)
Operating income: R1.81m (R5.86m)
Abnormal items: -R20.23m (--)
Net profit after tax: -R19.45m (R9.59m)
HEPS: 11c (2.17c)
Current assets: R27.78m (R31.26m)
Current liabilities: R24.29m (R13.27m)
NTAV per share: 9c (15c)
Operating activities: -R3.56m (-R8.79m)
Although the core skills resourcing business remained profitable, the company reported a net loss of R19.45 million after tax. This was mainly owing to abnormal items totalling a negative figure of R20.23 million on the income statement.
Headline earnings per share soared from 2.17c to 11c.
Kekana, appointed CEO after the resignation of Graham Foster in January, says the professional services division, which focused on Macola software installations, was severely affected by the resignation of its entire key management team and most of its staff.
"They set up business in direct competition and legal action to stop them was unsuccessful. The consequent losses to the company amounted to R6 million and the business is in the process of being discontinued."
The Munsoft division was sold to Sandile Telecommunications & Technologies last year, but Kekana says R4.6 million remains unpaid and has been written off, with the division reverting to Crux.
"It is trading unprofitably and management is seeking a buyer for it."
Development expenditure of R5.3 million relating to the healthcare market was written off after no progress in that direction was made and management decided not to pursue it any further.
To add to the company`s woes, Kekana says a large provincial government customer has breached its contract with Crux for the provision of IT solutions and services.
"This contract has a termination date of 31 August 2002 and at 30 November 2001 an amount of R7 million is reflected as owing under current assets. Management has taken legal action and is confident that this amount will be recovered."
He adds that certain other significant debts have proved extremely difficult to collect and have been written off.
Crux has embarked upon a process of rationalisation, which Kekana says will leave it clearly focused on the core skills resourcing business.
"The restructuring process is expected to be completed by 31 March 2002. Crux is therefore expected to return to profitability and generate positive cash flow for the last two months of the financial year. The situation should improve further in the next financial year as certain fixed costs come to an end."
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