Faritec's auditor has raised concerns about the company's ability to continue operating, because it has not yet raised the R60 million it requires to implement its business plan.
Faritec's auditor, Charles Orbach & Company, notes the company incurred a net loss of R159.5 million for the year to June. The auditor adds that Faritec has continued to incur losses and has restricted cash flows.
“These conditions... indicate the existence of a material uncertainty, which may cast significant doubt on the group's and company's ability to continue as a going concern.”
However, Faritec's directors say they have reviewed the cash flow forecast for the year to 30 June and are satisfied it can continue to operate.
Soon, soon
Late last year, Faritec said it was seeking to raise about R60 million to implement its turnaround strategy, pay trade creditors and have enough cash to execute its business plan.
This earned the company a warning from the JSE, which said that if it did not submit the report by the end of January, trade in its shares would be suspended. While Faritec has escaped being suspended by the bourse, it has not yet finalised the transaction to raise the funding it needs.
Despite the audit report, and a delay in wrapping up funding, Van Rensburg is confident Faritec will return to profitability again. He expects the funding to be completed in 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.”
Wider losses
However, because the company did not raise the funding it required, a tax asset on its balance sheet, which it could offset against tax on future profit, has been reversed.
The reversal of this deferred tax asset of R37 million, impacted its result to June last year, and widened its headline loss per share from 35.8c to 49.6c.
Once the funding is raised, the company expects to be able to reinstate the asset, it says.
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