Embattled Spicer Holdings has issued a profit warning pertaining to its year-end financial results. The company attributes the expected loss to its unprofitable UK subsidiary and finance charges on short-term borrowings.
Spicer says the finance charges incurred on short-term borrowings necessary to fund operations until the completion of the Spicer Specialised Services (SSS) sale has driven it further into the red.
The company announced the completion of the deal along with the profit warning today.
This, coupled with the fact that its UK subsidiary MIS-Corporate Defence Solutions (MISCDS) has not been profitable, has added to the company's misfortune and Spicer expects to finish the year in negative territory.
Spicer CEO Sas du Toit says the company now has working capital in hand and will be going forward with operations.
"We have working capital in hand after the Specialised Services deal has gone through, and although we will not have good figures for the year, we will be moving ahead with our remaining businesses," says Du Toit.
In April, Spicer borrowed R25 million from the World Trade Centre in an attempt to settle some of its debt, which found Spicer in a "borrowing from Peter to pay back Paul" situation.
Du Toit said at the time that the sale of SSS would enable the company to divest itself of interest-bearing debt and would free it up to continue operations without the nagging concerns of having to service interest.
Regarding MISCDS, Du Toit has in the past told ITWeb: "After initial teething problems at MISCDS, things are going well. The company has reacted well to management change. It is an exciting business and we are expecting substantial growth from it."
At the halfway mark, Spicer released interim results showing operating margins halved compared with the previous six-month figure, despite a 53% increase in turnover.
Market speculation in May that the company might be forced to de-list where dismissed by Du Toit, who said: "After careful consideration, we have decided it would not be in our shareholders' best interests to de-list."
The Spicer share enjoyed a strong position at the end of January this year, trading around the 200c mark. However, the share plummeted to 5c in May.
The share has since had a marginal recovery, closing at 8c yesterday, but the profit warning has seen the share lose 1c or 12.5% since trade opened today.
Du Toit seems unmoved by the share price: "The market doesn't fully understand the details of operations at Spicer. More details will be released in time to come, which may put the company and the share in a better light."
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