Wounded Zaptronix plans to delist

By Iain Scott, ITWeb group consulting editor

Johannesburg, 27 Jul 2001

Zaptronix, which plunged into the red in the year to end-April as a result of lengthy delays in the Hitachi Kidcard project, intends to delist.

The group also says it has spent the past six months trying to restore the "old commerce" business to profitability so it can fund the "new commerce" initiatives.

Commenting on the Kidcard project, CEO John Heath says the group`s original development agreement with Hitachi envisaged an initial order of 250 000 units with a further 250 000 units expected in the year to April.

"At the time (last April) we were asked to give Hitachi written assurances that we would free up enough production capacity to fulfil both initial and subsequent orders. This was done at the expense of existing contracts."

During the year, Hitachi Europe underwent several internal changes and a number of the people with whom Zaptronix had built relationships since mid-1999 either left Hitachi voluntarily or were retrenched.

"In the last 12 months the Hitachi representative on our board has changed four times," Heath says. "This break in continuity and the resultant uncertainty around the Kidcard project has hurt our company`s earnings severely during this period.

"The situation remains unclear," he adds.

"Notwithstanding that Hitachi has shipped us 30 000 of the specialised chips that go into the units, we are yet to receive an order to convert these into finished product.

"In addition, there are still moneys outstanding on the development of the unit that have not been brought to book for this period.

"We estimate that we have lost in the region of R17.5 million in pre-tax earnings as a result of the Kidcard orders not being placed."

Heath says the company has for the past six months been trying to ensure that its "old commerce" business (the specialised outsourced manufacturer of electronic assemblies) returns to profitability, at least to the extent that it can fund the new initiatives.

The older business is not yet profitable, but the pipeline of potential business is encouraging, he adds.

"With the changes to the JSE Securities Exchange SA listings requirements, the board has decided to pursue a delisting. We will actively seek a suitable partner and a proposal will be put to shareholders when such a partner has been found."

The Zaptronix share was trading 3c or 20% down at 12c on the JSE by late this morning.