JSE-listed Zaptronix has laid off a number of staff at its Durban plant and has warned that the modification of a contract with Invensys will have a negative effect on its financial position.
The setback is a blow for the company, as it has already been hard hit by lengthy delays in the Kidcard project it undertook for Hitachi.
Zaptronix`s Durban plant has retrenched several staff members. However, the company says the plant is fully operational.
Zaptronix announced in July, with the release of its financial results, that Invensys had placed a significant order for the company`s product.
However, Invensys has subsequently begun restructuring. The process includes cost-cutting measures resulting in the long-term contract with Zaptronix being modified.
Zaptronix says the contract included a commitment to specific quantities and the modification will result in a significant reduction in the committed quantities.
"The company has not procured components, produced or delivered any units relating to the initial order and the directors believe that it would not be prudent to do so in light of the current restructure within Invensys," Zaptronix says.
However, it warns, the developments will have an adverse financial effect.
The company`s results for the year to end-April painted a dismal picture, with revenue falling 43% and a net loss of R8.89 million. This compared with a net profit of R5.94 million the previous year.
"The ongoing business of the group is being reviewed and is dependent on the conclusion and fulfilment of certain significant contracts in the near term," it says.
The company, which has renewed a cautionary notice saying it is in negotiations, has moved to reassure shareholders by adding that it has positive current assets and cash in the bank.
The Zaptronix share price was unchanged at 7c by midmorning today.
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