Johannesburg, 01 Apr 2003
Auditors say they are concerned about the ability of Global Technology (Glotec), which has reported a full-year loss of R379.4 million, to continue as a going concern.
Glotec`s auditor, Deloitte & Touche, raised an emphasis of matter in an unqualified review opinion on the group`s results for the year to 31 December 2002, saying Glotec depends on the introduction of new capital and a cost reduction programme under way.
Glotec CEO Ray Leonard says the directors have implemented a cost-cutting and reorganisation exercise and the group will begin the formal process for a rights issue to raise capital towards the end of this month.
He says 80% of the group`s costs are related to human resources and as a result a retrenchment process began in September last year. "And everybody has to work harder and smarter," he says.
A number of software products the group deemed to be viable only in the medium-term have been either mothballed or sold.
"The 2002 financial year has been the most difficult in Global Technology`s 14-year history," Leonard says.
Of the R379 million attributable loss, R168 million was related to losses attributable to Swiss-listed Temenos and the write-down to current market value of Glotec`s 15% stake in that company.
The R139 million operating loss was caused mainly by a revenue drop to R347.9 million from a 12-month pro forma R437 million; a foreign exchange loss of R23 million; a loss in Global Technology Australia of R33 million; and a R27 million provision for bad debts, relating mainly to Zimbabwean debtors.
Leonard says the Zimbabwean situation arose not because Zimbabwean clients are unable to pay their debts, but because the money cannot be taken out of Zimbabwe.
In addition, the group has impaired the value of goodwill in subsidiaries by R19 million and has written down development costs by R28 million.
Under pressure
"The group has identified all non-core and non-strategic businesses and has implemented major cost cuts. The benefits of these measures will be felt from July this year, with the elimination of R76 million in costs per annum."
Leonard says the exercise will result in costs being lower than annuity income.
"From a month-to-month operational point of view, the group will have little dependency on new sales, which are expected to remain under pressure for at least another 12 months.
"We have procured a further R10 million in continued support from the group`s bankers and major shareholders and have committed ourselves to de-gearing the balance sheet and reducing our exposure to our bankers over time."
He says the rights issue is the first step in this process.
The Glotec share was trading at 5c this morning, down 3c from yesterday`s close.
Related stories:
Glotec says loss will be significant
Glotec to delist Australian subsidiary
Temenos cuts staff, reports loss
Share