IT services group Brainware, whose share price has taken a hammering over the past few months, admits it made mistakes in the year to 30 June.
Releasing its provisional results for the year, the group also says it grew too quickly and some acquisitions did not live up to expectations or fit with the core culture.
Brainware, which has been the subject of a great deal of negative market perception, began an extensive restructuring process in the past financial year after "a great deal of critical self examination".
This resulted in several disposals and divestment of some local and international interests, which saw the group shed 34 of its 49 operating companies.
It also reduced to four the number of divisions: health, technology, consulting and application solutions. This has brought about "a leaner, flatter, more manageable structure with real synergistic opportunities", says CEO JC van Niekerk.
The company lifted headline earnings 16.7% to 15.8 million in the year under review, but headline earnings per share fell 43% to 2.9c from 5.1c the previous year.
This was in line with market expectations owing to an increase in the number of shares.
"This dilution of share capital was due to two main factors - the fall in the stock market in general and the IT sector in particular, and the continued negative market perceptions concerning Brainware, aggravated by the termination of merger talks," says Van Niekerk.
"The lower share price obliged the company to issue more shares than anticipated to group subsidiaries in terms of their profit warranties."
The share price tumbled after high-level resignations and the termination of merger talks with Altech after the latter completed its due diligence.
Analysts say the management style of founder and former chairman Piet den Boer has also had an effect on perceptions. Den Boer recently announced his resignation as non-executive chairman.
"Notwithstanding the difficulties of the past year, the results point to the underlying potential of the restructuring group," says Van Niekerk. "Prospects for the year ahead are generally good."
He adds that market conditions remain challenging, but "we remain confident notwithstanding".
"We will seek mutually beneficial alliances and cooperation agreements but no major equity partners are sought for the moment."
He says the restructuring will begin to impact the group`s performance in the current financial year, but its full benefits will be in evidence only from the following financial year.
"Profit expectations for the current trading year should therefore be tempered, but the extensive restructuring measures will ensure growth of shareholders` value in the medium-term."
The share was trading at 21c late on Wednesday morning, down 4c or 16% from Tuesday`s close.
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