Plans to sell off the 11 subsidiaries of troubled IT group Brainware is not considered a fire sale by its executives, even though the company owes creditors R30 million.
After taking yet another knock earlier this week with the announcement that Rock-it would not be extending the R10 million life-line to the haemorrhaging IT company, Brainware has announced it will be selling off its eleven subsidiaries and discontinuing head office operations.
Brainware directors foresee the company being transferred to the cash companies sector of the JSE.
Two options will then remain for Brainware. The board will have to decide whether to distribute any surplus cash to shareholders as a final dividend and de-list, or retain the remaining cash in a cash shell pending the acquisition of suitable assets, complying with JSE listing criteria.
Speaking at a press conference in Johannesburg this morning, Brainware CEO JC van Niekerk said the announcement was the hardest thing he has had to, but the decision is "the right thing to do".
Citing various contributory factors to the current dilemma, Van Niekerk said that apart from the difficult market conditions, the Brainware name has become a liability and the continued fall in the share price was leading to negative perceptions within the market and press.
There have also been a number of problems originating from within the group. Van Niekerk said the substantial head office costs have been a constant drain on resources.
"Although our subsidiaries are operating on a profitable basis, they have not been able to contribute enough revenue to sustain the group`s overheads and operations as a whole," said Van Niekerk.
As the books stand at the moment, Brainware has a consolidated debt in excess of R30 million, R17 million of which is a long-term debt to ex-CEO Piet den Boer.
The only potential cash flow relief that exists in the near future is the disposal of the subsidiaries and the money generated by the planned off-shore listings of off-shore subsidiaries, US.Com and Aqeuro. Van Niekerk has discounted the latter possibility, as the listings would only come after the June year-end results.
"Brainware has appointed Bridge Capital to oversee the sale of the subsidiaries to ensure the highest possible level of transparency and it will also participate in all meetings to safeguard the interests of the 6 600 shareholders," explained Van Niekerk.
Commenting on statements made at the announcement of the Brainware interim results, where Van Niekerk had painted a rosy picture of the company finishing the year in the black, the CEO said: "It is still my opinion that the second half would be profitable. I am not making excuses, that is why we are here today doing the right thing," said Van Niekerk.
At noon today the Brainware share was trading in heavy volume at 3c.
The Brainware board hopes to have concluded today`s stated goals by the end of July or the beginning of August.
Brainware will hold a shareholder information session in Centurion at 10am on Tuesday, 23 May. It has also established a shareholders help facility at e-mail sharehelp@brainware.co.za or by fax at (012) 663-0183.
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