JSE-listed IT solutions group Contlan Holdings is to sell its infrastructure services division for R2.5 million to recapitalise the group.
The sale, to AST-A, also involves Contlan retaining a share of the profits of certain infrastructure services contracts.
The group will focus on project services and software development.
Contlan`s results for its maiden year to February, reported earlier this year, fell far short of pre-listing forecasts. Turnover of R23.6 million was 57% below forecast, while headline earnings per share of 0.13c were 98% below forecast.
The group says it has experienced a significant deterioration in profitability, partly because of negative market sentiment towards small-cap stocks, as well as "operational inefficiencies".
"The continued negative market sentiment is accentuating the need for strong balance sheets and critical mass within the operational business units of companies," it adds.
Contlan says it remains undercapitalised, although it is debt free and has made progress in solving its internal inefficiencies.
Because of the undercapitalisation, it adds, it is "disproportionately exposed to the lack of critical mass within its business units, especially within the infrastructure services division".
The division is a specialist network design, implementation and integration solutions provider focused on the stockbroking, investment banking and asset management industries.
The sale is subject to shareholder and regulatory approval, and also the assignment of certain "key client contracts" to AST-A.
Related stories:
Contlan can`t land forecast figures
Share
