Write-down of MGX loan hurts Eureka

Investment trust Eureka Industrial`s latest full-year results have been hit hard by a R13 million write-down of a loan to IT group MGX Holdings.

Eureka is invested in a range of mainly listed shares, including technology stocks.

Chairman Ronnie Price says the IT investments performed satisfactorily. However, the group has taken a knock from the write-down of the loan to MGX.

"In order to maintain a conservative approach regarding asset values, the loan to MGX Holdings has been written down by R13 million because it is difficult to ascertain whether this loan can be recovered within a reasonable period of time," Price says.

MGX is in the midst of a restructuring process that forms part of a recovery strategy begun last year under turnaround specialist Peter Flack.

It has in recent months announced the sale of several of its operations in a bid to reduce debt levels.

Eureka incurred an attributable loss of R11.74 million for the year to 28 February, which compares with a profit of R4.93 million for the previous year.

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Revenue increased from R32.1 million to R57.28 million, although operating profit slipped to R1.3 million from R3.75 million previously.

Price says the operating profit comprises trading results from operating subsidiaries, joint ventures and the profits or losses in the share trading portfolio.

Among the company`s other investments, trading conditions for Atlas Utas, in the automotive engineering sector, were deemed to be acceptable.

Price says Magnalec, the joint venture in the engineering sector, has begun to improve profitability and is expanding its activities in the specialised magnetic resistor and transformer component market.

"The group`s share investments comprise the major part of the group`s value and future growth will be largely dependent on their performance," he says.