Shares in Protech Khuthele dropped 15.79 percent to close at 16c on the JSE yesterday after the listed civil engineering group reported on Friday that it had voluntarily applied to be placed in business rescue.
The company’s announcement about its application for business rescue was released after the close of trading on the JSE on Friday and after Protech’s share price had dropped 24 percent during the day to close at 19c.
Protech had advised its shareholders on May 23 that the audit of its financial results for the year to February was in the process of being finalised but taking longer than initially anticipated.
This resulted in the company postponing the planned release of its annual financial results on May 26.
This was followed by Protech reporting on Wednesday that Antony Page was standing down as chief executive with immediate effect and Victor Dingle, the company’s newly appointed chief financial officer, had been appointed acting chief executive with immediate effect.
The company said on Friday that its application to be placed under business rescue followed a demand received from suppliers for the immediate repayment of project expenses incurred, which the company was unable to pay.
It said the company had also become aware on Friday that the anticipated receipt of R40 million from a substantial debtor might be delayed or possibly not paid in full, which would adversely affect the company’s cash flow.
“As Protech cannot meet its commitments, Protech has no choice but to lodge an application for business rescue,” the company said.
Protech did not identify the major debtor whose R40m payment had been delayed nor did it specify the amount demanded from the company or identify who had issued the demand.
However, in a trading update published in March Protech highlighted problems with a mining infrastructure project in the Democratic Republic of Congo (DRC), where it was a 33 percent joint venture partner with a leading but unnamed South African construction company.
“The difficulties include payment disputes and cost overruns,” it said at the time.
Protech said group liquidity would remain tight until all payments due on the DRC project were paid during the next six months and the effects of the new secured work generated positive cash flows.
Dingle said yesterday that given the cash flow impediment, Protech’s board had concluded that although the company was financially distressed, there appeared to be a reasonable prospect of potentially rescuing the company because the assets, fairly valued, exceeded the liabilities.
“The board is unanimous in its decision that Protech voluntarily begin the business rescue process.
“Furthermore, the board is of the opinion that the voluntary rescue process will afford the directors the opportunity to develop and implement the business rescue plan in a manner that will optimise the likelihood of Protech continuing as a going concern,” Dingle added.