Roy Cokayne

The performance of the project in the Democratic Republic of Congo (DRC) that plunged Protech Khuthele into a financial crisis have continued to worsen since the listed civil engineering group voluntarily applied to be placed in business rescue at the end of last month.

The group revealed this week that the cash due to the group from the joint venture had resulted in additional provisions for tax losses of R11.6 million. This provision is in addition to the one accounted for when it published its trading update in March when Protech highlighted problems with a mining infrastructure project in the DRC, where it is 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.

Its joint venture partner in the DRC project is believed to be Group Five.

Trading in Protech’s shares on the JSE was suspended last week at the company’s request.

Protech said last week its board had decided to voluntarily suspend trading because there was still “material uncertainty” regarding the company as a going concern. Also, its business rescue plan was at an early stage and all stakeholders were being engaged.

The company said this week in commentary released with the delayed publication of its financial results for the year to February that based on the progress with the business rescue plan, the directors remained of the opinion there was a reasonable prospect of rescuing the group.

It said a “preliminary” business rescue plan had been put in place by the company’s board of directors.

The group also highlighted its solvency, stressing this was evidenced by the excess of assets over liabilities of R232m and a tangible net asset value of R195.4m. The group incurred a loss after tax of R111.2m in the year to February compared with the R16.1m profit in the previous year.

The loss was after impairment of outstanding receivables of R13.5m and non-recoverable foreign withholding taxes of R15.6m, and the continued depressed market conditions that had led to an idle plant and the non-recovery of project overheads.

Revenue for the Readymix segment declined to R141.1m from R150.6m. It reported an operating loss of R100.8m compared with an operating profit of R46m in the previous year. This resulted in a headline loss a share of 31.4c compared with headline earnings a share of 3.9c in the previous year.

The net cash flows absorbed in operations totalled R109.2m compared with R180.6m in cash generated in the previous year.

Together with a net cash outflow in investing and financing activities, this led to an overall decrease in cash and cash equivalents of R171.8m compared with the R59.1m increase in the previous year and a net overdraft position of R32.7m compared with a R139.1m bank and cash balance.

The group said in the event that it was not successful in its business rescue plan, significant uncertainty would exist about its ability to continue as a going concern and it, therefore, may be unable to realise its assets and settle its liabilities in the normal course of business and at the amounts stated in its financial statements.