JSE-listed ConvergeNet, which was recently bought out through a hostile takeover, has made a loss for the first half of the year after contracts were delayed.
This week, ConvergeNet published its results for the six months to February and said revenue fell from R496.6 million a year ago to R416.5 million. The group reported a total loss of R6.3 million compared with a R17.7 million gain in the first half of last year.
ConvergeNet says delays in inking contracts and “substantial” expenses at some subsidiaries gearing up to carry out deals led to a R27.7 million operating loss, compared with a R19.2 million operating profit last year. Its total headline loss is R16.4 million, compared with a R12 million gain last year.
In February, a consortium led by Trinity Asset Management bought a controlling stake in ConvergeNet, and said it aimed to oust most of the directors. Shareholders have until Friday to accept a 26c a share offer to be bought out.
Trinity CEO Quinton George has raised concerns that three or four of ConvergeNet’s acquisitions have been losing money under the current executive team, a trend he says started to happen at Sizwe, ConvergeNet’s largest entity.
ConvergeNet owns stakes in several companies, including Sizwe, Navix, SCS and Netxcom.
ConvergeNet says revenue dropped 16%, because of delays in awarding and implementation of major contracts. It says most of the deals have now been signed up and implementation of one started in February, which will boost second-half earnings.
The company expects market conditions to improve in the next six months and adds it has a sound pipeline of business in most of its subsidiaries. The group says its balance sheet is “sound” and it has very little gearing, which leaves it “well positioned in difficult times and for future opportunities”.
ConvergeNet says its purchase of the rest of Structured Connectivity Solutions in September, paying R239 520 for the remaining 10% stake, is starting to pay off as it has shown “positive turnaround” and has a solid pipeline of new projects.
In December, ConvergeNet sold 5% of its 20% shareholding in FutureCell, for R11.8 million. It says it is holding the remaining 15% for sale, for R41.7 million, as it has lost “significant” influence.
It did not declare a dividend, as it intends using its cash to fund growth.