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Cape Town - Empowerment company Sekunjalo Investments has been forced to walk away from a lucrative technology contract with the Gauteng government, it was disclosed on Thursday.
A post-balance sheet disclosure in Sekunjalo's year to end-August results said the contract entered into between joint venture company Amethst, and the Gauteng Department of Health for implementing hospital information and electronic health systems had been cancelled.
Sekunjalo said the action was taken because of non-delivery by the Gauteng Department of Health on their contractual obligations. This prevented Amethst - as part of the Baoki consortium - from making their contractual deliveries to the Department of Health.
But more critical was the admission of "an extended non-payment of invoices" due to the Baoki Consortium.
Sekunjalo said legal advice was being sought regarding the recovery of the outstanding debts and possible damages.
The outstanding debt was not quantified, but Sekunjalo said the Baoki Consortium was still engaging with the Gauteng Department of Health in an attempt to get a revised project contract in place.
Presumably, the outstanding debt from the Department of Health affected cash flows. Sekunjalo's operational cash flow for the financial year was just R1.4m compared with over R32m the previous year.
Sekunjalo indicated that the contract cancellation had resulted in restructuring and retrenchments in a bid to re-align Amethst.
In terms of its overall performance, Sekunjalo took strain throughout its businesses in the year to end August with three out of four operating divisions running in the red.
Only Sekunjalo Informatics - of which Amethst is a part -trading profitably, contributing R11m to operating profits.
Premier Fishing, Sekunjalo's biggest operating division, notched up operating losses of R30m from turnover of R192m.
The restructured health care division recorded a loss of R21m and the pared down financial services division lost R4m.
In total Sekunjalo's operating loss was R28m.
Newly appointed Sekunjalo CEO Khalid Adbulla said that a combination of the global crisis and the restructuring initiatives implemented over the last 10 months has resulted in a short-term negative impact on the company.
But Abdulla was happy with Sekunjalo's restructuring process, pointing out that the process had strengthened the balance sheet and lead to annual savings of between R30m to R40m.
- Fin24.com
