Congloerate courts Indian investor to stem haemorrhage
Dumisani Ndlela, Deputy Editor-in-Chief
INDUSTRIAL conglomerate Gulliver Consolidated Limited's solvency woes, first reported by The Financial Gazette's Companies & Markets (C&M) in January last year, appear to have deepened, with investigations indicating that the group was on auto-pilot after losing key executives.
Sources indicated that chief executive officer, Tanyaradzwa Chinamo, had not been replaced since leaving the group to take over a foundry in Marondera.
The group's finance director, Tinashe Mukadzambo, is also said to have left the organisation two months ago as the haemorrhage on the group intensified.
Latest information was that the group had not replaced the two senior executives. Workers indicated that Esau Phiri, the finance director for More Wear Industries, a unit of Gulliver, was handling issues related to the group although he had not been appointed to act as the CEO.
The afflictions besetting the company had been compounded by the fact that Gulliver failed to publish financial results for the year to September 30, 2011 within the three months provided for under Zimbabwe Stock Exchange (ZSE) regulations. Sources said the company's auditors had ditched the firm after failing to get payment for previous audit work.
The company should have published its financial results between October and December last year. It failed to do so in January, and sources indicated there were no prospects of shareholders getting an update on the company's financial status soon.
"They don't have audited financial results as we speak," a source told C&M. "Their financial position has in fact worsened. They are on the market looking for a bailout partner."
Gulliver's board chairperson, Engineer Mataure, confirmed the group had not yet published its financial results and indicated they had sought necessary approvals from regulators.
"We have sought postponement from the Zimbabwe Stock Exchange. We have a transaction pending and might issue a cautionary in a few days," he said, indicating that Justin Samudzimu, a board director, had been asked to take an executive role at the company since the departure of Chinamo and Mukadzambo.
He said Samudzimu was well placed to handle queries and would call this reporter for clarifications. He had not done so at the time of going to press.
Indications from various market enquiries are that Gulliver could have turned to an Indian firm interested in investing in rolling stock for the National Railways of Zimbabwe to support its projects in the country.
Rolling stock includes vehicles that move on a railway, for example, locomotives, railroad cars, coaches and wagons.
Gulliver owns More Wear Industries, Moresteel, Megasteel, Industrial Gulvanising & Fabricating, Transport & Crane Hire and Lysaght Steel Merchants.
It is a supplier of steel and steel-engineered products such as railway rolling stock, mining equipment, road transport trailers, storage tanks and bins, large bore pipes and others.
The group had extended its net loss position to US$2,7 million during the year to September 30, 2010, from US$991?120 during the comparable period the previous year. Current liabilities exceeded current assets by US$3,7 million, making the group technically insolvent.
The Gulliver board had warned that the company had been significantly affected by the prevailing economic environment and could continue to suffer from the adverse affects of the country's macro-economic environment which had resulted in a significant downturn in economic activity, especially the main business drivers for group operations.
The situation is therefore said to have worsened during the year to September 30, 2011.
"The status quo has seriously affected operations and gives rise to a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern," said the group's board in an announcement of the 2010 results.
A going concern is a company's ability to continue in operation without the threat of going out of business and liquidating its assets mainly to settle liabilities.
For a company to continue as a going concern, it has to generate or raise enough resources to stay operational.
The group had a portfolio of non-current assets amounting to US$14,7 million and current assets of US$1,7 million.
Non-current assets are assets which are not easily convertible to cash; in most cases, they are not expected to become cash within the next financial year.
Current assets are those assets in the form of cash or cash equivalent, accounts receivable or inventory which can be easily used to redeem liabilities.
Long-term liabilities, those expected to be settled outside the current financial year, amounted to US$16?717 as at September 30, 2010, while current liabilities, also known as payables or current debt and which represent the sum of money owed by a company and due within a financial year, amounted to US$5,3 million.
This represents a glaring mismatch between assets and liabilities, a situation that places the group in a very invidious situation.
A proposed restructuring to mitigate the risk of bankruptcy had failed to take place, according to information gathered by C&M.
This would have entailed disposal of non-profitable divisions and debt restructuring.
The Gulliver board has previously expressed concern at the recurrent cost base which has been unhealthy given the level of business the group's operations have been getting.
In previous reports to shareholders, the group indicated its intention to rationalise the cost base in tandem with the business level and retiring expensive debt.
The board had reviewed the business models in the group and believed there was merit in focusing on fewer strategic business units.
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