JSE rebukes inept TCS

2015-02-01 15:00

Traffic technology company Total Client Services (TCS) has been censured by the JSE for “inappropriately” declaring itself not bankrupt in its 2013 annual report.

Soon after making this statement in its report, the AltX-listed TCS was placed under business rescue.

A spokesperson for the JSE told City Press that TCS’s board had approved the annual report and financial statements in September 2013, in which they indicated that the company would be a going concern until the end of February 2014.

TCS was also in a poor financial position, with its debts dwarfing its assets in both 2012 and 2013, and losses at R10?million and R6?million, respectively.

“The JSE found that the company failed to complete a rigorous and robust review of its future cash flow and income projections for its next financial year to February 2014,” the JSE said.

“Furthermore, the JSE found that the company had knowledge of certain material facts at the time of signing off on the financials and failed to adequately disclose the material facts.

“The inadequate disclosure of the material facts are the same set of facts that led to the application for business rescue in November 2013.”

But TCS chief executive Lindikhaya Sipoyo said his company objected to the public censure in December, insisting it had made adequate disclosures to the market.

JSE officials wrote to the company informing it of the exchange’s intention to publish a public censure early in December, and TCS financial director Christo Els wrote back objecting to the censure.

In his response, Els detailed how the company had kept investors apprised of its financial position.

The JSE dismissed the company’s objections and confirmed that it would continue with the publication of the censure – which it did last week.

TCS issued cautionary announcements as far back as April 2012 stating that it had entered into negotiations that would result in significant new capital for the company and reduce its exposure to preference shares granted to Mvelaphanda Holdings in a R26?million empowerment deal in 2007.

But TCS’s Sipoyo said a standoff between shareholders, who would have seen their shares diluted in favour of the unnamed potential buyer, scuppered the R15?million deal.

“When you do a share issue, it will impact on the others,” said Sipoyo. “There was an organised takeover that never happened because we went into business rescue.”

At the end of November 2013, Mvelaphanda’s preference shares, which were then valued at around R35.7?million, were up for recall and TCS did not have the cash to buy them back.

This precipitated the business rescue and the voluntary suspension of share trading.

Els said the business rescue process was completed in August and the company would apply to lift the suspension of its shares after its annual general meeting, which will be held within the first half of this year.

Sipoyo said there was nothing the company could do about the public censure, except “going to the market and letting them know what the facts are”.

At least R5?million of the Mvelaphanda debt

was written off and the rest converted to loans, with most of these subordinated in favour of other creditors.

The company targets the roads and traffic sector, but it plans to make a shift to the private sector through manufacturing its own cameras, some of which will be available for the public to purchase.

Sipoyo sees this as a growth area that will reduce its reliance on government business – which sometimes pays late

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