Embattled Faritec has one chance to raise the R60 million it needs to continue operating, and key management members are also subscribing for more shares.
Should Faritec fail to raise the funding, “it will have major consequences on the industry as a whole”, notes an analyst who asked not to be named.
The analyst adds that Faritec is a major IBM partner, and, with the recent collapse of Masana - another IBM partner - Faritec's failure could leave IBM high and dry without a partner to service its client base.
IBM has declined to comment on Faritec's precarious financial position.
Shareholder issues
The analyst says Faritec is likely to raise the cash it needs, but it if doesn't, “it would be an embarrassment and severally shake the shareholders”.
Faritec is majority-owned by Shoden Data Systems, which owns 51% of the company. At the moment, Faritec is trying to get Shoden - which has already invested R20 million in the company - to partially underwrite a share offer.
Another major shareholder, Cornastone Enterprise Systems, has 9.31% of Faritec, while the J&J Group owns 29.55%, according to the latest available information. None of these entities have commented on Faritec's need to raise the cash, or indicated if they would bail the company out.
One chance
Faritec CEO Fannie van Rensburg says: “We've got one opportunity to fix this thing and that's the opportunity now.” The company is in discussions with several parties and hopes to announce an inked deal soon.
Van Rensburg says Faritec had several deals lined up, but these were not in the best interests of the company and it walked away.
The R60 million is required to pay creditors, fund its turnaround strategy and provide working capital. Faritec said it needed to raise the cash late last year and had expected to have wrapped up a deal by the end of last month.
Van Rensburg says management will be involved in the fundraising, and he will also invest a significant sum of money. “I'm not going to put money in there and let it fail.”
Despite the company's loss-making position, Van Rensburg is confident he can turn Faritec around and it will make a profit by year-end. He is willing to invest in the firm because he believes it has huge potential.
Faritec's interim results to the end of December are expected to be out by the second week of March. The results are expected to show earnings between 25% and 45% higher, and both earnings per share and headline earnings per share for the six months will be between 80% and 90% higher.
This, however, is still a loss. The company's share was unchanged at 4c this morning.
