On 20 September 2012, Loqus Holdings plc published its Annual Report covering the financial year ended 30 June 2011. The results showed a loss of €1.4 million compared to a marginal profit in the previous financial year. The deterioration follows an 8.3% drop in revenue to €4.1 million, reflecting the one-time income recognised in the previous financial year, and an increase in the Group’s cost base given the investment made in specific research and development in e-forms and advanced document management – the new focus areas of the Group.
Sale of Fleet Management
The Loqus Group is still in negotiations with an established international partner to sell its Fleet Management business. This segment of the Group’s operations has been reclassified as assets held for sale and valued at €5.66 million based on the price being discussed with the potential buyer. However, the auditors were unable to verify the accuracy of this price.
Furthermore, other business components that perform well have been identified and are being positioned in a way to enable the Group to find suitable partners in order to provide cash injections and growth in these areas.
Cash Flow Constraints
The Annual Report clearly indicates the challenges being faced by the Group in terms of its cash flow management. The CEO, Mr Joseph Fenech Conti, explained that the Group has been experiencing a slowdown in payments from Government and international customers. As a result, not enough cash from operations was being generated forcing the Group to request the assistance of its bankers which have until now continued to support the Group by releasing funds tied in to performance guarantees and bid bonds in favour of Government.
Loqus is in breach of loan covenants and as such all amounts outstanding to the bank have been reclassified as immediately due and payable. As a result, the Group’s current liabilities exceed current assets (excluding the €5.66 million related to the Fleet Management assets held for sale) by €2.7 million. To date, the Group’s bankers HSBC Bank Malta plc have provided their support but they have not formally committed to extend this support in the future.
The financial statements under review were prepared on a going concern basis as the Directors have reasonable expectations that the Group will continue in operational existence for the foreseeable future. Nonetheless, the Directors hinted that the realisation of the sale of the Fleet Management business is critical for the Group to remain in operational existence.
In contrast, the Auditors explained that they have not been provided with formal plans and detailed cash flows to confirm the use of the going concern assumption in the preparation of the financial statements.
The CEO of Loqus explained that the period since July 2011 has been even tougher. As such, the Loqus Group is not expected to break-even during the financial year ended 30 June 2012 and only aims for a recovery by June 2013.
Disclaimer of Opinion
The Auditors Ernst & Young failed to give an opinion on the financial statements of Loqus Holdings plc for the financial year ended 30 June 2011.