Receivers in as Eftpos firm fails to raise funds

Some of nation's richest investors refuse to back ProvencoCadmus. Photo / Martin Sykes

Debt-ridden Eftpos technology company ProvencoCadmus, whose major shareholders include some of New Zealand's richest people, yesterday called in receivers after failing to secure support for its badly needed recapitalisation from key investors.

A few hours after its shares were suspended from trading on the NZX yesterday morning, the company issued a statement saying it had asked its bank ANZ National to appoint receivers, "as the company will not have sufficient funds to meet its working capital requirements".

Chairman Rick Christie said the company's "unsustainable debt burden, sluggish investment and product markets and a weaker than expected trading performance" had combined to prevent the company from achieving "strategic objectives".

ProvencoCadmus' receivers are trying to sell the company's businesses as going concerns and are saying it is business as usual for customers and suppliers.

Michael Stiassny and Brendon Gibson of KordaMentha are not signalling redundancies among the 180 staff.

"Today we don't know. We would hope not," Stiassny said.

ABN Amro Craigs head of research Mark Lister said the receivership was no surprise given the company's announcement last week that it was urgently seeking up to $5 million in working capital.

"It sounded pretty ominous. We knew that unless something happened pretty drastically that things could have gone this way."

The company yesterday confirmed that major shareholders, including Todd Capital - an investment vehicle for New Zealand's richest family the Todds, which held 12.6 per cent of the company - and Navman founder Peter Maire's Tahia Investments, which held 6 per cent, were unwilling to offer further support.

That was in spite of the company's directors yesterday saying they believed the underlying trading business was "fundamentally sound and capable of generating good returns in the future".

Nevertheless, the company's independent directors acknowledged "the strong support" of Todd Capital and Tahia, which between them provided $8 million in additional funding last year. A spokeswoman for Todd Capital declined to comment.

Apart from the company's need for working capital, Christie last week estimated long-term restructuring would require $10-15 million and said the firm had been talking to prospective cornerstone shareholders.

Interest in the group's core payments business had been strong, and still was "but investors were reluctant to invest in the listed company with its complex debt structure and corporate costs burden", Christie said.

He said the decision to call in receivers came after a period of major restructuring, redundancies and asset sales in an effort to reduce debt and improve profitability in a weakening market for all the group's major businesses, including international retail oil automation, payments technology and division Vantex, which it sold to US firm Ingram Micro in April.

In weeks following the Vantex sale, the Herald learned that ProvencoCadmus had hoped to get more than $40 million for the business but weak trading conditions saw it eventually agree to a conditional price of $22.5 million. The Herald understands the final price may have been even less than that.

The company had taken on significant debt "during a period of strong growth and development in a buoyant market" but that debt had now become unsustainable, said Christie.

Lister said ABN Amro Craigs had ceased following the stock a year ago, noting that the two component companies had "promised a lot but delivered little".

ProvencoCadmus shares plunged sharply after last week's announcement and last traded at 3.5c against the 12-month high of 21c.

TERMINAL CASE
ProvencoCadmus

* Formed in May last year with merger of Provenco and Cadmus.
* Reported a first half net loss of $25.6 million.
* Owes $45 million to its bankers and capital note holders.
* Sold key asset Vantex to Ingram Micro in April but got less than hoped for.
* Major investors Todd Capital and Peter Maire declined to prop the company up with more working capital.
* Other investors include Warehouse boss Stephen Tindall's Norwood Investments and South Island tycoon Alan Hubbard's Hubbard Churcher Trust, according to the company's recent annual report.
* KordaMentha's Michael Stiassny and Brendon Gibson appointed as receivers.