Connection Group Holdings is closing or selling non-core businesses and streamlining others in a bid to recover after excessive expansion saw the group incur an operating loss of R26.7 million for the year to end-May.
This was despite an almost 400% growth in turnover to R923.6 million, mainly on the back of the acquisition of Incredible Connection.
CEO Pierre Joubert, appointed in April, says the poor performance is due to a lack of strategic and operational focus.
"The group embarked on rapid organic and acquisitive growth, which put pressure on our cash resources. In addition, our internal control systems were insufficient in certain areas and our head office structure was cumbersome," he says.
"All this was against a background of high interest rate levels, which impacted on consumer spending."
Several senior executives also left the group during the "problematic" year.
Connection Group sustained a loss per share of 20.11c, compared with earnings of 8.60c for the 1998 financial year.
An exceptional item of R5.7 million relates to profit on the disposal of Comtec and the Training Connection building in Rivonia, offset by the cost of restructuring the group and a settlement payment to Microsoft.
Losses from discontinued operations amounted to R16.8 million, comprising losses from six retail outlets and a number of Solutions businesses, which were disposed of or closed during the year, while taking into account the profit achieved by UK-based training subsidiary Comtec.
An operating loss of R9.9 million was incurred by continuing operations, attributed mainly to group costs and the losses sustained by the local training division. The 15 Incredible Connection outlets and the Solutions Division achieved modest operating profits.
Joubert says substantial corrective measures have been taken to boost performance, including the closure or sale of non-core businesses, the sale of Comtec and the 28% stake in Business Connection, the implementation of strict cost control measures, a reduction of head office overheads and a streamlining of businesses within the retail and solutions divisions.
He adds that the group will focus in the year ahead on its core activities in retail, local training and solutions, which he says have significant upside potential.
"At Incredible Connection, we have appointed a new MD, Toni Fourie, who was previously the deputy CEO of Mass Discounters and who brings 18 years of retail experience to the division. In addition, we have introduced an efficiency improvement programme and conducted a detailed store viability study.
"There are also encouraging signs for the solutions division, particularly for the Active Retail software product, which won an international award for innovation from Microsoft. We expect to generate healthy returns from this product towards the end of this year.
"As a consequence we have increased our stake in Active Retail from 50.1% to 83.3%."
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