UNIFER HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/010061/06)
(Share code UNF ISIN ZAE000027504)
("UniFer")
Further announcement regarding a profit warning
1. UNIFER ANNOUNCEMENT OF 15 JANUARY 2002
UniFer issued a profit warning on 15 January 2002 which referred to a
detection of a material deterioration in the debtors' book of UniFer which
will result in significant losses for the six-month period ending 31 March
2002.
2. FURTHER INFORMATION
2.1 The origin of the problem
When the market fundamentals in micro-lending changed with the curtailment
of the Persal deductions, UniFer responded by announcing a period of
consolidation. After this slowdown, alternative collection methods were
introduced and UniFer's management embarked upon a strategy of rapid growth.
Despite assurances of management, it has become clear that provisions are
inadequate. The use of a decentralised credit model and inadequate
administration capacity and systems underlie the underprovisions that arose
as a result of overheated trading from April to June 2001. The understanding
of the extent of the problem was exacerbated by the lack of information to
the UniFer board. The board relied on the representations of management
which conveyed neither the full nature nor extent of the problem.
2.2 The nature, extent and impact of the problem
The nature of the problem is that bad and doubtful provisions are materially
understated. The present picture is that the extent of the understatement in
UniFer's provisions are estimated at R1,5 billion. The external auditors
have been tasked to verify the position and will report in 30 days from 15
January 2002. Given this position the net asset value of UniFer is at risk.
3. UNIFER TURNAROUND PLAN
The critical success factors for UniFer going forward revolve around a
review of market potential and industry segment, as well as improved risk
management systems, policies and procedures. In addition to this, an
aggressive collections drive will be undertaken.
The core focus areas for UniFer's turnaround is the strengthening of
management coupled with efficiency improvements. Strengthening management
entails the secondment of specialist Absa Group Limited ("Absa") skills to
UniFer as well as the enforcement of financial and corporate governance at
UniFer. Efficiency improvements will be undertaken with regard to the
collection processes, the application of Absa systems as well as cost
reductions.
Short-term actions as well as a long-term strategy underpin UniFer's
turnaround. The short-term actions that will be undertaken include the
restructuring of UniFer, the leveraging and acceleration of synergies with
Absa as well as the implementation of a new credit model and collection
methodologies.
In addition to the above, Absa has undertaken to support UniFer throughout
the entire process by agreeing to follow its own rights entitlement, by
underwriting the remainder of the rights offer and by providing support to
depositors and the necessary liquidity to UniFer during this period, should
it be required.
The UniFer board is confident that the actions mentioned above will ensure a
sustainable future for the Group.
4. FURTHER ANNOUNCEMENT
A further announcement will be made within the 30-day period referred to
above.
Johannesburg
17 January 2002
Merchant bank to the transaction
ABSA CORPORATE AND MERCHANT BANK
Corporate Finance
(Registration number 1986/004794/06)
Sponsor
Barnard Jacobs Mellet
Corporate Finance
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