DESPITE Polartechnics confidently declaring only a month ago it had no problematic debtors, it appears that bad debts may be one of the triggers for the decision by the company last week to place itself into voluntary administration.
After entering a trading halt last week to consider “the adequacy of the company’s funding”, Polartechnics’ directors announced on Friday that they had turned the company over to administrators, saying the company needs time to restructure its operations to become profitable.
And it appears debtors that have failed to pay their bills may be a major trigger for the move, with the board saying the “conversion of debtors to cash for the funding payment of creditors is not yet sufficient nor timely” to support the company’s operations.
The problems with debtors were flagged last month, when Lonergan Edwards slammed the company’s position in a damning independent valuation report commissioned by the board of Fermiscan, which was considering merging with Polartechnics.
The report flagged significant problems with Polartechnics’ debtors, saying that, while the company was on track to achieve its $3 million sales target by the end of the financial year, a substantial portion of the sales had not yet been paid for.
“… as at March 31, 2009, Polartechnics’ creditors significantly exceeded its cash resources (after adjusting cash to include amounts raised subsequently from share and convertible note issues),” the report said.
“While Polartechnics has debtors and other assets, we understand that the large majority of the debtors at March 31, 2009, remained unpaid as at May 2009.”
At the time, Polartechnics chief executive Ben Dillon waved away the concerns, telling BTN on June 30 that the company didn’t have a problem with the lines of credit it had extended.
Dillon flatly denied Polartechnics had a problem with bad debts, saying he did not expect the company to have to make provisions for bad debts at the end of the financial year.
“I’m not expecting to go into June 30 having debtors that have to be provided against, because of the terms of trade and the relationship model and business model that we have here.”
But that appears not to have been the case, with Polartechnics going into administration last week, blaming its inability to raise capital and bad debts for its troubles.
In a statement released last Friday, the company’s board said its decision to call in McCleod and Associates as administrators had been based on consideration of the “financial position of the company, including the position of its creditors, the status of discussions with various funding sources known to the board, the likely timetable needed to rearrange replacement funding and the general economic conditions” in which it was operating.
Despite its confident predictions of topping $150 million in revenue by 2011, the company has clearly not been able to convince potential investors of that, only able to raise $2.25 million of an $8 million target in the share purchase plan it ran earlier this year.
Polartechnics chairman Robert Hunter told shareholders at the last AGM in November 2008 that the company would have annual revenue of $151 million by 2011, with its Chinese operations delivering the bulk of that revenue.
As at last year, Polartechnics had spent a total of $72 million funding the development of its diagnostic portfolio, raising $22 million of that total since 2006.
Trading through
But Polartechnics’ directors also made it clear they expected the company to be able to trade through its difficulties, implying the move into administration would give it breathing space to restructure its operations.
According to the board’s statement, administration will allow the company to “restructure the company so as to minimise its need for working capital over the next quarter”, to allow time for its eastern European and Asian operations to “further mature”.
Polartechnics says it intends to continue to “provide essential services to its customers and ensure that all TruScreen distributors have access to inventories for their ongoing TruScreen-related operations” during the initial period of the administration.
The company will also postpone the launch of its Cerviscreen product, which was being prepared in conjunction with Genera Biomed.
Genera not affected
Genera Biomed chief executive Dr Allen Bollands told BTN the Polartechnics collapse would have “zero” impact on his company.
“We have not invested anything in the project, and our internal business planning makes no assumptions around income from that project. It would have represented a small upside rather than the core business,” he said.
“We remain focused on getting PapType registered in the European Union and Australia, and on securing a commercial partner to take the test to market. I’ve just returned from a lengthy business trip to the USA, where I’ve spoken to many companies and opened up several new business development lines of discussion – around PapType, the broader AmpaSand platform and also our developmental biosensor, QSand.”
Bollands said Genera might still pursue the self-sampling idea, however, with another partner.
“We continue to be interested in self-sampling in concept and may pursue the opportunity sometime in the future with alternative partners,” he said.
PLT Price at posting:
7.1¢ Sentiment: None Disclosure: Not Held
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