Evans Medical, one of the more recognizable pharmaceutical companies in Nigeria (with its popular Allenbury’s Glucose D powder), is facing an uncertain future.
According to the company’s auditor, PriceWaterHouseCoopers (PWC), there are “significant doubts” about the ability of the company to continue as a going concern.
After incurring losses of N820 million in 2013, major doubts are hanging over the company, as its current liabilities pile above its current assets. The group’s current liabilities, which consists of borrowings, tax liabilities and trade payables stand at N3.6 billion, as stated in its 2013 audited financial statements. Current assets are only N2.8 billion. This gives a net current liability of N881 million. The company has not yet released its 2014 and 2015 accounts.
The company is also facing significant and potentially severe shortage in its working capital. In its financial statement, it said:
During the year, the company and its subsidiaries experienced significant working capital challenges which affected product availability and revenues. Consequently, the company defaulted in the repayment of various borrowing from a local bank.
In January 2015, its matured bank borrowings were restructured into a term loan facility of N690 million with a tenor of 5 years and an interest rate of 22.5% per annum.
To improve working capital, the company did a rights issue in March 2014, through which it received a net proceed of N586 million, 51% short of a projected net proceed of N1.2 billion.
Part of the proceeds were utilised in reducing its debts.
The company said it has applied and secured approval for a term loan of N2 billion (as part of CBN’s Real Sector Support Facility, RSSF, through Skye Bank). The loan, which is expected to be a 10 year facility at 8% interest, will be used to boost working capital and upgrade its factory. Management expects to receive the loan before the end of year 2015.
The firm is also in talks with equity investors, to inject fresh capital into the business.
The company’s auditor however stated that its opinion is not qualified in respect of the matter. PWC said:
The group and company incurred net losses of N820.5 million and N543.8 million respectively during the year ended 31 December 2013 and, as of that date, the group’s and company’s current liabilities exceeded its current assets by N881 million and N888 million respectively. This, along with other matters…indicates the existence of material uncertainties which may cast significant doubt about the ability of the group and company to continue as a going concern. Our opinion is not qualified in respect of this matter.