Component Homes a subsidiary of Wangara-based JV Global has appointed a voluntary administrator.
JV Global set up the kit home builder for rural and regional WA in April last year.
Shortly after the appointment of a managing director and chief financial officer it is appears things with the business began to go awry.
In April this year, after promising to make the business profitable by March 2010, Component Homes' managing director resigned without notice.
In a statement, JV Global said the CFO also left shortly afterwards leaving the subsidiary in a vulnerable position.
The board of JV Global soon became aware of serious problems in profitability and injected funds into the company to help turn it around.
It was agreed that administrator Dino Travagini of Moore Stephens, Chartered Accountant should be appointed to thoroughly assess the future of Component Homes' business.
Pending the outcome of the assessment by the Administrators, JV Global has announced it will instigate a new capital raising program by way of an initial placement to Sophisticated Investors and a non renounceable rights issue to existing shareholders.
See full statement below:
JV Global Limited (ASX: JVG; :JV Global" or the Company) announces that the Board of its subsidiary company JVG Framing Pty Ltd (trading as Component Homes) ("Component Homes") has appointed a Voluntary Administrator effective at the close of business yesterday, 13 July 2010.
Mr Dino Travaglini of Moore Stephens, Chartered Accountants has been appointed as Voluntary Administrator of JVG Framing Pty Ltd (trading as Component Homes) under Part 5.3A of the Corporations Act 2001.
Following the capital raising of JV Global Ltd in April 2009, which included provision of capital for the subsidiary Component Homes, a Kit Home builder for the regional and rural areas of Western Australia, the Board of JVG appointed a Managing Director under contract with apparent qualifications, and a Chief Financial Officer. These appointments were undertaken to fully and totally manage Component Homes with undertakings from the Managing Director on his appointment that the business could be transformed into a profitable position by March 2010. The initial brief of the Managing Director was to assess the business some 6 weeks prior to his formal appointment in September 2009.
In April 2010 the General Manager resigned without notice and the CFO also gave notice leaving the subsidiary in a very vulnerable position and after having absorbed a considerable portion of the capital raised by the parent company, JVG. JVG injected additional funds into the subsidiary based on the ongoing assurances of an inevitable turnaround and eventual profitability as outlined in various projections and cash flow forecasts provided to the Board of JVG, albeit frequently late.
However, as a result of the resignations and comments by our auditors in relation to the condition of the accounts of Component Homes, the board and Company Secretary of JVG immediately became directly involved in the daily activities of Component Homes.
It soon became apparent that the JVG Board had for some time been receiving considerably inaccurate data and information contained in reports that did not reflect the true forward projections, profitability or position of Component Homes and that quoting procedures were flawed in relation to figures provided to the Board. In addition the promised necessary procedural changes had not been effectively implemented nor had effective sales and marketing programs.
After assessing the position of Component Homes and reaching the conclusion that it was not in the interests of JVG shareholders to continue to fund Component Homes in its current condition, it was agreed to appoint a voluntary administrator to provide a report on the affairs of the subsidiary in order to allow the JVG Board to thoroughly assess the future of Component Homes' business. This appointment will also allow the JVG Board to pursue more positive activities on behalf of the shareholders that have been previously outlined in our statements to the exchange and shareholders.
The cash drain has delayed the potential diversification of JVG and although recent opportunities received from within the construction industry have been considered by the JVG Board, the Board felt that these would have jeopardised the overall financial position and listed status of the parent company to the detriment
The Board of JVG believe that as disappointing as this situation is, it is a positive move in the right direction as it has removed the ongoing burden of that subsidiary in its current format and allows a new invigoration of the company's activities going forward.
Pending the outcome of the assessment by the Administrators, JVG will instigate a new capital raising program by way of an initial placement under section 708 to Sophisticated Investors and a non renounceable rights issue to existing shareholders, and an announcement on this is imminent.
The Board have secured the total ongoing support of the major shareholders and Note Holders and this will enable JVG to proceed with a considerably greater degree of certainty.
As a result of the prudent cost saving measures implemented by the Board over the last 12 months in regards to JVG, JVG has one of the lowest cost operating expenses of any listed company on the ASX.
The Board has previously, and is currently being approached by a number of interested parties including Brokers proposing various opportunities to JVG and the Board will continue to assess all of these on their merits.
Members of the JVG Board have also recently travelled to Dubai, Kazakhstan and China for discussions with interested groups and a trip to Indonesia is expected within weeks to discuss opportunities there. We look forward to the ongoing support of the shareholders to allow this rejuvenation to proceed.
