A R40-million nonpayment from a debtor and a lack of funds to pay its own immediate bills has led financially distressed JSE-listed Protech Khuthele to lodge an application for business rescue.

The civil engineering and construction company fell into the red during the financial year ended February as its project in the Democratic Republic of Congo (DRC) hampered performance, with the group expecting a loss a share of between 23c and 27c and a headline loss a share of between 24c and 28c.

This compared with the earnings a share of 4.4c and headline earnings a share of 3.9c achieved the year before.

In a March trading update, the group attributed the loss to payment disputes and cost overruns, besides others, which emerged in November, as Protech’s 33.33% joint venture project moved to complete mining infrastructure in the DRC.

At the time, Protech said liquidity was expected to remain tight until all payments due on the DRC project were paid during the next six months and the new secured work generated positive cash flow.

The company currently sources its main cash flows from debtors for current and completed projects.

However, with an anticipated receipt of about R40-million from a substantial debtor delayed or possibly not paid in full, Protech said it could not meet demands for immediate repayment to suppliers for project expenses incurred.

FD and acting CEO Victor Dingle believed there was a “reasonable prospect” of rescuing the company, as the assets, fairly valued, exceeded the company’s liabilities.

Further, the voluntary business proceedings would provide the company’s directors the opportunity to develop and implement a business rescue plan to optimise the chances of Protech continuing as a going concern, he said.

The company warned shareholders to exercise caution when dealing with the company's securities as the full impact of the business rescue application was still to be determined.