Shareholders in struggling toy and confectionery wholesaler Funtastic (FUN) will meet in early May to vote on delisting from the ASX.
The board of Funtastic, which distributes Cabbage Patch Kids, Care Bears and Star Wars branded toys and merchandise, wants to delist following a decade of sliding earnings and shares in order to restructure debt and grow.
The extraordinary general meeting will take place at Funtastic’s head office in Chadstone, Victoria.
The company shares ended steady on a tenth of a cent on the ASX yesterday with more than half a million shares traded. According to the company’s brief half year report on Friday night, the company’s future is clouded to say the least.
The report showed a fall in revenue, lower costs and a smaller loss for the latest half year compared with a year ago. But the directors and the company’s auditors both cast doubt on whether Funtastic is a “going concern” if its financial performance is worse than expected.
After having carefully assessed the Group’s forecasted cash flows and with increased control over costs, the directors believe that the Group will continue to operate as a going concern for at least the next 12 months and it is therefore appropriate to prepare the financial statements on the going concern basis,” directors said.
Directors must be assured the company has some sort of future because the interim report reveals that the National Australia Bank has provided an extra $3 million loan.
But directors added “Should the Group’s actual results vary significantly from forecast and it is unable to manage any shortfall through the measures outlined above, a material uncertainty would exist as to whether the Company and the Group will be able to continue as a going concern and therefore whether they will realise their assets and discharge their liabilities in the normal course of business.
Directors said the financial report does not include any adjustments relating to the recoverability and classification of the recorded asset amounts, nor to the amounts and classification of liabilities that might be necessary should the Company and the Group not continue as a going concern.
And auditors Grant Thornton wrote in the report:
"Included within Note 3 of the financial report, the Company has reported Goodwill amounting to $14,163,000. We have been unable to obtain sufficient appropriate audit evidence in respect to forecasts relating to new product revenue and margins to be achieved on these products contained within the Directors’ assessment of Goodwill. These uncertainties may require an impairment of Goodwill in the future, should management be unable to achieve these targets.
“We draw attention to Note 1 of the financial report, which indicates that the consolidated entity incurred a net loss of $4,400,000 during the half-year ended 31 January 2017 and, as of that date, the consolidated entity’s current liabilities exceeded its current assets by $45,285,000 with a net asset deficiency of $21,325,000.
“These conditions along with other matters set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern. Therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business, and at amounts stated in the financial report. Our opinion is not modified in relation to this matter,“ the auditors said.
