Plagued by scandals and financial woes, ASX-listed IP-security vendor, Zylotech (ASX: ZYL), has gone into administration. But the outlook is not too grim, according to the company’s administrator.
A business restructure early in the year has failed to resuscitate the flagging company and Zylotech entered into voluntary administration under the Corporations Act on August 20 after discussions with its accountant.
Zylotech administrator, Andrew Needham of HLB Mann Judd, will be working through the company’s order books to discern whether the vendor can deliver the goods as well as finding ways to tweak orders to extract greater value out of them. He will also look at possible routes to make cost reductions, an important step since, according to ASX records, Zylotech was burning cash it didn’t have.
Needham said it was unlikely the company would be liquidated since there was an intrinsic value in the listed entity.
“I think Zylotech will be restructured or sold off in some way,” Needham said. Results will be out in six weeks time.
For the vendor’s former employees, secure and general creditors, chances are they will receive all their money, Needham said, but he was unsure whether shareholders would have the same luck.
“It depends on if I can resurrect the company,” he said.
Needham was optimistic about Zylotech’s chances. He highlighted his past experiences with the now defunct Open Telecommunications, which he managed to bring back from the brink.
Avnet, which became Zylotech’s first and only Australian distributor in December last year, terminated the partnership just five months ago. Avnet general manager, Gavin Lawless, said he saw the writings on the wall. He cited well-publicised scandals including the departure of Zylotech’s CEO due to breaching terms of employment and significant board shuffles as reasons the two companies parted ways.
“It became clear that as an organisation, it was struggling both in leadership direction and financially at that time, so we made the decision to stop our work with them pretty much before we even started,” Lawless said.