The latest shareholders update by the retail behemoth Choppies – whose results have been pending for months – has generally received a positive response from the financial markets.
Informed sources say this comes from the fact that it has become clear that the operational systems of the business have remained solid and continue to deliver value to the business.
The company financial results for the year ended June 30, 2018 have not been completed within the stipulated time frame after external auditors – PricewaterhouseCoopers – raised concern with regard to three areas.
These are: “audit concerns and queries relevant to the Group’s compliance with International Financial Reporting Standards; certain matters which, in terms of the Company’s announcement dated 27 September 2018, were referred for investigation, analysis and advice, and which involved a number of commercial agreements to which the Group was party in Botswana during past years.”
The Board in its latest trading update confirms that PwC’s enquiries have substantially been addressed, though work continues in the area.
“The Group expects detailed audit work in the various end-markets to conclude during March 2019, allowing the Audit Queries to be closed by the end of April 2019; in relation to the Legal Investigation, a Botswana law firm was appointed to undertake and provide the necessary legal analysis and advice. The primary work of the law firm has concluded and its report on the relevant matters has been tabled before the Board. The Board is considering the recommendations and remedial actions proposed in the Legal Report. Subject to the implementation of the recommendations in the Legal Report, and the addressing by the law firm of any ancillary issues that may arise by way of a supplemental report, if necessary, the Legal Investigation is expected to close by the end of April 2019.”
The Group has become aware that any financial information prepared and presented in prior periods requires restatement or representation.
“Based on the Group’s unaudited assessment, the cumulative impact of such restatements will be to reduce total equity of the Group as at 30 June 2017 (as previously reported) by an estimated P378, 000,000. The Group estimates that P338, 000,000 of such total restatement results from the de-recognition or impairment of goodwill and other tangible and intangible assets, revised depreciation and amortisation of tangible and intangible assets and de-recognition of deferred tax assets previously recognised. The Group currently estimates, on an unaudited basis, that the consolidated net income after tax for the year ended 30 June 2018 will be lower than that originally reported for the year ended 30 June 2017 by P389, 000, 000,” said the company.
At this stage the company could not confirm matter of fact when the results would be released besides saying they have engaged the Botswana Stock Exchange for the possibility of releasing the two periods result simultaneously once they audit is completed.
In the interim the Group’s executives and Board have engaged their different stakeholders, in particular the lenders to provide them with information and disclosures to which the lenders are entitled.