Tongaat slapped with R20 million fine for accounting irregularities.
The FSCA says the restated financial resulted have highlighted the gap that existed between prior public statements and the financial reality.
Tongaat Hulett has been fined a massive R118 million by the Financial Sector Conduct Authority after it was forced to restate its financial results after uncovering massive irregularities in previous years’ accounts. However, after Tongaat approached the regulator asking for the remission of the penalty, it agreed to reduce it to R20 million due to the cooperation of new management and its difficult financial position.
The FSCA said an investigation had determined that the agri group and sugar producer had breached the Financial Markets Act by misrepresenting its financial performance, resulting in the restatement of its 2017 and 2018 financial results. It said the prior period errors extended back over the past six years and the cumulative correction was reflected in the 2017 financial statements.
The FSCA states that events after the restated financial results have highlighted the gap that existed between Tongaat’s prior public statements and the financial reality,” the regulator said. “The size of the headline penalty of R118 340 000 reflects the scale and severity of the regulatory breach. Nonetheless, considering Tongaat’s current financial position, we have made the decision to remit a substantial proportion of the penalty.”
Last month, the JSE fined Tongaat R7.5 million, with R2.5 million suspended for five years, for breaching listing requirements by publishing incorrect, false and misleading financial information to the detriment of investors. It also attributed the discounted fine to the agri group’s cooperation with its investigation, its current financial constraints and the weak economic climate.
Tongaat’s problems were brought to the fore in February last year when the group warned of a big full-year loss, resulting in a sharp decline in its share price. Gavin Hudson, who had recently taken over as CEO, said a strategic and financial review had unearthed practices that required further examination and remedial action. It called in PwC, whose probe uncovered dubious accounting practices. The investigation found that 10 executives, including former CEO Peter Staude, inflated profits to boost their own financial incentives.
The company’s previous account practices resulted in revenue being recognised earlier than it should have been and expenses inappropriately capitalised to assets. This resulted in profits in the respective years being inflated and in the overstatement of certain assets in the group’s financial statements.
Following the release of the PwC report in November, Tongaat said it planned to pursue claims against some of its former executives and was considering civil actions against those implicated, as well as other individuals, to recover bonuses and benefits paid to them.
Tongaat’s shares closed 3.5% down at R5 yesterday.
Main Image: Tongaat
