Fraud hits Advtech stock
The education and staffing group has uncovered fraud by a financial manager in its schools division
Shares in private education conglomerate Advtech — which owns brands such as Crawford Colleges, Trinity House, Abbotts and Varsity College – took a beating after management stumbled on fraudulent activities in its core schools division.
Although the financial impact of the fraud is small when measured against market capitalisation and bottom-line profits, Advtech’s share price finished 3.99% down at R15.65.
In a voluntary announcement issued on Friday, Advtech said a restructuring of the company’s finance and administrative functions in the schools division had uncovered incidents of fraud that spanned three years from the 2015 financial year.
In aggregate, the misstatements and cash loss amounted to R48.1m, which meant a R35.5m after-tax impact over three years, it said. Advtech will account for the effect of the fraud in the 2017 annual financial statements.
Events showed that the move by Advtech to centralised cost control was necessary as this fraud was happening at schools level, said Anthony Clark, an analyst at Vunani Securities. “It’s not great news for a Friday but it shows the company is honest and on top of its game,” he said.
Advtech said the fraud was committed by a unnamed financial manager, whose activities over three years were not easily identified as the amounts involved were not significant. The cash component of the fraud amounted to R5m.
Advtech estimated that R2m should be recovered, with a court order already secured to freeze the bank account of an unnamed external service provider that colluded with the financial manager.
The company believed the balance should be recoverable through its insurers. Criminal charges have been laid against the financial manager and the colluding service provider.
Advtech CEO Roy Douglas said management deeply regretted the occurrence.
The fraud resulted mainly from head office book entries and would not affect delivery, fees or quality at any of Advtech schools, he said.