Healthier Tongaat Hulett puts breach of JSE rules behind it
Fine of R7.5m was the largest penalty the exchange could impose, says shareholder activist Chris Logan
Sugar producer Tongaat Hulett said on Wednesday that it has accepted a R7.5m fine from the JSE for publishing financial results between 2011 and 2018 that provided false information to shareholders.
The JSE has suspended R2.5m of the fine for five years provided Tongaat does not breach “material and important” listing rules during the period. The JSE said it took into account Tongaat’s full co-operation in its investigation.
Tongaat, once one of the country’s most recognisable blue-chip stocks, announced in November that it would pursue claims against some of its former executives after a PwC investigation identified a number of undesirable accounting practices that, among other things, overstated its profits.
The PwC investigation identified practices that led to revenue being recognised in earlier reporting periods than it should have been, and expenses being inappropriately capitalised to assets.
The company has been forced to restate previous financial results, including for the six months to end-September 2018, which resulted in total assets decreasing by about R12bn, or 34%.
Tongaat said on Wednesday that it co-operated with the JSE and is committed to ensuring that no transgression of the listing requirements recurs.
Shareholder activist Chris Logan said Tongaat’s fine was largely ceremonial as it was the maximum penalty the JSE could impose.
“The amount of the fine is a lot less than the misstatements. Tongaat now has a new executive and board, which is playing things by the book with respect to the punishment against the company,” he said.
“The problem is that the company is being punished now and not the officers of the company who have since left. Those officers are facing criminal cases brought upon them by Tongaat. We need to see what will happen to that legal action,” Logan said.
Tongaat said in June that it expected to report a jump of more than 200% in operating profit from a previous R1.2bn for the year to March. It said the improved performance was a result of the group’s turnaround strategy spearheaded by CEO Gavin Hudson, who took the helm at the sugar producer amid a storm of allegations of financial misconduct.
Ten of its executives have been nabbed for their involvement in the company’s financial wrongdoing.
“This result is on the back of excellent progress with the overall business turnaround strategy. The board believes that the underlying fundamentals of the business are good and that the group is in a much stronger position than it was a year ago,” the company said.
Tongaat’s share price was up 1.28% to close at R5.38, giving it a market capitalisation of R726.9m. The stock has lost 95% of its value over the past two years. /with Alistair Anderson