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Johannesburg - Troubled microlender African Dawn Capital's shares plunged by almost a third on Wednesday, after the firm restated its earnings for the last two years with a total adjustment figure of R450m.
In a notice to shareholders, the group lowered its headline earnings for the year to end-February from 87.9 cents per share to a loss of 108c/share. Net asset value per share was reduced from 248c to 46.7c. This indicated that the board had stripped out all goodwill and intangibles associated with the 2009 valuation.
The announcement followed a palace revolution at African Dawn in October. During this, shareholders removed some executive directors, including CEO Marius van Tonder, financial director Connie van Nieuwkerk and chief operating officer De Wet Vivier.
Shareholders' lack of confidence in the old board stemmed from revelations that one of Afdawn's associates - Allegro - had placed funds with Corporate Money Managers. The firm was recently been placed under curatorship after irregularities were discovered.
Following the dismissal of Van Tonder, Van Nieuwkerk and Vivier, the company appointed Robert Emslie, former CEO of Absa Corporate and Business Bank, former banks registrar Christo Wiese and former head of Coronation Capital Adolf Potgieter to its board in non-executive capacities.
In Wednesday's announcement, Afdawn said the earnings adjustment not only relates to Allegro's fortunes, but also to previously undisclosed accounting errors.
"Shareholders are further advised that the adjustments relate to the carrying value of goodwill, the effect of the subsidiary company Allegro, additional impairments of receivables and fundamental accounting errors in the results previously reported for the years to 28 February 2009 and 2008," the statement read.
Independent small-cap share analyst Keith McLachlan from Smallcaps.co.za told Fin24.com that Wednesday's announcement has not answered all the questions that investors may have about Afdawn.
"My biggest worry is that African Dawn's systems allowed the Allegro [investment] to happen," McLachlan said, suggesting that similar ill-considered investments could have occurred.
He also said that a share becomes tainted once a company admits to accounting errors.
By noon on Wednesday, Afdawn shares traded at 56c, down 30% for the day.
- Fin24.com