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Johannesburg - The lesson learnt by two beleaguered JSE-listed companies is that one person can't serve as the financial director of two companies.
The two groups whose profits for the financial years to end-February 2008 and the end of February this year were overstated are African Dawn and Alliance Mining.
The shares of both were listed on the AltX and the financial director of both companies was Connie van Nieuwkerk. Last week she resigned as financial director of Alliance Mining - and she was also one of three Afdawn directors booted by shareholders at the annual general meeting in October.
AltX head Noah Greenhill says he was aware that Van Nieuwkerk was financial director of both companies.
Earlier this month Afdawn's profit for the past two financial years was adjusted by R450m, and its headline earnings for the financial year to end-February adjusted to reflect a loss of 108c instead of the previous "profit" of 87.9c a share.
According to an Afdawn announcement, these adjustments had been necessary because of accounting errors and the provisional liquidation of its subsidiary, Allegro. Allegro and Corporate Money Managers (CMM), which is under curatorship, were joint partners in a company financing Allegro's property developments.
In exchange for the funding, Allegro had issued just under R700m worth of debentures to CMM in a complex structure. The money that CMM advanced to Allegro should have been invested in a money market fund.
Afdawn's share price was hard-hit, falling to 46c on Monday, having been R4.50 last year and, in October when the directors were shown the door, the shares were trading at 98c each.
In a research report Imara SP Reid says Afdawn shares should be avoided until what the new directors plan to do with Afdawn becomes clear.
Alliance Mining shareholders have fortunately been spared a similar share-price massacre following the announcement of the adjustment to the financial results.
Trading in Alliance shares was suspended by the JSE in October, when the company apparently found itself in hot water with its auditors.
These were the very auditors that had reported irregularities in Alliance's financial results to the Independent Regulatory Board for Auditors. Apart from the overstated profits, the auditors alleged possible transgressions of the JSE's listing requirements and violations of provisions in the Companies Act.
The auditors also said that no credence could be given to the results announced by Van Nieuwkerk before they were signed off by them.
In a shocking announcement last week - in which Van Nieuwkerk's resignation was also reported - it appeared that in the financial year to end-February Alliance had sustained a loss and not, as previously declared, made a profit of R149m.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.
