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Tongaat Hulett Chairman Louis von Zeuner assured shareholders who attended Monday’s General Shareholders’ Meeting (AGM) that the board will “take action where we believe it should be taken,” but did not commit to taking action against it. external auditor Deloitte.
Much of the focus of the two-hour meeting was on Deloitte’s role in the near-collapse of the company.
“The fact that we are not public in our discussions does not mean that we are unwilling or will not act,” Von Zeuner said, adding that Deloitte is “well aware of the fact that the case against him is not closed.”
Shareholder activist Chris Logan, who has called the problems at the sugar group since 2014, questioned whether the board realized “how badly Deloitte disappointed the company.”
Logan said the problem was not just the reimbursement of audit fees.
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Breach
“If Deloitte had done its job properly and caught the massive misstatements early on, it would have alerted shareholders to the serious mismanagement at this company three, four or five years ago, and shareholders could have changed direction.”
Logan said that by not doing its job, Deloitte facilitated the cancellation of R12 billion shares.
“So it’s not just about recovering the fees, the R12 billion write-off is the real damage.”
Von Zeuner told Logan that the board “fully understood that was the case.”
He said the board has reached out to the JSE as well as the Financial Sector Conduct Authority (FSCA) and is continuously engaged with the Independent Regulatory Board of Auditors (Irba) on the matter. (Jenitha John, recently appointed Executive Director of Irba, was previously Director of Tongaat and chair of the audit committee.)
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The various approaches appear to be part of a concerted attempt to build an airtight case against the audit firm.
“I absolutely agree that this is not just a question of fees,” said Von Zeuner.
The cancellation resulted in the share price plummeting from more than R100 in early 2018 to a low of R2 in April; it has recently gone up to a current R5.95.
In financial year 2020, Tongaat paid Deloitte R88 million in commissions, which is equivalent to 10.5% of the company’s current market capitalization.
Linda de Beer, current head of Tongaat’s audit committee, told the meeting that the steep increase in fees, compared to R30 million in 2019, was due to “enormous additional work that had to be done.”
Additionally, the company was dealing with a difficult sale of major assets and other debt restructuring initiatives and felt it needed an auditor with knowledge of the company.
De Beer said the board couldn’t have “the layoff discussion as long as we have to work with them. [Deloitte]. “
Deloitte will remain the group’s auditor this year, but is expected to be replaced in 2022.
De Beer acknowledged that the issues related to the misstatement were not complex, but noted that building a strong legal case was a complicated matter.
Von Zeuner asked the newly appointed Deloitte Africa president Ruwayda Redfearn, who was attending the meeting, to comment on the issues, but she refused, referring to Irba’s ongoing investigation.
Board praised
Financial analyst Dave Woollam, who had early warned the board of the magnitude of the problems within the group and had written a lengthy report on the matter, praised the board at Monday’s AGM for pulling the company out of the abyss.
But he urged directors to take decisive action.
“It does not seem correct that the company that suffered the damage has to pay twice to rectify the situation. You must get money back from anyone who was paid to do a job and didn’t do it.
Woollam also inquired about the group’s remuneration policy, which used considerably larger companies for benchmarking purposes, as well as the payment of R100 million to the top six executives.
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