Tongaat Hulett finally released its financial results for the year to end-March as well as its restated results for 2018 on Tuesday. The figures show an almost R11.9 billion reduction in the group’s equity, mainly due to a R7 billion hit from its Zimbabwean business.
The delayed results and restated 2018 financials from the agriculture and land-development giant follow revelations of accounting and governance irregularities under the group’s former leadership that came to light earlier this year.
The results, released on the JSE and during a presentation in Cape Town, show that the group has suffered a R4 billion hit to its equity, due to impairments and “the derecognition of expropriated land in Zimbabwe”.
Tongaat Hulett was dealt a further blow of R3 billion related to deferred tax assets that had not been recognised in Zimbabwe.
The group’s equity was restated at just R62 million for its 2018 financial year, following the R11.9 billion reduction.
The reduction in its equity is much worse than expected.
In May, Tongaat Hulett notified the market that it would have to restate its equity by between R3.5 billion and R4.5 billion. This followed a strategic review of the group under its new CEO Gavin Hudson and board, led by new chair Louis von Zeuner.
The initial review revealed several accounting and governance irregularities and saw the group’s new leadership bring in PwC to undertake a six-month forensic investigation into the group’s past operations. News that it would need to restate its financials and had launched an investigation saw the group’s share price plunge further to R13.21 by June 10, when it decided to suspend trading on the JSE.
The group released the key findings of the investigation – which fingered several former executives, including former long-time CEO Peter Staude – on November 29.
More than 75% had been wiped off the value of Tongaat Hulett’s share price this year until June 10. At the time of the suspension of trade on the JSE, the group’s market capitalisation stood at just under R1.8 billion. Its shares traded at around R53 a share at the start of the year, valuing the group at just over R7.1 billion. At the start of 2018, it had a market capitalisation of some R15 billion.
Despite announcing an almost R11.9 billion reduction in its equity, the group’s new leadership put on brave faces at the results presentation in Cape Town, which was broadcast live on its website.
Reiterating sentiments expressed in its Sens announcement earlier in the morning, Hudson said that while the restatement was significant, it is important to note that Tongaat Hulett has a significant business as a going concern, has a huge and attractive asset base, and is generating decent cash flow with strong margins.
He added that more than R3 billion in cash flow improvements over two years has already been identified and the company is tracking well in achieving this.
In addition, the group has “the support of its lenders”, with whom it has signed debt refinancing agreements.
Tongaat Hulett reported a headline loss of R923 million for its full-year ending March 2019, against a restated loss of R947 million for its 2018 financial year. The group recorded revenue of just over R17 billion, from R17.5 billion in the restated 2018 financial year. Its earnings before interest, taxes, depreciation, and amortisation (Ebitda) came in at R1.86 billion, compared to R727 million in the restated previous year.
While Hudson did not take Moneyweb interviews, he said in a statement that the group was “pleased to be able to release the financial results after an extremely challenging year and a great deal of hard work”.
He added: “The results are better than anticipated given the turmoil of the past year, and importantly, an accurate accounting of our financial position allows us to reset the baseline.
“The closure of this chapter will free up management to focus on delivering on our strategy and begin to build a sustainable and long-term future.”