The JSE’s problem children

The shares of nine companies are currently still suspended from trading by the Johannesburg Stock Exchange (JSE) for not publishing their financial results on time. The exchange lifted the suspension of another four companies after they published their results.

JSE regulations require that a listed company publish its interim and annual results within three months after the end of the reporting period. The annual results should be either reviewed condensed results or audited financial statements. The company is then obliged to publish its comprehensive annual report, containing audited annual financial statements, within four months after the financial year-end.

The main difference between the initial publication of annual results and an annual report is that the latter contains additional prescriptive information, such as the notice of the annual general meeting, corporate governance disclosures and other information required by the Companies Act and the JSE’s listing requirements.

Most companies issue their full annual reports within the three-month deadline for the publication of their annual results, removing the need to adhere to two different time frames.

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Andre Visser, director of issuer regulation at the JSE, says these time frames align with international practice and reflect “the importance of financial information for investors”.

“If an issuer fails to comply with the deadline referred to for annual and interim results within 14 days, then the JSE will annotate the issuer’s listing on the trading system indicating to the market that the issuer has failed to comply with the requirements,” he says.

“At the same time, the JSE will release a Sens announcement advising the market that the issuer did not submit their annual or interim results and cautioning that the issuer’s listing may be suspended if the issuer fails to comply by the end of the fourth month.”

The same process applies to the annual report, except that the timelines are slightly different. Trade in a company’s share will only face suspension five months after year-end.

“Most listed companies publish their results within the prescribed time frames.

“The timeous publication of financial information is critical for investors to make informed investment decisions and it is for this reason that the JSE has a robust regulatory framework for this to ensure a fair and efficient market,” says Visser.

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The JSE says it is important to note that the decision to suspend the trade in a company’s shares must follow the process prescribed by the Listings Requirements and the Financial Markets Act. These include affording the issuer of the listed instruments an opportunity to make written representations as to why the suspension should not be effected.

However, a company must continue to comply with the listing requirements and relevant regulations even if its shares and other instruments are suspended. A company must also give regular progress reports to the JSE and shareholders on the current state of affairs and any actions taken to have the listing reinstated.

The suspensions of trading in the shares of Acsion, Sable Exploration and Mining, Visual International and Vunani were lifted when these companies issued their results.

Many of the companies that remain under suspension have been suspended for a long time, with some in business rescue or in the process of being liquidated.

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Tongaat

Tongaat Hulett’s listing was suspended in June 2019 at the request of the board of directors when it notified shareholders that financial statements for the year to March 2019 would not be ready on time and due to the continuing review of past financial practices.

While these results were published, as well as those for subsequent years, the shares remain suspended because the company entered business rescue.

The latest official update from the company states that the business rescue practitioners still believe that Tongaat can be saved.

Tongaat Hulett shares were suspended from trading on the JSE on 20 July 2022, pending the release of the audited annual financial statements for the 2022 financial year.

The company opted for business rescue a few months later, and has still not published audited results. Chris Logan, founder and CIO of Opportune Investments, says  Tongaat still needs to comply with the Companies Act and must publish its annual results.

“We are talking about the second biggest fraud on the JSE. Not reporting any results for three years creates space for misdirection.

“Not complying [with] regulations with regards to the publication of results will make it harder and harder for the business rescue process to succeed,” says Logan.

Tongaat did publish some financial information for the year to March 2022 – but nothing yet for 2023 and 2024.

However, the business rescue team says the results were neither unaudited nor reviewed.

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It added: “The financial information has not been reviewed nor approved by any audit sub-committee of the board of directors of Tongaat Hulett nor has it been audited, reviewed or otherwise reported on by the company’s external auditor.

“The financial information is being released to shareholders of the company in the interest of transparency and in response to requests received from shareholders. Given such requests, the JSE has agreed to the release of the unaudited financial information.”

The business rescue practitioners (BRPs) say they are satisfied that the financial information is not misleading and no facts have been omitted or untrue statements made that would make the financial information false or misleading, but added that they “were neither involved with the company during the period being reported on, nor have they had any involvement in the preparation or review of the financial information”.

“In the circumstances no representation or warranty, express or implied, is or will be given by the BRPs as to the accuracy, completeness or fairness of the financial information and, except in the case of fraud, no liability whatsoever is accepted for the accuracy of the financial information nor for any errors, omissions or misstatements relating thereto,” they say.

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More problems

Trade in the shares of PSV Holdings was suspended in August 2020 after the small engineering company was placed in business rescue and failed to produce financial results. It was put under provisional liquidation thereafter, and is still trying to raise capital.

African Dawn Capital (Afdawn) said in a Sens announcement on 19 July 2024 that it was unsuccessful in its appeal of the JSE’s decision to suspend its shares when the company did not publish its report for the year to February 2024 on time. It said the results would be ready by the end of July, but this wasn’t the case. The last available results are for the six months to August 2023.

Its website says that Afdawn still believes that its short-term lending business can be viable, but it needs to raise capital. It also needs to pay some outstanding tax.

Shareholders in coal miner Salungano have not been able to trade the shares since August 2023 because its results were not published for the year to end March 2023.

Recently, the company issued an update on the continuing problems of reporting on time, this time referring to its 2024 results. It says it was its intention to publish the interim and annual results by end August, but missed the deadline due to the appointment of new auditors.

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Struggling

Some of the other companies under suspension are struggling even more.

Chrometco said in its latest quarterly update with regards to the suspension of its shares (since the middle of 2022) that the company has been struggling to appoint new auditors as three of its subsidiaries are in business rescue.

Conduit Capital remains suspended too, as it only published its annual results for the financial year to June 2022 a few weeks ago. Subsequent results are still outstanding.

Its main subsidiary, Constantia Insurance, is in liquidation and Conduit said it requested the JSE to keep the suspension in force until such time as the board of directors has had an opportunity to further engage with the liquidator and assess the full impact of the liquidation on Conduit.

Ellies avoided suspension when it quickly published its results after a warning by the JSE at the end of February 2024, but asked the JSE to suspend trading in its shares a few weeks later when it entered business rescue. It advised shareholders a few weeks later that it had applied for liquidation.

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Hope

Labat Africa was suspended by the JSE in October 2023 for failing to produce its annual report for the preceding financial year, and remains suspended. However, the directors are adamant that the suspension will be lifted in due course.

It says in the latest update to shareholders: “First and foremost, the company wishes to reassure its shareholders and stakeholders that Labat remains a going concern. The suspension of the company’s shares trading on the JSE is a matter that the company is addressing with the utmost seriousness and diligence and it is actively working to lift the suspension by concluding the 2023 and 2024 audits and ensuring full compliance with the JSE Listings Requirements.

“It has been assured that once this is completed the suspension of the shares will be lifted.”

Labat says the new auditors will be appointed soon and that the company “remains resolute in its commitment to adhering to all regulatory requirements, as it has successfully done over the past 30 years”.

Management says it can assure shareholders and stakeholders that all necessary disclosures and updates are being made in accordance with the JSE Listings Requirements.

“The information provided on Sens is comprehensive and aligns with the company’s obligations. Labat’s goal remains to fulfil these requirements fully and to facilitate the lifting of the suspension in the trade in the company’s shares,” it says, adding that discussions with potential auditors are at an advanced stage.

Property trust aReit Prop was suspended in July 2024 for not publishing its results for the year to end December 2023. However, it still declared a dividend later the same month, with its directors saying that the dividends for the year represented 100% of the distributable income.

This article was republished from Moneyweb. Read the original here.