Resilient brings trusts into fold
CONCEDE: PROPERTY GROUP FINALLY BOWS TO CRITICS
Its new stance is giving credence to concerns by a number of investment firms.
by Resilient as it gives credence to allegations raised by a number of investment firms – initially by 36ONE Asset Management, then Mergence and Arqaam Capital.
The investment firms raised red flags about the trusts, which hold 12% of Resilient and 11% of Fortress Income Fund, an associate company of Resilient. 36ONE has been the most vocal critic of Resilient, raising concerns about the degree of the group’s control of the trusts.
In a report, the asset manager said a majority of the Siyakha trustees were linked to Resilient. The trusts and Resilient group employees also borrow money from Resilient and Fortress to buy shares, which they have to repay at interest rates of prime plus 2% – equivalent to about 12% annually.
36ONE pointed out that R436.8 million of Resilient’s income during the year to June 2017 was from the interest paid to it from the Siyakha trusts and employees, while Fortress bagged R404 million over the same period. It accused Resilient of using this interest to artificially boost income and dividend payments.
Essentially, 36ONE called into question the independence of the trusts from Resilient and its ability to make decisions in the best interest of its empowerment beneficiaries. Resilient will now see a substantial decline in reported distributable income for the six months ending December 2017. Further, Resilient paid a cash dividend for the six months ending December of R3.06 per share.
The restatement will arguably give Des de Beer, the founder and CEO of Resilient, a headache as he has dismissed the allegations as an effort by short-sellers to profit from the sustained sell off in the property group’s shares.
Market watchers said the restatement also calls into question the audit opinion of external auditor Deloitte Africa, which has signed off on the group’s financial results since 2009.
Employees and the trusts given loans to buy shares.