JSE refuses to lift suspension of trade in shares of grocery group Choppies
The JSE has refused to lift the suspension of Botswana-based grocery retailer Choppies after its 2019 audit was rendered unusable.
Trade in the company’s shares was suspended in September 2018 after it delayed releasing its financial results when then-auditor PwC began “reassessing a number of past accounting practices and policies ”.
Choppies asked the local bourse in July to let it trade on the exchange.
Allegations of fraud surrounded the company relating to how it had conducted and recorded stock takes at its SAowned stores at the time and its Zimbabwe businesses.
PwC refused in 2019 to continue auditing the company due to reputational risk, and the grocery retailer struggled to find another auditor.
Earlier this year, Choppies announced Mazars was doing its audit, and in July released restated and delayed results for 2018, 2019 and 2020.
Choppies, which sold its SA stores to Kind investments for R1 in 2019, said as early as March in Botswana media that it was attempting to be relisted on the Botswana exchange and the JSE.
It was reinstated on the Botswana Stock Exchange in July. But its attempt to have its JSE suspension lifted has failed. The JSE said the audit on the company was not usable as auditors could not form an opinion on much of the company’s financial statements.
In the 2019 results, Mazars said it did not have enough evidence to verify financial cash flows recorded by the company in 2019 nor could it back-verify the 2019 inventories of the retailer as it became its auditor only in 2020.
Andre Visser, director of issuer regulation at the JSE, said it could not lift the suspension without enough financial information on the company. “The company ’ s latest financial information presented to the market contains modified opinions from the auditors, with certain elements of the financial information being disclaimed by the auditors. A disclaimed opinion means that the auditor is unable to express an opinion on very important elements of the financial statements, and shareholders and investors have no assurance as is required,” said Visser.
Investors therefore do not have reliable information to make informed investment decisions,” Visser said.
In response to Business Day questions, Ottapathu said the problem was not related to its 2020 results, but was linked to its 2019 report.
However, international accounting standards require companies to have at least two sets of audited reports for two concurrent years so investors can compare how the business has performed year on year
Asked what the point of an audit was if it could not form an opinion on financial matters, Mazars partner Edwald van Heerden said: “It is important to note that the opinion was not disclaimed; rather, a qualified opinion was issued, and we can refer you to the published report. Unfortunately, we cannot discuss our audit or provide further detail without our client’s express permission.”
Choppies has been embroiled in controversy for years. CEO Ram Ottapathu was suspended after two investigations of Choppies affairs: a legal report by the Desai Law Group and a forensic investigation by advisory group EY. But Ottapathu took back control in 2019 when shareholders voted to oust board members who had pitted themselves against him.
INVESTORS ... DO NOT HAVE RELIABLE INFORMATION TO MAKE INFORMED INVESTMENT DECISIONS
Calvin
Anderson