Radar shares lost two cents to close at 18 cents. The stock had remained untraded at 20 cents on Tuesday, resisting the news of review.
In a cautionary statement to shareholders on Tuesday, Radar Holdings said a routine review had found misallocations of cost into a non-distributable reserves account of its brick making unit instead of the company’s cost of sales account.
Radar last month reported that it had posted a modest US$4 577 million profit during the 12 months to June 30, a marked improvement from the US$1,1 million loss during the same period last year.
“The majority of the transactions relate to the 2008/2009 financial year. However, the balances were carried into a 2009/2010 financial year therefore requiring a current adjustment,” reads the cautionary statement.
Analysts told businessdigest yesterday the company’s share price would crash further as local investors are now quick to react if there is “alleged cosmetic or wrong accounting”.
“When the cautionary statement was made public (on Tuesday) the counter did not trade,” an analyst said. “It had an offer of 20 cents. It could further retreat in the short term and maybe rebound if they announce promising trading updates or encouraging interim results. “It will follow a similar pattern of Hunyani last month after the company allegedly forged financial results.”
Hunyani Holdings Ltd was forced to restructure and refurbish its plant after internal and external auditors revealed that the group’s Bulawayo division —Printopak — had overstated its profit to US$423 000 when the actual figure was US$64 000.
The company’s share price dropped by 92% inside one week after the news filtered into the market.
“The impact of the misallocation has been to overstate profit by US$537 618 and accordingly this adjustment has been taken into account in the year to June 30 2010. This has no cash flow impact and will not affect future profits,” said Radar.
In a statement attached to the group’s financials last month, Radar said demand for the group’s products had remained strong in the same period resulting in high earnings.
“Members of the public should be guided accordingly in considering the company’s results published on September 8 2010,” said Radar.
Apart from MacDonald Bricks, Radar also owns United Builders’ Merchant, and Border Timbers. The group had attributed its change of fortunes to a strong overall performance throughout the year.