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Fresh tensions at DW

Melody Chikono

DAVID Whitehead Textiles Ltd shareholders have expressed concern over the credibility of the financial statements submitted by its judicial manager Knowledge Hofisi after auditors issued an adverse opinion on the figures.

The auditors also claimed they were denied full access to documents they requested. According to documents seen by businessdigest this week, shareholders feel that they will not sell their shares to prospective investors until key issues relating to his failure to submit financial statements for four financial years are addressed.

Shareholders — Daphne Ritson, James Ferguson, Ian Cripps and Edwin Chimanye, Enerst Chivaura, Douglas Muskwe and George Maulidi — jointly agreed to set aside the transaction that saw Pradyumin Ganediwal acquire a controlling 51% equity stake at a grossly discounted price of ZW$5,4 million.

The shareholders jointly distanced themselves from the sale of a 51% equity stake in DWTL to Pradyumin Janadiewel, the owner of Pure Oil, for an amount they say was a gross discount given the company’s real assets, property and plant.

An audit report by the company’s auditors states that they were unable to determine adjustments that might have been necessary in respect of some elements of the financial statements to satisfy themselves concerning the presentation of the financial statements that were presented in US dollars for the financial year ending December 31 2018.

“In our opinion, because of the significance of the matters described in the basis for the adverse opinion below, the accompanying financial statements do not present fairly, the financial position of the company as at 31 December 2018 and its financial position and cashflows for the year ended in accordance with international financial reporting standards and in the manner required by the Companies Act chapter 24:03,” the auditors said.

Chivaura raised concern on the adverse opinion and its implications.“EC went further to explain (that) this in essence means that these are not audited accounts since the auditors clearly qualify that they do not present fairly the position at year-end the financial position and cash flows at year-end,” the minutes read.

The shareholders are now holding the judicial manager to account.The shareholders are demanding that Hofisi provide them with detailed annual financial statements for 2014, 2015, 2016 and 2017 (even unaudited) as required by the Companies Act. They also want Hofisi to unveil the actual debt asset valuation report done and paid for in 2019.

According to the minutes for the shareholders’ meeting convened on September 14 gleaned by businessdigest, shareholders noted that it appeared the auditors were unable to have access to certain documents yet the Companies Act stipulates that auditors have access to all accounting records.

The auditors pointed out that they “were unable to obtain sufficient appropriate audit evidence regarding the completeness and valuation of the staff costs payable balance of ZW$1 380 396 as at December 2018 as management were not able to provide us with supporting documentation of the accounts opening balance of $835 648 as at December 2016 accrued since placement of the company under judicial management in December 2010”.

The shareholders resolved to demand from the judicial manager the actual debt asset valuation report done and paid for in 2019 after he sought permission from shareholders and creditors to dispose of non-core assets worth up to US$51 million.

The shareholders also want a comprehensive breakdown of how the funds from the disposal were utilised.“Until the above matters are resolved the shareholders hereby reserve their option to trade their shares to any prospective investor,” the shareholders resolved.

The shareholders in July moved to fire Hofisi for failing to produce financial statements, alleged misappropriation of asset disposal proceeds, conflict of interest, overcharging for services and general management failure.

In May, Hofisi reportedly sold a 51% equity stake in the textile company (Agri Value Chain) without consulting shareholders and creditors of the company to a creditor at a grossly discounted price in RTGS dollars.

“Finally, shareholders collectively distance themselves and do not recognise the sale of 51% of DWTL for ZW$5,4 million to Agri-Value Chain by the judicial manager, especially since they have not been provided with details and basis for their valuation at the least and since there was never a publication notice/invitation for bids to purchase same. Further to this, the option for other possible investors to purchase the 51% was never published, advertised or declared as far as the major shareholders are aware,” the shareholders said.

The company incurred a loss after taxation amounting to US$1 608 694 in the full year to December 2018 from US$1,186 million in full-year 2017.

“During the year end, the company’s current liabilities exceeded its current assets by US$19 587 587 as at December 31 2018. These together with other assets in note 17, indicate the existence of a material uncertainty that may cast doubt in the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. The material uncertainty does not indicate that the use of the going concern basis of accounting is appropriate,” a statement attached to the financial results said.

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