Investors can be forgiven for thinking, “where there is smoke, there is fire”, when it comes to JSE-listed firm Oceana. The fishing company has twice delayed the release of its annual results, pending the result of an investigation by law firm ENSAfrica into how it accounts for its US business interests.
The issue revolves around Oceana’s ownership of US fishmeal and fish oil processing company Daybrook Fisheries, which the company purchased for R4.6-billion in 2015. In 2016, WFP exercised its put option. Because Oceana could not legally own this stake, it embarked on a bidding process to identify an appropriate US citizen who could acquire the Westbank interest. Fifteen months later, no suitable candidate had materialised and Oceana CEO Francois Kuttel, who is a US citizen, indicated his interest in acquiring the 75% stake. He tendered his resignation and in 2018 his acquisition of the WFP stake was approved by shareholders.
A whistle-blower raised several concerns about accounting practices at Oceana, specifically relating to the treatment of the 25% stake in Westbank, prompting the board to appoint ENSAfrica to investigate the transactions of 2015 and 2018, as well as the related legal agreements and operating practices, among other issues.investigation and analysis had been concluded.
Mnguni is astounded. “They want to shift the asset from current assets to goodwill? You can’t reallocate goodwill after the fact. You have to test for impairment. It’s only if you buy a real bargain that you can write goodwill up. The bottom line is that they don’t want to impair this loan because then they have to bring it onto the income statement, which would reduce earnings.
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