JOHANNESBURG - Private education group ADvTECH’s share price dropped by 7.06percent on the JSE after the group said on Friday it had uncovered incidents of fraud in the schools division.
ADvTECH shares closed 3.99percent lower on the JSE at the end of the day at R15.65.
The group said that the fraud was perpetrated by a financial manager in the schools division head office and took place over a period of three years, beginning in 2015.
However, the amounts were not easily identified as they were not individually significant.
But the activities resulted in an over-statement of revenue, an understatement of costs and the theft of cash.
The cash component amounted to R5million, of which R2m should be recovered as the company had secured a court order freezing the bank account of the service provider, with whom the financial manager colluded, it said.
“The balance should be recoverable through our insurers. In aggregate, the misstatements and cash loss amount to R48.1m, resulting in R35.5m after tax impact on the reported figures for the period,” the group said.
As a result of these offences, ADvTECH has laid criminal charges against the financial manager and the colluding external service provider.
“These charges are being vigorously pursued. The impact of this occurrence will be accounted for in the 2017 annual financial statements,” the group said.
Chief executive Roy Douglas said the management deeply regretted this occurrence.
“They resulted mainly from head office book entries and will not impact delivery, fees or quality at any of our schools.
"Management remains committed to the highest levels of corporate governance and to ensuring that any deviations will not be tolerated. We will pursue this matter to the full extent of the law,” Douglas said.
ADvTECH has a portfolio of top schools like Crawford, Trinity House and Abbotts College and tertiary arms like Rosebank College.
The group has been acquiring some schools and tertiary institutions recently.
The company acquired a stake in a private tertiary institution, the University of Africa, in Zambia in 2016 and locally a 51percent stake of Oxbridge Academy.
In the schools division it acquired the Summit College.
In the last annual results, the group reported revenue growth of 24percent to R3.35billion for the year to end-December, up from R2.72bn recorded during the corresponding period last year, while earnings before interest, taxation, depreciation and amortisation jumped 33percent to R740.6m, up from R557.9m.
Headline earnings per share rose by 39percent to 71.1cents a share as compared to 51c a share reported a year earlier.