WPP Scangroup staff at a past meetin. PHOTO | COURTESY | SCANGROUP WPP Scangroup plans to take legal steps to obtain information on foreign investments representing minority stakes in companies spread across five countries.
The marketing services firm has a 25 percent stake each in Ocean Ogilvy Gabon, Ocean Central Africa, Ocean Burkina Faso, Ocean Afrique Occidentale (Senegal) and Ocean Conseil (Cote d’Ivoire).
The company says it has not been able to obtain information relating to the associate companies and that efforts to do so have been unsuccessful.
“The group will pursue the matter legally on obtaining information and will also review its options with regard to these investments,” the Nairobi Securities Exchange-listed firm says in its latest annual report.
The company said it has not been able to account for the results of the associate companies as required by accounting rules.
Scangroup added that the cost of the foreign investments has been fully provided for in the past due to the lack of information and dividend returns.
It was not immediately clear how much the company had spent in acquiring the minority stakes and whether the foreign companies are still in business. The majority shareholders of the foreign companies was also not disclosed.
The matter saw Scangroup’s external auditor Deloitte & Touche LLP issue a qualified opinion on the company’s accounts, citing the information gap.
“We were unable to obtain sufficient appropriate audit evidence to determine if the investments exist or not, nor the appropriateness of the carrying amounts of these investments,” the audit firm said in its report.
“Consequently, we were unable to satisfy ourselves that no adjustments to the carrying amount of these investments or to the relevant share of net income for the year were necessary.”
Scangroup is also reviewing its investments in other subsidiaries and has told shareholders that this could result in impairments of the assets.The company plans to restructure its balance sheet in a way that will enable it to absorb potential losses from the business review without hurting its income statement and ability to pay dividends.It has made a special proposal to be considered at its upcoming annual general meeting and which will allow it to write off losses in subsidiaries against funds already accumulated in its balance sheet.The funds, amounting to Sh9.1 billion, are held in the share premium account and represent the value of shares acquired by shareholders above their nominal price.Share premium cannot be distributed to shareholders and […]