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ADVTECH LIMITED - Voluntary Disclosure of Fraud

Release Date: 01/12/2017 07:30
Code(s): ADH     PDF:  
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Voluntary Disclosure of Fraud

ADvTECH Limited
(Incorporated in the Republic of South Africa)
(Registration number 1990/001119/06)
Share code: ADH
ISIN: ZAE000031035
("ADvTECH" or “the company” or “the group”)

Voluntary disclosure of fraud

As a result of changes being implemented through the restructuring of the finance and administrative functions in the
schools division, the company has uncovered incidents of fraud. This was perpetrated by a financial manager in the
schools division head office and took place over a period of three years beginning in 2015. The amounts were not easily
identified as they were not individually significant. Whilst not material, in the interest of transparency, the directors
have decided to voluntarily disclose this to the market.

These activities have resulted in an over-statement of revenue, an understatement of costs and the theft of cash. The
cash component amounts to R5million, of which approximately R2million should be recovered as the company has
secured a court order freezing the service provider’s bank account, with whom the financial manager colluded. The
balance should be recoverable through our insurers. In aggregate, the misstatements and cash loss amount to
R48.1million resulting in a R35.5million after tax impact on the reported figures for the period as reflected below:

                                         12 months to       12 months to    6 months to     6 months to       Total
                                          31 December        31 December      30 June       31 December       Amount
                                             2015               2016           2017            2017
                                              R’m                R’m            R’m             R’m             R’m

      Revenue overstated                          -               (9.3)           (5.1)           (2.5)        (16.9)
      Expenses understated                                                                        (6.5)        (31.2)
      (including the cash loss of
      R5million)                                (6.7)            (15.1)           (2.9)
      Operating profit overstated               (6.7)            (24.4)           (8.0)           (9.0)        (48.1)
      Tax effect                                 1.9               6.6             2.0             2.1          12.6

      Profit after Tax effect                   (4.8)            (17.8)           (6.0)           (6.9)        (35.5)

Upon discovery of these discrepancies, a thorough and comprehensive investigation was undertaken which documented
the full extent of these activities. Criminal charges have been laid 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.

ADvTECH CEO, Roy Douglas said: “Management deeply regrets 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.”

The amounts referred to above and included in the table have not been audited or reviewed by the group’s auditors.

1 December 2017
Johannesburg
Sponsor: Bridge Capital Advisors Proprietary Limited

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