The Botswana Stock Exchange listed Olympia Capital Corporation has been flagged as a non-going concern by its new auditors, raising concerns about the future of the company going forward, dealing a blow to the company which this week released its financial results which showed a loss.
The external auditors, Mazars, say the company’s net loss of P1.6 million for the year ended December 2017 add to accumulated losses of about P28.3 million, and as of that date, the company’s total liabilities exceeded its total liabilities by P16.9 million.
“These events or conditions, along with other matters as set forth, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in that respect,” said Shashikumar Velambath, in an auditor’s independent report.
In accounting terms, going concern is a basic underlying assumption that a company or other entity will be able to continue operating for a period of time that is sufficient to carry out its commitments, obligations, objectives, and so on. In other words, the company will not have to liquidate or be forced out of business in the foreseeable future. If the accountant believes that an entity may no longer be a going concern, then this brings up the issue of whether its assets are impaired, which may call for the write-down of their carrying amount to their liquidation value. Thus, the value of an entity that is assumed to be a going concern is higher than its breakup value, since a going concern can potentially continue to earn profits.
The auditors at Mazars explained that in preparing the consolidated and separate annual financial statements, the company’s directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to the going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or cease operations, or have no realistic alternatives but to do so.
Olympia’s directors confirmed that their latest financial statements have been prepared on the going concern basis, and were approved by the directors. Moreover, the company directors say Olympia will continue to operate in the foreseeable future.
“The directors have reviewed the group’s cashflow forecast for the year to December 2018, and in light of this review and current financial position, they are satisfied that the group’s has or had access to adequate resources to continue in operational existence for the foreseeable future,” the directors said in the directors’ responsibilities and approval statement.
The ability of Olympia to continue as a going concern is dependent on the continued support of the shareholders, and parent company. The company’s significant borrowings are from group companies; which have confirmed their continual financial support of the company.
In the delayed financial statements, Olympia’s revenue declined 11 percent to P38 million, while operating profit plunged by 88 percent, and in the end the company posted a loss of close to P1 million, down by 58 percent from the previous corresponding period.
Olympia, an investment holding company in the building material industry in Southern Africa, was admitted back on the BSE after spending 4 years in the wilderness following its suspension from trading due to failure to publish financial results on time. The parent company to Kalahari Floor Tile and Plush products was last month warned by the BSE for failure to publish audited annual financial statements for the year ended December 2017.
The defiant Olympia released a trading statement a day after it was cautioned by the BSE, stating that the company’s results for the period will be lower than those reported in the previous year due to the challenges faced in 2017, those include macroeconomic factors in the company’s exports markets which contributed significantly to the decline coupled with decreased local consumer demand for the company’s products.