Bidfraud

Bidcorp said late last week that it has uncovered a serious fraud in its Chinese subsidiary and has to delay its results to quantify the appropriate accounting write-downs. The fraud was found in a subsidiary called Miumi, part of the food division of its Angliss Greater China business. It came to light in June thanks to internal surveillance and control processes.

"It is apparent that this fraud has been going on since about 2016 and has involved the manipulation of accounts receivables, prepayments, and the misappropriation of inventories, the result of which these balances have been progressively overstated for the past six years," said Bidcorp in a statement.

The company estimates that this will result in impairments of around R501 million in receivables and prepayments, another R202 million in inventory write-downs, and R36 million in unrecorded liabilities. The company believes some of it can be recovered from insurance, perpetrators, and other third parties involved in this scheme.

The share price of Bidcorp dropped last week on the news, but has held up fairly well since then. A detailed forensic report is being prepared by Ernst & Young. Individuals and minority shareholders involved in this scheme have been suspended or fired on the spot. We are long-term investors in Bidcorp, so this is very disappointing. We continue to watch Bidcorp very closely.