Renaissance Services has uncovered evidence of fraud totalling US$2.9mn in a subsidiary of its Topaz unit dating back 'over a number of years' as the company's first-half profits dropped 71 per cent, according to company chairman Samir Fancy.
Announcing the decline in profits from RO11.7mn in 2010 to RO3.4mn in 2011 to the Muscat Securities Market (MSM), Fancy said that while implementing a new code of business conduct in Topaz, the company found "circumstances suggesting financial misconduct in one of the Topaz subsidiaries abroad."
The finance manager of the unnamed subsidiary has been dismissed, with auditors and external legal advisers appointed for further probe - which has also uncovered evidence of misconduct in other Topaz businesses.
Fancy said, "This investigation centred on the use of approximately US$2.9mn of cash in the business, which is fully provided in the accounts. The investigation uncovered evidence of fraud, ethical misconduct and control weaknesses over a number of years.
"In light of these findings the company extended the investigation across all Topaz businesses. The investigation is at an early stage but some further similar concerns have arisen."
As a result of the problems in the Topaz group, CEO Fazel Fazelbhoy resigned on May 30 this year, with the group's chief operating officer and finance manager also stepping down. Renaissance CEO Stephen Thomas has taken over as the unit's interim CEO.
Alaa el-Din Moustafa, general manager of Vision Securities, said, "The Topaz subsidiary has a lot of problems, and the numbers are very poor. In the previous year, the interest in Renaissance was high with foreign investors and institutions buying the stock."
Moustafa added that the company is strong enough to rebound from the problems which peppered its first-half results. "I think they factored in all the bad news in these results. Maybe after they clean this mess up the next quarter could see better results."
Revenue rose 13 per cent to RO132.8mn in 2011, with profit growth in the company's marine division but losses announced in its engineering and contract services groups.
Sameer Kattiparambil, senior analyst at Al Madina Finance and Investment Services, said that although there are currently some 'core problems' with the company, Renaissance does have the capacity to bounce back with the struggling Topaz division expecting extra work in the next half.
© Muscat Daily 2011
