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Afarak expresses relief as special audit of accounts better than feared

Afarak said the audit will not cause the company "significant cost burdens"

Afarak
The audit will look at transactions conducted by major shareholder Danko Koncar

Afarak Group PLC (LON:AFRK) breathed a sigh of relief after Finnish authorities ordered a special audit of the chrome producer's accounts that was not as bad as feared.

The Regional State Administrative Agency for Southern Finland has ordered Idman Vilån Grant Thornton Oy to conduct the audit of Afarak’s accounts for financial periods between 2015 and 2018.

READ: Afarak Group updates investors as Helsinki court rules on shareholder case

The auditor will look at the business and legal transactions conducted by Danko Koncar, chief operating officer of Afarak, which is listed in London and Helsinki.

Danko appeals court ruling 

Koncar, who was chief executive of the company for two years until 2015, is appealing a ruling by the Helsinki Administrative Court to uphold the Financial Supervisory Authority's (FSA) decision to force him to make a public bid for shares in Afarak.

Koncar is a major shareholder of Afarak through his controlled entity Kermas Ltd.

READ: Chrome producer Afarak mulls Helsinki de-listing

The FSA had accused Koncar and the entities controlled by him for acting in concert with Hino Resources Co. Ltd, Finaline Business Limited and Koncar's spouse Jelena Manojlovic in order to exercise control in Afarak.

The Helsinki court ruled that Kermas and Hino Resources’ shares in Afarak exceeded the 30% maximum required to launch a full takeover bid for the business on October 22, 2009, and that Koncar was the party that needed to make the offer.

In June 2018, certain minority shareholders of the company submitted an application to the Regional State Administrative Agency for Southern Finland to conduct a special audit.

Afarak said on Friday that the agency found that the application discloses “weighty reasons for reviewing the regularity of transactions made with all companies potentially belonging to the immediate circle of Mr Danko Koncar”.

In other respects, however, the Regional State Administrative Agency has rejected the applicants' claims, the company said.

Audit won't cause significant cost burdens, says CEO 

Afarak chief executive, Guy Konsbruck, said: “We are pleased that a decision has now been given and that the audit is limited so that it that does not cause the company significant cost burdens or burden human resources.

“Out of many accusations by the applicants only this one issue was seen to give reason for special audit.

He said the decision gives the company comfort that it is “very well in compliance” with its corporate governance rules.

Konsbruck said the company’s view is that the transactions described do not exist but the matter is now under review.

“We will be cooperating with the auditor to ensure an expeditious auditing process and we are hoping that the Special audit is carried out as soon as possible,” he said.

“In accordance with the Companies Act, shareholders will be informed of the results of the audit in due time.”

In a separate announcement, Afarak also said that the public tender offer for a maximum of 26mln of its own shares will commence on June 10 2019, and expire on 1 July, with the offer price set at €1.015 per share.

 -- Adds tender offer announcement --

Quick facts: Afarak Group PLC

Price: 25 GBX

LSE:AFRK
Market: LSE
Market Cap: £62.67 m
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