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By Mark Kappart 

Investment house Mayberry, gaming giant Supreme Ventures and digital learning company EduFocal headed by Gordon Swaby have all been tardy with their audited financial statements to the Jamaica Stock Exchange (JSE), thus continuing a worrying trend that sees many listed companies in breach of timely reporting.

Timely disclosure of financial information is critical for well functioning capital markets and this recent surge in late JSE filings is concerning.

JSE managing director Marlene Street-Forrest and her team may have to put in place more stringent measures to censure errant listed companies that fail to make timely financial reports.

The JSE has already mandated that companies with audited financial statements which are 90 days overdue shall have trading in their shares suspended until their reports are in order.

Yesterday it was announced that effective June 4, EduFocal, would be suspended from trading its shares in keeping with JSE’s Junior Market Rule Appendix 2, part 4 (2). The JSE took the decision to immediately suspend trading in the shares of EduFocal, pending the submission of its 2023 audited financial statements.

The Jamaican company received a loan from Mayberry in 2022 of J$200 million for working capital, expansion and loan financing.

Despite forebearance by the JSE, EduFocal continued to have problems presenting its audited accounts. On May 24, EduFocal wrote to the JSE advising that its annual report for the year ended December 31, 2023, is delayed and that it would submit its annual report for the year ended December 31, 2023, by June.

“We apologise to our shareholders for this delay”, it further added.

Then on May 28, EduFocal Limited (which trades as $LEARN) again wrote to the JSE advising that its unaudited financial statements for the first quarter ended March 2024 will be posted on or before May 31. “We apologise for the delay.”

Well, that deadline came and went and EduFocal failed to submit the required statements.

It may be the case that EduFocal who has recently looked to acquire a business abroad and reorganised its finances simply didn’t have the time to get this salient information in its filing in order to meet the deadline. Now it has paid a terrible price.

On February 28, Supreme Ventures wrote “ Supreme Ventures Limited wishes to advise that its audited financial statements for the year ended December 31, 2023, due to be filed with the JSE by February 29 are delayed.

“Our auditors require additional time to complete the audit in accordance with international standards of auditing. Supreme Court Ventures is making every effort to have the audited financial statements for the year ended December 31, 2023 submitted to the JSE on or before Friday March 29, 2024.

Supreme Ventures has diversified and has several businesses not to mention it now has a presence in Guyana, South Africa and Ghana. This no doubt will take considerable accounting work, hence the need for a reputable and competent auditing and financial team, both internal and external. It can get complicated, nevertheless, Supreme Ventures has been late with their accounts two years straight.

Mayberry which is renowned for championing local equities has also been late with its statements.

On March 28, 2024, it wrote to the JSE, saying, “Mayberry Group Limited is hereby advising that the consolidated financial statements for the year ended 31st December 2023 will be made available and published on or before April 26.

“Our auditors require additional time to complete the audit in accordance with International Standards of Auditing. Mayberry Group Limited apologises for the delay against this time specified for the publication and any inconvenience to our valued stakeholders.” 

The aim is to get more local companies listed but it is incumbent on these companies to be compliant with JSE rules and exhibit strong governance. Listing your company carries many responsibilities and expectations and the levels of transparency are invariably high. It is disturbing to know that since 1997, ten companies have been suspended from trading on the JSE for failing to file timely audited reports including the Dyoll Group and Stocks & Securities Limited Venture Capital.

Up to March of this year, a third of listed companies were late in publishing their audited reports. 

Some have blamed the aftermath of the COVID pandemic, while others have more rigorous international reporting standards.

Nevertheless, companies like GraceKennedy, Sagicor Group Jamaica and Scotia Group Jamaica don’t have this problem. Earlier this year KLE advised that there would be a delay in the publication of its financial statements for the year ended December 31, 2023. This was due to delays in the audit process by its auditors. 

It must be said that late financial reporting can impact relations with investors and lenders. It becomes a cause of concern for stakeholders. Great care must be taken to keep the board of directors apprised of basic risk information in a timely manner. Late reporting leads to a collapse of proper risk management. 

Shareholders in Jamaica are more savvy than a decade ago. They have expectations and utilise information more effectively. Late voluntary disclosure of financial statement information can place uncertainty in shareholders’ minds in making financial decisions.

The COVID period saw many companies encountering difficulties with timely reporting. Of late some lament that there just aren’t enough auditors around, others take issue with the quality and professionalism of the auditors. There there are those who balk at the ever-increasing audit fees.

What is clear is that companies need to nominate well-qualified members for their committees who have experience supervising complex financial transactions. Board members must maintain constant contact with regulators.

Suspensions can precipitate liquidity risk with the erring company’s stock price falling. iCreate is a case in point here, a company that had considerable auditing problems which led to its suspension from the JSE on August 21, 2023. 

What the Regulatory and Market Oversight Committee (RMOC) of the JSE has to say is instructive “ The requirement seeks to create an assurance that member dealers are undertaking their fiduciary responsibilities, having been given the privilege to trade on the Exchange.”

This in effect means companies on the JSE must be both vigilant and compliant. They must exhibit the ability to be worthy of being on the JSE and if they can’t, then they should delist.

NCB Capital Markets counselled, ”It is important that investors assess the level of independence on the various boards of companies they invest in, as  independent directors help to oversee the activity of the executive and non-executive members with affiliation to the company in question. They can foster more efficiently run companies by evaluating management teams and seeing to it that they are meeting the business goals and objectives; ensuring transparency around financial reporting and ensuring responsibilities towards stakeholders including shareholders are understood and accomplished.”

Forbes Magazine gave sage advise on this issue, advise that Jamaican companies listed on the JSE would do well to follow.

“Ensure reports are tailored to your company and industry. Your financial statements should be tools that allow you to run the business and make decisions proactively. They should be reliable, timely and tailored to your industry, stage of the company and goals for the future. They should compare you to others in your industry, provide benchmarks and report on key performance indicators.” 

At the end of the day, the JSE can see that businesses depend on accuracy in their financial reporting but ensuring that reports are timely is equally important.