PureCircle (LSE: PURE) (the "Company"), the world's leading producer and innovator of great-tasting stevia sweeteners for the global food and beverage industry, provides the following update further to the announcements of 20 September, 25 October, 28 October and 14 November 2019.
In these announcements, the Company referred to a potential issue relating to classification and valuation of inventory and how certain other transactions have been constructed and/or reflected in the Group's accounting records. The Company wishes to announce that the investigation work by KPMG LLP to identify possible accounting irregularities and omissions, and to quantify the necessary adjustments to be made to the accounts is now complete.
The investigations relating to the classification and valuation of certain inventory items identified errors that had not been identified by our monitoring controls. In line with the guidance provided in the announcement dated 14 November 2019, the Company's assessment is that those issues have had the cumulative effect of reducing inventory by approximately US$23 million and consequently increasing cost of goods sold by the same amount, spread across financial years 2018 and 2019, with potentially a relatively modest adjustment to 2017.
Separately, as disclosed in the announcement dated 14 November 2019, during the course of work of KPMG and PricewaterhouseCoopers, matters of concern were identified in relation to how certain other transactions had been constructed and/or reflected in the Group's accounting records. These matters relate to revenue cut-off, and non-commercial transactions. The investigations identified apparent override of controls by members of senior management that may have contributed to the historical misstatements of the Company's results going undetected. As a result, adjustments with the effect of reducing sales of approximately US$5.9 million and US$2.2 million have been made to the 2018 and 2017 financial results respectively.
The Company does not expect these amounts to change materially in its audited financial statements for the year ended 30 June 2019, but still subject to any further audit adjustments, and yet to be signed off by the Group's auditors, PricewaterhouseCoopers.
Led by the new Group CFO and overseen by the Group's Audit Committee, the Company is taking actions to prevent the incidents that resulted in the accounting misstatements from re-occurring. The measures include:-
1. Undertaking significant steps to improve the Group's systems, processes and controls, both locally and at a Group level;
2. Increasing the resources and improving the capabilities of the controlling function based in Malaysia;
3. Increasing financial oversight by the Group CFO of the Group finance function, with clear and timely oversight from the Audit Committee Chairman based in Malaysia; and
4. Strengthening of the internal audit and risk management functions of the Group.
The Group's Audit Committee has been appointed to oversee the implementation of the work to be undertaken to strengthen the Group's financial controls and the associated recommendations by KPMG.
Date 5 March 2020
Jimmy Lim, CFO
Phone: +603 2166 2206
Newgate Communications, Media Relations
Email: [email protected]
Phone: +44 (0) 20 3757 6880
Notes to Editors
· PureCircle is the only company that combines advanced R&D with full vertical integration from farm to high-quality, great-tasting innovative stevia sweeteners.
· The Company collaborates with farmers who grow the stevia plants and with food and beverage companies which seek to improve their low- and no-calorie formulations using a sweetener from plants.
· PureCircle will continue to: lead in research, development and innovation; produce a growing supply of multiple varieties of stevia sweeteners with sugar-like taste, using all necessary and appropriate methods of production; and be a resource and innovation partner for food and beverage companies.
· PureCircle stevia flavor modifiers work in synergy with sweeteners to improve the taste, mouthfeel and calorie profile, and enhance the cost effectiveness, of beverage and food products.
· Founded in 2002, PureCircle is continually investing in breakthrough research and development and it has been granted over 214 stevia-related patents with more than 300 applied for patents pending.
· PureCircle has offices around the world with the global headquarters in Chicago, Illinois.
· To meet growing demand for stevia sweeteners, PureCircle is rapidly ramping up its supply capability. It completed expansion of its Malaysian stevia extract facility in March 2017, increasing its capacity to rapidly supply the newer and great-tasting specialty stevia sweeteners and helping provide ever-increasing value to its customers.
· PureCircle's shares are listed on the main market of the London Stock Exchange.
· For more information, visit: www.purecircle.com
· Given the growing global concerns about obesity and diabetes, beverage and food companies are working responsibly to reduce sugar and calories in their products, responding to both consumers and health and wellness advocates. Sweeteners from the stevia plant offer sugar-like taste and are becoming an increasingly important tool for these companies.
· Like sugar, stevia sweeteners are from plants. But unlike sugar, they enable low-calorie and zero-calorie formulations of beverages and foods.
· Stevia leaf extract is a natural-based, zero calorie, high-intensity sweetener, used by global food and beverage companies as a great-tasting zero-calorie alternative to sugar and artificial sweeteners.
· Stevia is a naturally sweet plant native to South America; today, it is grown around the world, notably in Kenya, China and the US.
· The sweet-tasting parts of the stevia leaf are up to 350 times sweeter than sugar: stevia's high-intensity sweetness means it requires far less water and land than sugar.
· Research has shown that the molecules of the stevia leaf are present and unchanged in the dried stevia leaf, through the commercial extraction and purification process, and in the final stevia leaf extract product. All major global regulatory organisations, across 65 countries, have approved the use of high-purity stevia leaf extracts in food and beverages.
· For more information on the science of stevia, please visit https://www.purecirclesteviainstitute.com/
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