Legal proceedings are expected after a forensic audit at Shawcell Telecommunications division EuroPoint revealed evidence of substantial fraud.
Heavy losses at EuroPoint have also caused a dip in Shawcell's fortunes, with the group's operating profit falling to R36.52 million for the year to 31 December 2000, from R64.75 million the previous year.
EuroPoint's MD and financial director were dismissed in June last year.
Shawcell says "serious irregularities began to surface" afterwards and an internal audit resulted in an external audit being commissioned in December. That audit is continuing.
"It is anticipated that legal proceedings will be instituted against the perpetrators [of the fraud]," the group says.
Europoint Cellular was bought in July 1999. It is a distributor of cellphone accessories and related products to retail chain stores and independent outlets, predominantly under its own proprietary brands.
Shawcell's revenue for the year amounted to R84.75 million (1999: R121.45 million). Attributable earnings fell to R43.17 million (R74.7 million).
Earnings per share dropped to 2.88c (4.98c).
The group says all losses were written off during the period. The acquisition cost of EuroPoint has been written off and is not reflected at any value in the balance sheet.
"While the last year has been difficult, the board believes that the company has sound prospects of achieving the levels of profitability previously enjoyed and anticipates sound growth from present earnings levels."
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