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Questions swirl around Ferrexpo’s charitable donations, as final results put on hold, and auditors circle

Financial irregularities at medical and social services charity under investigation

Money may have been siphoned away from medical services

Ferrexpo PLC (LON:FXPO) has delayed releasing its financial results, as auditors continue to investigate discrepancies in the bank statements of Blooming Land, a charitable organisation at the heart of the company’s community and social responsibility programme in Ukraine.

The company’s shares fell by more than 8% in early trade to 247p.

Auditors at BDO are now widening their inquiries from the bank statements to the way the funds were allocated and spent in Ukraine.

In an earlier announcement in February, Ferrexpo said that donations to Blooming Land amounted to US$9.5mln in the first half of 2018. The company ceased donating in May 2018.

Gone astray?

Some or all of this money now appears to have gone astray, or as Ferrexpo put it bluntly in its regulatory news announcement: “The funds may not all have been used for their stated purpose”.

The company said it is committed to “understanding” the full extent of these issues.

In response to that part of the statement, broker Shore Capital commented, in apparent sarcasm, that such efforts were to be regarded “laudably”.

The initial news of the irregularities at Blooming Land came just days after the resignation of Simon Lockett as the senior independent non-executive director.

Deloitte has indicated that it may qualify or otherwise modify its audit opinion relating to the full year accounts, pending the outcome of the case.

As it stands though, Ferrexpo expects the full year 2018 earnings before interest, tax, depreciation and amortization to be in the region of US$500mln.

Investors may, on the whole, be fairly sanguine about the recent share price fall. As it stands, Ferrexpo shares are still trading at around six-month highs, as the iron ore price remains relatively strong after the Brazilian dam collapse last month.

The shares are trading at around eight times the level they were at three years ago.





Quick facts: Ferrexpo PLC

Price: 161.5 GBX

Market: LSE
Market Cap: £991.56 m

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