External auditors in doubt on KTB as going concern

by ASILA JALIL/ pic credit: ktb.com.my

KONSORTIUM Transnasional Bhd’s (KTB) external auditors stated their concerns about its financial situation and operations certainty as the transport service operator filed its financial year ended Dec 31, 2019 (FY19), results.

In a filing to Bursa Malaysia yesterday, auditor Messrs Al Jafree Salihin Kuzaimi PLT drew attention to KTB’s current liabilities exceeding its current assets by RM70.33 million and cast doubt about the liability of the group to continue as a going concern.

“These conditions indicate, along with other matters as set forth in Note 2.1 to the financial statements, the existence of a material uncertainty which may cast significant doubt about the liability of the group and the company to continue as a going concern,” said the auditor.

It said the group and company’s ability to continue as going concern depends on the group obtaining support from its penultimate holding company and the Land Public Transport Agency to be disbursed to the private stage bus operators including the group, the group and company’s ability to generate adequate cashflows and future profits from its ongoing reorganisation of its operations, and obtaining continued support from creditors and lender.

It noted that KTB made an announcement on April 14 regarding its classification as an affected issuer under Practice Note 17.

“The company is required to submit a proposed regularisation plan for the group and the company to the relevant authorities and to implement the regularisation plan within the stipulated time frame.

“On July 1, 2020, the company submitted a monthly announcement in regard to the First Announcement as the company had yet to finalise the regularisation plan for submission to the relevant authorities for approval, in which it is being due in 21 months,” said the auditor.

It added that as at the date of the report, the company was in the middle of formalising the regularisation plan and the auditor was unable to determine whether the regularisation plan will be approved by the relevant authorities and successfully implemented for KTB to achieve sustainable and viable operations.

“The financial statements of the group and the company do not include any adjustment relating to the amount and classification of assets and liabilities that might be necessary should the going concern basis of preparation of the group’s and the company’s financial statements be inappropriate. Our opinion is not modified in respect of this matter,” it added.

Responding to the matter, KTB said the group has continued the process of addressing the net current liabilities by negotiating with the creditors for extension or converting debts into a few years’ repayment period of the existing short-term debts until completion of the group’s turnaround exercise.

KTB recorded a higher audited net loss of RM90.56 million for FY19 due to impairment on goodwill amounting to RM62 million and higher operating costs.

The group stated that the registered losses are higher than its unaudited results of a loss after tax of RM34.24 million that was announced on Feb 28, 2020, and this gives rise to a devastation of more than 10%.

“The deviation is mainly due to the impact of Covid-19 which has resulted in the company to recognise additional impairment on goodwill and receivables, and deferred tax assets to current year statement of profit and loss,” it said.

KTB is also expected to suffer from a massive drop in revenue this year due to the Movement Control Order following a rise in cancellations and passenger refunds.

Its chairman Tan Sri Dr Mohd Nadzmi Mohd Salleh noted in its annual report filed with Bursa Malaysia yesterday that the industry has been severely affected in the first half of FY20 by the Covid-19 pandemic that leads to travel restrictions while the public is still in fear of the disease.