SCABLE 5170 SARAWAK CABLE BERHAD triggers PN17 criteria as auditor issues disclaimer of opinion on FY22 financials

 SCABLE 5170 SARAWAK CABLE BERHAD triggers PN17 criteria as auditor issues disclaimer of opinion on FY22 financials

KUALA LUMPUR (Sept 30): Sarawak Cable Bhd's external auditor has expressed a disclaimer of opinion on the cable and wire producer’s audited financial statements for the 17-month period ended May 31, 2022 (FY22).

Ernst and Young PLT (EY), in its report, said it had not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.

The independent auditor's report, reproduced by Sarawak Cable in a filing with Bursa Malaysia, said EY was awaiting the group's directors to finalise a proposed regulation plan after financial institutions had suspended the group’s credit facilities.

EY said it was notified on Sept 22 that Sarawak Cable and six of its subsidiaries intended to apply to the High Court for leave to convene a meeting with their creditors and to apply for a restraining order to restrain legal suits, winding up petitions and enforcement proceedings against the group and subsidiaries.

The six subsidiaries are Universal Cable (M) Bhd, Leader Cable Industry Bhd; Universal Cable (Sarawak) Sdn Bhd, Sarwaja Timur Sdn Bhd, Trenergy Infrastructure Sdn Bhd and Aerial Power Lines Sdn Bhd.

EY said after Sarawak Cable successfully obtained a court order on Thursday, certain financial institutions had suspended the group’s unutilised credit facilities. It said this indicated that a material uncertainty existed that may cast significant doubt on the group’s ability to continue as a going concern.

“Nevertheless, the directors continued to prepare the financial statements on a going concern basis, premised on certain critical assumptions which include continuous support from the financial institutions and creditors.

“The directors have not finalised the proposed regularisation plan and we have not been provided with the cash flow forecast incorporating the effects arising from the proposed regularisation plan to assess the ability of the group and of the company to continue as a going concern,” EY said.

The firm said it therefore was still unable to obtain sufficient appropriate audit evidence to support the validity of the assumptions adopted by the directors in preparing the financial statements on a going concern basis.

In a separate filing, Sarawak Cable said it has triggered the criteria of a Practice Note 17 (PN17) company following the disclaimer of opinion. It said it is in the midst of formulating a regularisation plan to address the PN17 status.

It also said that the High Court of Sabah and Sarawak in Kuching had allowed the group to call for a court convened meeting for the creditors of the group and six subsidiaries for a proposed scheme of arrangement.

“The order also allows the applicants and the scheme creditors to negotiate and finalise the terms of the proposed scheme of arrangement without the potential threat of any proceedings and actions being brought against the applicants in the interim,” it said.

Last December, Sarawak Cable changed its financial year end from Dec 31, 2021 to May 31, 2022 citing reasons to facilitate better audit planning and allocation of resources.

Thus, the audited financial statement adopting the new financial year end was prepared and made up for a 17-month period from Jan 1, 2021 to May 31, 2022.

Sarawak Cable had previously triggered the PN17 criteria last December as its shareholders’ equity on a consolidated basis was 50% or less than its share capital, based on its financial results for the quarter ended Nov 30, 2021.

At that time, EY had also highlighted a material uncertainty related to its going concern in the group’s financial statements for the financial year ended Dec 31, 2020 (FY20)

And back in July 2020, EY had issued a modified unqualified audit opinion with emphasis of matter on material uncertainty relating to going concern, in relation to Sarawak Cable’s audited financial statements for FY19.

Sarawak Cable said the auditors had drawn attention to the group incurring a net loss of RM86.6 million in FY19 and, as of that date, the group's current liabilities exceeded its current assets by RM169.9 million.

For the consolidated financial results from Jan 1, 2021 to May 31, 2022, Sarawak Cable reported a net loss of RM124.7 million on revenue of RM815.9 million.

Sarawak Cable’s shares closed unchanged at 10.5 sen on Friday, bringing the group a market capitalisation of RM39.99 million. The counter has fallen by 48.2% year to date.

Read also: Sarawak Cable triggers criteria but will not be classified as PN17 firm

Sarawak Cable's independent auditors flag going concern uncertainty

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