This article first appeared in The Edge Financial Daily on August 1, 2018

KUALA LUMPUR: The independent auditors of Scomi Group Bhd have highlighted a material uncertainty related to the going concern of the group, in an emphasis of matter paragraph of the audit report for the group’s financial year ended March 31, 2018 (FY18).

In the paragraph, which Scomi Group filed with Bursa Malaysia yesterday, the auditors KPMG PLT noted that Scomi Group, together with its subsidiaries, incurred net losses of about RM332.1 million for FY18, while its net current assets stood at RM80 million.

The auditors also highlighted several project disputes and problems the group faces — among which is its ongoing legal battle with Prasarana Malaysia Bhd over the RM494 million monorail expansion project. It also noted that during FY18, the group encountered difficulties to meet statutory payments to authorities, and delayed payments to its employees and creditors for services rendered.

These events and conditions, the auditors said, “indicate that a material uncertainty exists that may cast significant doubt on the ability of the group and of the company to continue as going concerns”.

In response, Scomi Group said the auditors had expressed unqualified opinions about the financial statements of the group and that their opinions were not modified in respect of the statement on that matter.

The group also said it had started the process of addressing the key issues the auditors highlighted, which include the pursuit of all avenues available to recover the claims in relation to the project with Prasarana. It also intends to pursue various fundraising exercises over the next 12 months to improve the group’s working capital.

In addition, it said it is still in the process of negotiating the terms of the repayment plan with the significant project lender in relation to the Line 17 project awarded by the Metro Company of Sao Paulo, and will endeavour to conclude it over the next three months.

“With the realisation of the above, the company’s financial position is expected to improve and address the going concern issue. The company will continue to focus on cost-optimisation programmes and continuous product improvements and developments to remain competitive in each of the sectors it is involved in,” Scomi Group added.

Scomi Group shares fell 4.5% yesterday to 10.5 sen, with a market capitalisation of RM100.8 million.