Maxwell mulls independent audit of controversial ad spending

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KUALA LUMPUR (Feb 12): Maxwell International Holdings Bhd said it may engage an independent firm to carry out an investigative audit on its hefty advertising spending in China, which affected its overall financial performance.

In a filing with Bursa Malaysia today, the textile and sports shoe maker also shed more light on the controversial ad spending, which was undertaken by its intermediate subsidiary, Maxwell (Xiamen) Co Ltd.

It said the subsidiary had executed contracts last year with six marketing agents in China for the promotion and establishment of 390 marketing billboards, as well as light emitting diode (LED) signboards for a period of one year.

The company paid a total of 92.4 million renminbi (RM58.56 million) for the contracts, it added.

Yesterday, Maxwell said it had appointed accounting firm Ferrier Hodgson MH Sdn Bhd to undertake an extended audit on the company’s advertising expenses.

This came a day after the company said management had yet to provide a satisfactory justification for the ad spending, and that its independent and non-executive director Lee Chong Hoe had resigned from the board.

The company had earlier blamed the RM46.25 million net loss it suffered in its third quarter ended Sept 30, 2015 (3QFY15) on ad spending, as compared with a net profit of RM12.18 million gained in its previous corresponding quarter.

Cash-rich Maxwell incurred selling and distribution expenses of RM42.59 million in its 3QFY15, which is a sharp jump as compared to RM1.09 million in the previous corresponding quarter.

Maxwell’s share price started dropping since March last year. Today, the counter dropped 1 sen or 13.33% to 6.5 sen, for a market capitalisation of RM25.93 billion.