Daya Materials’ auditors express opinion disclaimer on its FY21 financials on going concern doubts

Daya Materials’ auditors express opinion disclaimer on its FY21 financials on going concern doubts
-A +A

KUALA LUMPUR (Nov 5): Auditors Baker Tilly Monteiro Heng PLT have expressed a disclaimer of opinion on oil & gas services provider Daya Materials Bhd’s financial statements for the 12 months ended June 30, 2021 (FY2021).

According to Daya Materials' filing, the auditors found material uncertainties that cast doubt on the Practice Note 17 listed issuer's ability to continue as a going concern, so they were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the group's financial statements.

However, Daya Materials incurred a net loss of RM3.29 million for FY2021, while the group and the company’s current liabilities had exceeded their current assets by RM214.17 million and RM322.27 million respectively, while recording a capital deficiency of RM201.05 million and RM301.14 million respectively.

Daya Materials also defaulted in repaying certain financing and trade facilities with a total outstanding amount of RM183.22 million, which now results in the financing/trade facilities facing the risk of being terminated or recalled without notice, while the creditors could take legal action against the company and its subsidiaries.

Meanwhile, Daya Materials had submitted its revised regularisation plan to Bursa Securities in June, which the regulator subsequently said on Oct 18 that it had resolved to approve the plan. "However, the approval granted by Bursa Securities for the proposed regularisation plan is subject to the conditions as stipulated by Bursa Securities," the auditors noted.

Furthermore, according to a Nov 2 bourse filing, Daya Materials’ application for its regularisation plan is fixed for case management in the High Court on Nov 11.

“In view of the material uncertainties involving the approval by various parties and successful implementation of the Regularisation Plan, including sufficiency of funding supporting and possible monetisation of assets of the group and of the company, we were unable to obtain sufficient appropriate audit evidence to determine whether the management’s use of the going concern basis in the preparation of the financial statements of the group and of the company was appropriate,” the report said.

The application of going concern basis is on the assumption that the group and company will be able to realise their assets and settle their liabilities in the normal course of business, it further noted.

In addition, Daya Materials’ trade receivables relating to the Littoral Combat Ships Project (LCS Project) that it secured from the government in 2015 amounted to RM10.97 million in FY2021, compared with RM7.96 million in FY2020.

The LCS Project was suspended in January 2020 due to non-payment from the customer, but the government subsequently agreed to resume the project in May this year.

"In view of the uncertainties on the execution of conditions required to be complied with and the successful implementation of the scheme of arrangement of the customer, we were unable to determine whether any adjustments to the expected credit loss relating to the LCS Project were necessary," the auditors noted.

The report also revealed that the auditors were unable to determine whether the said trade receivables could be recoverable and if an expected credit loss was required.

“In view of the uncertainties on the execution of conditions required to be complied with and the successful implementation of the scheme of arrangement of the customer, we were unable to determine whether any adjustments to the expected credit loss relating to the LCS Project were necessary,” as reported by the auditors.

The auditors also said there were unverified trade payables, other payables and accruals amounting to RM6.76 million as of end-June 2021, and to RM10.07 million as at end-June 2020. “The unverified payables are related to a dormant subsidiary which was previously involved in the offshore oil and gas related business, namely Daya Offshore Construction Sdn Bhd. We were unable to satisfy ourselves by alternative means concerning the completeness and existence of these balances,” the auditors said.

The auditors also noted that certain retrospective restatements in relation to financial guarantee liabilities have been made to the financial statements that could have a material effect on the information in the statement of Daya Material's financial position at the beginning of the preceding period. "As a result, the company shall present a third statement of financial position as at 1 January 2019, in compliance with MFRS 10 Presentation of Financial Statements. However, the company had not presented a third statement of financial position as at 1 January 2019, which is a departure from the Malaysian Financial Reporting Standards," they added.

Tan Choe Choe