Asdion’s independent auditors flag going concern over FY2022 financial statements

Asdion’s independent auditors flag going concern over FY2022 financial statements
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KUALA LUMPUR (Feb 2): Asdion Bhd’s independent auditors Messrs CAS Malaysia PLT have issued an unmodified audit opinion with a material uncertainty related to going concern for Asdion’s statements for the financial year ended Sept 30, 2022 (FY2022). 

Based on the auditors’ report, the group's current liabilities have exceeded its current assets by RM22.79 million. As of Sept 30, 2022, the firm said, the group had suffered an accumulated loss of RM6.09 million.  

“These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern. Our opinion is not modified in respect of this matter,” CAS Malaysia said, drawing attention to Note 2.7 of Asdion’s financial statements.  

It said the ability of Asdion to operate as a going concern is dependent on the successful outcome and implementation of the current business plans to generate sufficient cash in the future to fulfil the group’s obligations as and when it falls due.  

“The financial statements of the group do not include any adjustment relating to the amount and classification of assets and liabilities that might be necessary should the group be unable to continue as a going concern,” CAS Malaysia said.

Under the key audit matters, the firm highlighted that the net carrying amount of goodwill of Asdion amounted to RM3.19 million as of Sept 30, 2022, about 8% of the group’s total assets.    

CAS Malaysia also said the deferred expenditure of the group amounted to RM26.72 million, about 67% of the total assets which relate to expenditures incurred for Asdion’s proposed development project in Tumpat, Kelantan.    

In light of the flagged going concern, Asdion said the group had undertaken more effective cost management measures to control its operational expenses through regular review of its operational cost structure.  

It said the operational expenses included minimising administrative expenses consisting of rental, utilities and transportation costs. 

Asdion added that it undertook cost-cutting measures such as reducing its office rental through the relocation of its corporate office in October 2022.  

It said the relocation saved approximately RM50,000 in annual office rental, which the group can use for its business operation, as well as working capital and administrative expenses.  

Asdion said it had also improved its financial position by disposing of a 24% equity interest in Maxillion Link Enterprises Ltd for US$1, which it proposed on April 13, 2022, to streamline the group’s core operation as a logistics service provider. 

Maximilian is in the business of design production and distribution of sanitary and high-purity fluid handling equipment and services in the Asia region.  

And on Dec 30, 2021, Asdion said it had completed the private placement of 37.55 million placement shares and raised approximately RM6.06 million in proceeds mainly for the expenditure related to the development of the Tumpat Support Base. 

The Tumpat Support Base was positioned to handle the loading of bulk cargo, to provide jetty services comprising cargo receival, storage and weighing, lighterage and stevedoring facilities, as well as other related equipment, services and resources, including maintenance, repair and overhaul services. 

Kingdom Infra Holdings Sdn Bhd owns the exclusive rights as the operator to develop and manage the Tumpat Support Base in Tumpat, Kelantan. 

Asdion in 2019 entered into a project development unincorporated joint-venture agreement (PDUJVA), which was based on a sharing ratio of 70:30 (Asdion 70% and Kingdom Infra 30%) for the total net profit earned or loss incurred by the joint venture. 

The PDUJVA was expected to enable the Asdion group to undertake the business and/or projects related to supply base operations and development, and thus improving the group’s earnings in the long term.

The PDUJVA was also expected to transform Asdion from a traditional logistics service provider into a full-fledged logistics service provider and operator in the logistics sector.  

The Tumpat Support Base was expected to begin its initial operation in December 2022 through the provision of jetty services to handle dry bulk cargo, while the full development of the base was expected to be completed within three years — by the end of 2025. 

On Thursday (Feb 2), trading of Asdion shares was halted on Bursa Malaysia for an hour in the morning. At the afternoon break, the share price of Asdion was unchanged at eight sen, valuing the group at RM31.73 million. 

Isabelle Francis