SCIB’s auditor expresses a qualified opinion on the group’s financial statements
KUALA LUMPUR (December 31): Sarawak Consolidated Industries Bhd (SCIB) said its external auditor had expressed a qualified opinion on the group’s audited financial statements for the year ended June 30, 2021 (FY21).
He also said his annual report for FY21 remains on hold as the group needs more time to update statements in the report.
The annual report is now expected to be released on January 31, 2022, the Sarawak-based civil engineering firm said in a stock exchange filing on Friday (December 31, 2021).
Trading in SCIB shares has been suspended since Nov. 9, after Bursa Malaysia Securities rejected an appeal by the group seeking an extension until Dec. 31 for the group to release its FY21 annual report, which was due to be released. October 31.
The group said its external auditor, Nexia SSY PLT, had expressed a qualified opinion on the audited financial statements presented on Thursday.
The qualified opinion was expressed on the settlement agreements signed by the group on November 10 with several parties concerning six engineering, procurement, construction and commissioning (EPCC) projects carried out in Qatar and Oman.
Nexia SSY said that after the settlement agreements were signed, SCIB’s administrators decided to reclassify the transactions relating to eight overseas-based projects (including the six projects carried out in Qatar and Oman), disclosing the net amount due to the group and the company of US$15.67 million (RM64.22 million) and US$4.25 million (RM17.85 million) respectively in project management fees.
As a result, the group and the company have made adjustments to the financial statements, the auditor said.
“We were unable to obtain sufficient appropriate audit evidence regarding the EPCC contracts and all related adjustments,” Nexia SSY said.
“As a result, the impact of the net profit recognized in the statement of profit and loss and other comprehensive income as disclosed, amounting to RM3,549,473, has not been determined.
“As a result, we were unable to determine whether said adjustments were deemed necessary,” the auditor said.
Difference between audited and unaudited profit
In a separate statement, SCIB said there was a discrepancy of more than 10% between after-tax profit and the group’s non-controlling interest shown in the unaudited sixth quarter results for FY21 and the audited financial statements.
The variance was caused, among other things, by the recognition of a gain amounting to RM5.5 million in relation to the settlement agreement with Gaya Belian Sdn Bhd and others, which was reclassified from the movement of reserves for other income.
This was also due to the recognition of a total net impairment provision of RM52.5 million, which included an amount due for overseas projects of RM50.9 million; an additional impairment loss of RM2.6 million based on sales payment profiles over an 18 month period; and a reversal of impairment of RM1 million due to the recognition of an advance payment made for the project being awarded.
Another contributing factor, the SCIB said, was the RM1.7 million consultancy fee spent due to unsuccessful projects.
SCIB is the second group under the belt of Serba Dinamik CEO Datuk Mohd Abdul Karim Abdullah who has been suspended from trading by the exchange for non-compliance.
The group changed its external auditor after KPMG resigned on July 26, following its sister company Serba Dinamik’s lawsuit against KPMG over auditing issues.
The SCIB said the impact of movement restrictions in Malaysia and overseas due to Covid-19 had also hampered its efforts to finalize and publish the annual report.
SCIB Managing Director and CEO Rosland Othman said the group remained committed to creating value and maximizing performance in the coming year.
“We will continue our expansion into Peninsular Malaysia and East Malaysia. We have redefined our geographical positioning by taking a closer look at potential emerging markets, particularly in the countries of origin and neighboring countries.
As of December 31, 2021, SCIB said its backlog remained stable at RM1.2 billion, translating into good earnings visibility through 2026.
“By focusing on leveraging our strength as the largest manufacturer of precast concrete and industrialized building systems (IBS) in East Malaysia, we can develop opportunities in Southeast Asia.
“In addition, SCIB is also planning to expand our manufacturing operations in Peninsular Malaysia, in addition to adopting 3D printing technology in our construction projects, as we believe this will give us the competitive edge needed to compete. in the construction industry,” added Rosland.
SCIB’s shares last traded at 20.5 sen, giving it a market cap of RM119.3 million.