Ireka's auditor flags material uncertainty over its ability to continue as a going concern

KUALA LUMPUR (Aug 31): Construction and property group Ireka Corp Bhd's external auditor Messrs Crowe Malaysia PLT has expressed a qualified opinion with indication on material uncertainty on its ability to continue as a going concern in view of its audited financial statements for the financial year ended March 31, 2021 (FY21).

In its auditors' report filed by Ireka with Bursa Malaysia yesterday, Crowe Malaysia said it was unable to obtain sufficient appropriate audit evidence on the carrying amount of the group's investment in Aseana Properties Ltd and its subsidiaries (ASPL Group) as at March 31, 2021 and the group's share of ASPL Group's profit after taxation for FY21 because it was unable to obtain access to the financial information, management, and the auditors of ASPL Group within the audit period.

Consequently, it was unable to determine whether any adjustments might have been found necessary to these balances.

Crowe Malaysia also highlighted that as a result of the movement restrictions imposed throughout Malaysia due to the Covid-19 pandemic, Ireka management was unable to provide the documentary evidence required for certain trade and other receivables and trade and other payables of a subsidiary as they were not able to operate during that period.

As such, the auditor was unable to obtain sufficient appropriate audit evidence in the following balances relating to the financial statements of a subsidiary as at March 31, 2021:
i. The amount to the financial statements on trade receivables amounting to RM62,201,573;
ii. The amount to the financial statements on other receivables amounting to RM48,496,474;
iii. The amount to the financial statements on trade payables amounting to RM148,518,448; and
iv. The amount to the financial statements on other payables amounting to RM9,375,034.

"Consequently, we were unable to determine whether any adjustments might have been found necessary to these balances," said Crowe Malaysia.

The auditor also drew attention to the group's basis of preparation to the financial statements for FY21, which indicated that Ireka incurred a net loss of RM25.08 million in FY21 and, as of that date, the group's current liabilities exceeded its current assets by RM40.24 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," said Crowe Malaysia.

Meanwhile, Ireka said its shareholders' equity was reduced to RM59.6 million in FY21, from RM79.3 million in FY20, due to losses recorded during the year. This is less than 50% of the issued share capital of the company.

However, Ireka will not be classified as a Practice Note 17 company and will not be required to comply with the related obligations, in line with the relief measures implemented by Bursa Malaysia from April 17, 2020 to June 30, 2021.

"In order to address the situation, the management is in the midst of undertaking various strategic corporate exercises to improve the financial position of the company, as well as repositioning it within the industry. To date, 18.67 million shares were issued raising approximately RM11.3 million," it said.

"In addition to the fundraising exercise and a change in business model, the company is also in discussions to dispose of its equity stakes in its non-construction business subsidiaries and associates in order to raise capital and streamline its business operations. This will enable the company to focus its efforts on strengthening its financial health and rebuilding its industry's position, while ensuring a successful completion of its ongoing transformation exercise.

"Barring unforeseen circumstances, the board expects to regularise its financial position by early 2022," Ireka added.

Get the latest news @ www.EdgeProp.my

Subscribe to our Telegram channel for the latest stories and updates 

Click here for more property stories