Top Builders says forensic auditors not appointed due to financial constraints; submits 1QFY2023 report but still owes two other reports

• "The board of directors wishes to announce that no forensic auditors have been appointed due to budgetary constraints and financial limitations that may restrict the organization’s ability to engage the services of forensic auditors during this period.”

KUALA LUMPUR (June 9): Top Builders Capital Bhd, which previously delayed the release of its annual report for the financial year ended June 30, 2022 (FY2022) to complete a forensic audit on irregularities found in the group's scheme of arrangement, now says it did not appoint any forensic auditors to look into the matter due to budgetary constraints.

"The board of directors wishes to announce that no forensic auditors have been appointed due to budgetary constraints and financial limitations that may restrict the organization’s ability to engage the services of forensic auditors during this period. In addition, the complexity and sensitivity of the matter under investigation may necessitate additional (sic) for thorough deliberation before engaging forensic auditors to ensure their involvement aligns with the organisation's specific needs and priorities," it said in a bourse filing on Friday.

"Nevertheless, the company will consider engaging forensic auditors when the financial position of the company permits," the Practice Note 17 group added.

The group disclosed in February this year that its year-end audit found irregularities in the scheme of arrangement it implemented in the second quarter of FY2022, particularly a waiver of liability of RM208.09 million by reducing the cost of goods sold — which were recognised as income that resulted in an overstatement of profit. At the time, the group said it had initiated the appointment of forensic auditors in view of the significant impact of the discovery on the financials of the group.

The group eventually submitted its 2022 Annual Report on May 29, but made no mention of the forensic audit until its Friday filing.

Based on its latest bourse filings on Friday, the group has also released its financial report for the first quarter ended Sept 30, 2022 (1QFY2023).

But the trading of the group's shares, which has been suspended from Nov 8 last year following the group's failure to release its 2022 Annual Report, will continue as there are still two more outstanding reports it has yet to submit — its quarterly report for 2QFY2023 for the three months ended Dec 31, 2022, and its 3QFY2023 for the three months ended March 31, 2023.

Top Builders’ unaudited financial results for FY2022 indicated it had returned to the black with a net profit of RM150.39 million, following the implementation of its scheme of arrangement. In its annual report, its stated net profit for FY2022 was RM148.97 million.

The group had been posting losses for the past three financial years, with a net loss of RM239.1 million for FY2021, RM144.35 million for FY2019 and RM26.93 million for FY2018.

For 1QFY2023, the group narrowed its net loss to RM1.62 million from RM4.77 million a year earlier on lower finance costs and administrative expenses. Revenue for the quarter, however, decreased to RM1.43 million from RM7.15 million due to lower revenue from ongoing projects.

Looking ahead, Top Builders expects its prospects to remain neutral pending the completion of the remaining projects and regularise its PN17 condition.

The group fell into PN17 status in June 2020, when the group’s external auditor KPMG PLT expressed doubts in the company’s ability to continue as a going concern as its current liabilities exceeded its current assets by RM21.6 million. At the time, the company’s equity on a consolidated basis was less than 25% of its share capital.

The group’s shares were last traded at two sen, giving it a market capitalisation of RM14.12 million.