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AUDIT REPORT - MODIFIED OPINION / MATERIAL UNCERTAINTY RELATED TO GOING CONCERN : MATERIAL UNCERTAINTY RELATED TO GOING CONCERN

KONSORTIUM TRANSNASIONAL BERHAD

Type Announcement
Subject AUDIT REPORT - MODIFIED OPINION / MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
Description 
Emphasis of a matter related to going concern by the External Auditors on the financial statements for the financial year ended 31 December 2018

Pursuant to paragraph 9.19(37) of Bursa Malaysia Securities Berhad's Main Listing Requirements, the Board of Directors of Konsortium Transnasional Berhad ("the Company") wishes to announce that the Company's independent auditors, Messrs, Al Jafree Salihin Kuzaimi PLT ("Independent Auditors") has included an emphasis of a matter to draw attention to the material uncertainty related to going concern in its independent auditors' report dated 3rd April 2019 ("Independent Auditors' Report") for the financial statements of the Group for the financial year ended 31 December 2018 ("Financial Statements").

1. Material uncertainty disclosed in the Independent Auditors' Report

The material uncertatinty disclosed are as follows:

"Without qualifying our opinion, we draw attention to Note 2.1 to the financial statements which indicated that for the year ended 31 December 2018, the Group's and the Company's current liabilities exceeded its current assets by RM63,066,000 and RM14,104,000 respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the ability of the Group and the Company to continue as going concern.

The ability of the Group and the Company to continue as going concern are dependent upon the Group obtaining the support from the Group's penultimate holding company, obtaining support the Land Public Transport Agency ("APAD") to be disbursed to the private stage bus operators including the Group, the ability of the Group and the Company to generate adequate positive cash flows and future profits from its ongoing reorganisation of its operations and obtaining the continuing support of creditors and lenders.

The financial statements of the Group and the Company do not include any adjustments relating to the amount and classification of assets and liabilities that might be necesssary should the going concern basis of preparation of the Group's and the Company's financial statements be inappropriate."

The following are the Key Audit Matters as reported in the Independert Auditors' Report:

No. Key Audit Matters How our audit addressed the Key Audit Matter
1.

Valuation and impairment of property, plant and equipment

Property, plant and equipment represents the most significant asset class on the statement of financial position of the Group amounting to RM172,995,000 as at 31 December 2018. Included in property, plant and equipment are buses and motor vehicles with aggregate carrying values of RM167,923,000.

We focused on this area due to its magnitude and significant judgement involved in determining the key assumptions used in performing the impairment test, such as estimating the recoverable amount of the buses.

Please refer to Note 3.1 Significant Accounting Judgements and Estimates and disclosure of Property, Plant and Equipment in Note 12 to the financial statements.

Our procedures included amongst others:

We have reviewed the management's impairment assessment on the indications of impairment of the buses as at the reporting date, which the management has considered both internal and external sources of information.

We have performed the physical sightings on a sampling basis to assess the physical conditions of the buses to identify the indications of impairment.

For the buses which have indications of impairment, we have performed the following procedures:

a) We have obtained the estimated recoverable amount of buses and checked, on a sampling basis, the accuracy and relevance of the input data used by management to estimate the recoverable amount of buses and motor vehicles; 

b) We have assessed management's key assumptions used to estimate the recoverable amount based on our knowledge of the public transportation industry.

 
2.

Goodwill impairment assessment - Park May Berhad Group

The Group has goodwill of RM78,582,000 as at 31 December 2018 attributable to the significant cash generating unit (CGU) relating to its acquisition of Park May Berhad Group (PMBG) in 2000.

We focused on this area due to the significance of the goodwill balance with indefinite useful lives which are subject to annual impairment assessment.

The impairment asessment performed by management involved significant degree of judgements in estimating the assumptions of growth rate and discount rate used. The key assumptions are disclosed in Note 15 to the financial statements and kindly refer to Note 3.1 for the Significant Accounting Estimates and Judgements.

Arising from the impairment assessment, impairment loss of goodwill amounting to RM8,010,000 was recognised in the current financial year.

Our procedures included, amongst others:

a) We have challenged the key assumptions used by management in the discounted cash flows projections in determining the recoverable amount which include the fuel cost, growth rate, increase in bus fare and discount rate;

b) We have assessed the reliability of management's forecast through the review of past trends of actual financial performances againstt the previous forecasted results;

c) We have reviewed the sensitivity analysis performed by management on the growth rate and discount rate to determine whether the reasonable changes on these key assumptions would result in the carrying amount of the goodwill to exceed their recoverable amount.

 

In relation the the above, the Board wishes to advise on the followings:

a) That the independent Auditors have expresed an unqualified opinion on the financial statements for the year ended 31 December 2018 and that their opinion is not modified in respect of the financial statements on that matter.

b) The Group has already started the process of addressing the net current liabilites by:

i) continue to negotiate with the creditors for extension/converting debts into few years repayment period of the existing short term debts until completion of the Group's turnaround exercise. The Group has successfuly negotiate lower monthly installment for the Group's hire purchase facility which is one of the Group's main monthly commitment; and

ii) out of the RM14.104 million net current liabilities of the Company, RM12.407 million represent net amount of the amount due to related companies and the Company's penultimate holding company which are maintaining  their commitments to continue their supports for the operations of the Group and the Company.

c) The Group has two separate agreements with APAD to provide bus services under the MYBUS and ISBSF programs. The revenue and financial supports, respectively, from both programs are significant and enable the Group to continue servicing its current financial commitments.

d) The Group had in 2018, ceased the operations of few loss making subsidiaries. The decision and action was made in line with the Group's rationalisation program to focus the limited resources on feasible business operations.

e) The Grpup will continue to focus on cost optimisation and stringent cash flow management and maintaining safety and quality services to remain competitive.

 

 

This announcement is dated 28 May 2019.

 



Announcement Info

Company Name KONSORTIUM TRANSNASIONAL BERHAD
Stock Name KTB
Date Announced 28 May 2019
Category General Announcement for PLC
Reference Number GA1-28052019-00010


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