KUALA LUMPUR (July 16): Sarawak Cable Bhd’s independent auditors have flagged the existence of a material uncertainty that may cast significant doubt on the group's and the company's ability to continue as going concerns.

In a bourse filing today, the cable manufacturer said its independent auditors Messrs Ernst & Young PLT have issued a modified unqualified audit opinion with emphasis of matter on material uncertainty relating to going concern, in respect of Sarawak Cable’s audited financial statements for the financial year ended Dec 31, 2019.

It said the auditors had drawn attention to the group and the company incurring a net loss of RM86.6 million (2018: RM38.8 million) and RM104.2 million (2018: RM34.7 million) respectively during the year ended Dec 31, 2019 and, as of that date, the group's and the company’s current liabilities exceeded their current assets by RM169.9 million (2018: RM184.7 million) and RM229.1 million (2018: RM144.1 million) respectively.

Key audit matters raised by the auditors included revenue from long-term transmission lines construction contracts; impairment assessment of property, plant and equipment — helicopters and impairment assessment of concessions financial assets.

The auditors said a significant portion of the group’s and the company’s revenue were derived from contracts with customers to build transmission lines and such contracts generally span over more than one accounting period.

The extract from the auditors’ report said the company is in the midst of formulating a Proposed Debts Restructuring Scheme to address the financial conditions of the group and the company and believes that the restructuring scheme, once formulated and implemented, will enable them to achieve sustainable and viable operations which will generate sufficient cash flows to meet their obligations.

“Should the going concern basis for the preparation of the financial statements be no longer appropriate, adjustments to the amounts and classification of assets and liabilities may be necessary. Our opinion is not modified in respect of this matter,” the auditors said.

On June 26, 2020, Sarawak Cable said it posted a net profit of RM550,000 for the first quarter ended March 31, 2020 versus a net loss of RM5.69 million a year earlier, mainly due to unrealised gain on foreign exchange.

This was despite the group achieving lower revenue of RM152.69 million versus RM181.76 million.

Sarawak Cable said it will finalise its Debts Restructuring Scheme before the financial year ending Dec 31, 2020 and will continue to operate as a going concern.

At the midday break, shares of Sarawak Cable dipped 1.72% or 0.5 sen to 28.5 sen, valuing it at RM90.36 million.