Hiap Seng Engineering says it can continue as going concern

Mainboard-listed Hiap Seng Engineering responded to Singapore Exchange (SGX) queries on its financial results yesterday.

The bourse had asked the board's assessment of the group's ability to operate as a going concern and whether its shares should be suspended given Hiap Seng's current liabilities of about $20 million.

Hiap Seng said cash-flow projections for 2020 to 2022 conducted by an independent consultancy firm suggest the group can continue as a going concern.

It added that the group is discussing additional equity funding with potential investors and financial advisers.

Hiap Seng - a provider of engineering and plant-related services for the petroleum and petrochemical industry - said the general outlook for the process sector of the oil and gas industry has shown signs of recovery.

The firm has been receiving more job inquiries and expects to secure projects with better margins. These additional projects should generate enough funds for operational needs, the board noted, adding that it does not feel the shares should be suspended from trading.

The SGX queried Hiap Seng on its trade and other receivables and asked it to provide an ageing schedule for its debtors.

The firm, in citing figures, said it is "confident that the recoverability of the trade receivables is not an issue". It added that a provision of $5.8 million was to provide for foreseeable losses for three projects.

Hiap Seng said its contract assets fell by 41.7 per cent and its contract liabilities increased by 373.4 per cent due to its adoption of the Singapore Financial Reporting Standards (International) on April 1 last year. Hence, it had to reflect contract assets and liabilities for the 2019 financial year and comparative 2018 statements.

Contract assets refer to revenue that is recognised but not yet billed to customers, while contract liabilities are billings for which revenue has yet to be recognised. The variances were due to timing of billings to customers and the recognition of related revenue.

SGX also flagged the group's borrowings of $30 million that were due in a year or less.

The group said this was categorised under bank borrowings and used for working capital, adding that the borrowings had been renewed. It also said cost overruns - the main reason for its 2019 gross loss - amounted to $15.4 million.

Outstanding orders stood at $126 million and were expected to be fulfilled by June 30 next year.

Hiap Seng was one of 12 mainboard companies added to the SGX watch list last month after a mid-year review. Its shares closed down 4.9 per cent at 7.8 cents yesterday.

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A version of this article appeared in the print edition of The Straits Times on July 05, 2019, with the headline Hiap Seng Engineering says it can continue as going concern. Subscribe