Nam Cheong auditor issues disclaimer of opinion on FY2021 financial statements

SINGAPORE (THE BUSINESS TIMES) - Nam Cheong said that its auditor has issued a disclaimer of opinion on the offshore support vessel builder's use of the "going concern" basis of accounting for its financial statements for fiscal year 2021.

The company said in its regulatory filing on Wednesday (April 13) that auditor Foo Kon Tan had been unable to obtain enough appropriate audit evidence to form an audit opinion on the financial statements.

Net current liabilities, flagged by the auditor, of the Malaysia-based group stood at about RM1.1 billion (S$355 million); its net liabilities amounted to RM675.8 million as at end-December 2021.

The statements were prepared by the management on a going concern basis, the validity of which was premised on a cash flows forecast of the group prepared for at least the next 12 months from the end of the reporting period, said Foo Kon Tan.

But it was assumed by the management that the group was not exposed to additional liabilities arising from its suspension of the remaining 10 shipbuilding contracts awarded to a group of shipyards, and that its restructuring exercise was to be completed in FY2022.

Nam Cheong's management told its auditor that an understanding without a written agreement had been reached with the shipyards in question to suspend construction or delivery of the vessels, with a view to extending the delivery period or terminating the contracts to minimise financial exposure.

But this information was not furnished to the auditor in the form of independently verifiable supporting evidence to convince the auditor that the balance sum of the contracts had not been incurred and all liabilities related to the contracts had been accounted for as at end-December 2021.

Nam Cheong's outstanding exposure under these orders to the shipyards is approximately US$104.8 million (S$142 million); US$24.7 million has been recorded in liabilities under trade and other payables.

Foo Kon Tan said: "Any adjustment that would be required may have a consequential significant effect on the cash flows forecast, net liabilities of the group as at Dec 31, 2021, and the profit or loss attributable to the owners for the year then ended and the related disclosures thereof in the financial statements."

Trading of the stock has been suspended since April 2018.

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