Vibrant's auditor unable to finish audit due to irregularities

Mainboard-listed Vibrant yesterday said its auditor KPMG was unable to complete an audit of its financial statements for the year ended April 30.

This was a result of the auditor finding irregularities and discrepancies in coal mining and coal trading receipts, and sales invoices in certain units of wholly owned subsidiary Blackgold International Holdings.

In particular, these relate to Blackgold units Chongqing Heijin Industrial, Chongqing Caotang Coal Mine Resources Development and Chongqing Guoping Heiwan Coal Mine Resources Development.

The news sent Vibrant shares, which had been halted since July 11, tumbling on resumption of trading. They slumped 13.1 cents, or 39.7 per cent, to 19.9 cents.

"As the auditors have not undertaken any further procedures, they are currently unable to determine if the irregularities have been fully identified and the associated financial impact," Vibrant said in a filing yesterday morning.

The auditors are unable to complete their audit without performing additional procedures, it added.

Vibrant acquired its 94.18 per cent stake of the then Australia-listed Blackgold - a Chongqing-based producer of coal - through a scheme of arrangement approved by the Federal Court of Australia, on July 13 last year, for A$37.6 million (S$37.8 million).

On finding irregularities, Vibrant said: "The auditors have recommended to the audit committee that the auditors carry out additional procedures on Blackgold's balance sheet as at the date of its acquisition by the group, to ascertain the existence, accuracy and completeness of the assets and liabilities acquired."

Vibrant's board has authorised the committee to appoint a special auditor to conduct an investigation into the irregularities.

Based on information available to the board, due to the irregularities, a reversal of all revenues arising from Blackgold subsidiaries' coal mining and coal trading business for the nine months ended Jan 31 would have resulted in a 70 per cent fall in revenue to $132.8 million, a 77 per cent fall in cost of sales to $89.2 million, and a 99 per cent fall in net profit to $1.6 million.

Vibrant's board is of the opinion that the company will be able to operate as a going concern as it is expected to have sufficient cash to meet its debts and liabilities in the next 12 months, and its shares are not suspended from being traded pending the outcome of the special audit.

However, in the event that its shares are suspended for a continuous period of more than seven days, the company is obliged to, at the option of a note holder, redeem notes from its multi-currency medium-term note programme - presently $66 million if fully exercised.

This will create an immediate and significant cash flow concern for the group, and is likely to affect its ability to operate as a going concern, Vibrant said.

A version of this article appeared in the print edition of The Straits Times on July 19, 2018, with the headline 'Vibrant's auditor unable to finish audit due to irregularities'. Print Edition | Subscribe