Published July 8, 2009

Sunray, Hiap Seng draw auditor concerns

By TEH SHI NING

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SUNRAY Holdings and Hiap Seng Engineering announced yesterday that their auditors have included 'emphasis of matter' notes in audit reports on the companies' full-year financials.

Without qualifying their opinion, Sunray's independent auditors, Grant Thornton, highlighted the group's losses and operational cash outflows, saying that these conditions, together with other matters, indicate the existence of material uncertainty, which may cast 'significant doubt' on its ability to continue as a going concern.

For the year ended March 31, 2009, the group incurred a net loss of about 61.98 million yuan (S$13.2 million), and its net operating cash outflows totalled some 16.7 million yuan.

Sunray said that it is working towards resolving the going concern issue. It has obtained new bank overdraft facilities for a year, amounting to 12 million yuan from a bank in China. This was pledged with some of the group's leasehold buildings and improvements, all its land use rights and investment properties, and supported by the corporate guarantees provided by a wholly owned subsidiary of the company.

Sunray also said that it would 'tighten cost controls over various general and administrative expenses', and is 'in the process to dispose of certain of its non-profitable operations'.

Separately, Hiap Seng Engineering's independent auditors, PricewaterhouseCoopers, drew attention, without qualifying their opinion, to lawsuits that the company's 60 per cent owned Malaysian subsidiary is currently involved in.

Last year, the subsidiary lodged claims against one of its main contractors amounting to about $8.4 million, of which $3.4 million is still outstanding. That contractor denied the claims and filed counter claims against Hiap Seng's subsidiary, amounting to some $38.3 million.

Hiap Seng said that the legal opinion of its subsidiary's lawyers is that it would likely succeed in its claims while the contractor is unlikely to succeed in its counter claims. The directors are hence of the opinion that no provision for liability is required.