KUALA LUMPUR (May 14): Ageson Bhd (KL:AGES), whose external auditor raised concerns about its receivables as well as its subsidiaries’ revenues and asset valuation, announced that consultant Virdos Lima Consultancy (M) Sdn Bhd (VL Consultancy) did not find any “material adverse findings from its independent assessment”.

In October last year, the engineering construction firm’s external auditor Messrs Jamal, Amin & Partners raised concerns about certain audit issues in its financial statements for the 18-month financial period ended Dec 31, 2022 (FPE2022).

'Insufficient' evidence on revenue

The audit issues were pertaining to transactions within the company and three other subsidiaries, namely Agesen SMSGMBH Sdn Bhd, Ageson Power Sdn Bhd and Ageson Industrial Bhd.

One of the issues that was flagged by the auditor was that it could not obtain sufficient audit evidence on the substantial amount of revenue reported by Ageson SMSGMBH and Ageson Power from the trading of polyester plywood.

For FPE2022, Ageson SMSGMBH reported a revenue of RM412.96 million, while the cost of sales amounted to RM322.18 million. Meanwhile, Ageson Power reported a revenue of RM26.8 million and a cost of sales of RM20.84 million.

In response to the concern, VL Consultancy said it had conducted an independent assessment of the sale transactions, and noted that there were no irregularities based on an analysis of the customers’ audited financial statements.

According to the bourse filing, VL Consultancy had traced the customer payments to the corresponding sale invoices. “The alignment of sales transactions and payments with third-party documentation (such as customer statements of account and balance confirmations) verifies the accuracy of the records,” the bourse filing by Ageson stated.

Receivables impairment

Ageson’s auditor also highlighted that the company — formerly known as Prinsiptek Corp Bhd — did not recognise impairment for its receivables totalling RM43.3 million as of the end of FPE2022. This involved Prinsiptek International Ltd, which owed Ageson RM1.8 million.

In response, the independent assessment showed that the sum of RM1.8 million had been fully impaired by the company for the financial period ended Dec 31, 2023 (FPE2023). But VL Consultancy noted that “the remaining balance of RM41.5 million pertains to the stakeholder sums held under Ageson’s panel legal firm”.

Asset value

The external auditor also expressed concern about Ageson Industrial that recorded a valuation of property, plant, and equipment amounting to RM138.47 million as of the end of FPE2022.

“The company recognises its property, plant and equipment based on a cost model. As a result, there was a deferred tax liability of RM13.7 million reported in the financial statements,” it said, adding that there was no impairment loss of assets being assessed during the period, contrary to the standard requirement.

However, according to VL Consultancy, the valuation report "appears to be supported", and that the personnel responsible for the valuation "possess the requisite credentials and qualifications”.

Ageson said it will work closely with the potential auditor to address the above matters in its audited financial statements for the financial period ending June 30, 2024 (FPE2024).

Notably, there were two other issues raised by the external auditor that were not addressed in the independent assessment.

The auditor flagged that Ageson did not recognise impairment for its capital contribution in its subsidiaries — namely Ageson Development Sdn Bhd and Ageson Enterprise Sdn Bhd — totalling RM140.47 million. It said accumulated losses would have increased by RM63.97 million as of Dec 31, 2022, had such losses been recognised.

The auditor also highlighted that Ageson did not recognise impairment for its other investments related to Ageson Development, which would have otherwise increased accumulated losses further by RM4.15 million.

Financial year end changed twice in two years

Ageson previously changed its financial year end from June 30, 2022 to Dec 31, 2022, to provide adequate time for new auditors to complete the audit.

The company then changed its financial year end again from Dec 31, 2023 to June 30, 2024, to “better plan its audit schedule”.

Ageson was listed as a Practice Note 17 (PN17) company in November 2023, about 17 months after it made a cash call to raise RM41.56 million at 20 sen per share in June 2022.

It has until November to submit its regularisation plan to the relevant authorities for approval. “There has been no major development on the PN17 status as previously announced by the company,” it said on May 2.

For the 12 months ended Dec 31, 2023 (FPE2023), Ageson reported a net profit of RM1.29 million, on the back of RM29.31 million in revenue.

Its cash and cash equivalents as at end-2023 amounted to RM28.06 million, while its bank borrowings amounted to RM33.01 million. Trade receivables stood at RM6.74 million, while other receivables were at RM127.51 million.

Ageson's largest shareholder is Datuk Seri Larry Liew Kok Leong with 9.33% direct interest and 6.23% indirect interest held through Ukay One Sdn Bhd. Liew was previously the executive chairman of ARB Bhd (KL:ARBB).