SERBA Dinamik Holdings Bhd has completed the daunting task of publishing its Annual Report for the financial period ended June 30, 2021 but with its external auditors Nexia SSY PLT expressing an opinion disclaimer in the independent auditors’ report.

Nexia said its task to audit the recognition of revenue, purchases, receivables, payables and inventories for the 18-month period up to June 30, 2021 has been impeded by time limitations and occurrence of additional significant events which impacting the completion of its audit.

Above all else, Nexia also noted that its scope of services as per its letter of engagement makes reference to the availability of the on-going special independent review (SIR) by Ernst & Young Consulting Sdn Bhd (EY) for the purpose of completing its audit.

However, this has been curtailed by a directive from Bursa Malaysia Securities Bhd of Oct 22, 2021 for Serba Dinamik to announce the preliminary factual findings of EY by Oct 26 to which the company had responded on Nov 3 with the filing of an originating summons against the former at the Kuala Lumpur High Court.

On Nov 5, Serba Dinamik further filed a similar originating summons against EY pertaining to the said independent review.

“At the date of our report, the High court had fixed the next case management for legal suit against EY on Jan 6 (today) and the hearing for legal suit against Bursa Securities on Jan 17,” justified Nexia in a Bursa Malaysia filing today.

“The outcome of these legal suits extends beyond the timeline determined by Bursa Securities to the company for submission of its annual report.”

Time constraint

Elsewhere, Nexia noted that in view of the timing of its appointment, it was not in a position to observe the counting of Serba Dinamik’s physical inventories by June 30, 2021 while alternative means to verify the inventory quantities is still pending.

“Additionally, there are significant matters which we require that are outstanding at the date of our report and we have not been able to compile sufficient appropriate audit evidence to provide a basis for our audit opinion,” the auditor which took over the role of KPMG PLT pointed out.

Recall that Nexia was appointed as external auditor of the global integrated oil & gas (O&G) service provider on Aug 4 following the departure of KPMG on June 24 after Serba Dinamik filed a civil suit against KPMG.

KPMG claimed that the court action has compromised its ability to independently continue to audit the company and discharge its professional duties.

According to Nexia, both Serba Dinamik and the group have also triggered events of default for various contracts and obligations in respect of those contracts.

“These events or conditions indicate existence of material uncertainties that may cast significant doubt on the group’s and the company’s ability to continue as a going concern,” highlighted the auditor.

“Be that as it may, the financial statements of the group and of the company have been prepared on a going concern basis, the validity of which is highly dependent on the successful implementation of the directors’ plans in responding to the conditions above.”

Remedial action

As a solution, the Serba Dinamik board said the company will formulate a comprehensive regularisation plan for submission to Bursa Securities by end-January 2023.

“The regularisation plan includes inter-alia, funds raising exercise to be undertaken by the company, the proceeds raised therefrom will be used as working capital and funds for future projects,” noted the board.

“The company will appoint a principal adviser to advise the company on a regularisation plan.”

Moreover, the Serba Dinamik group will focus on costs saving and optimisation plans in order to remain competitive in the current business environment while engaging closely with secured lenders to discuss options for its debt resolution.

“Barring any unforeseen circumstances, the group expects to resolve the issues relating to the disclaimer of opinion within the next financial year (FY6/2023),” added the board.

Serba Dinamik was last transacted at 35 sen at the close of the mid-day trading on Oct 22 prior to the trading suspension of its shares/warrants, hence giving the company a market capitalisation of RM1.3 bil. – Jan 6, 2022