KUALA LUMPUR (April 28): Lebtech Bhd’s external auditor has raised a material uncertainty on the construction group's ability to continue as a going concern, with regards to its business activities during the financial year ended Dec 31, 2022 (FY2022), mainly with related parties.

Auditor Al Jafree Salihin Kuzaimi PLT noted that the group derived all of its revenue in FY2022 from related parties, while 98% of its trade and other receivables were due from related parties.

“This has inadvertently increased the exposure to the credit risk and going concern risk,” said the auditor in a report filed with Bursa Malaysia by Lebtech.

Nonetheless, Al Jafree Salihin Kuzaimi expressed unqualified opinion in respect of Lebtech’s FY2022’s accounts, meaning that the auditor is satisfied that the group's financial statements provide a “true and fair” view of its fiscal position, performance and cash flows.

Labtech had stated in its circular to shareholders seeking renewal to the mandate for existing recurrent related party transactions (RRPT) that there are RM12.44 million worth of trade receivable due from Lebar Daun Development Sdn Bhd (LDDSB) that exceeded credit term by over five years and RM4.85 million by three to five years.

LDDSB is 99.99%-owned by Datuk Noor Azman @ Noor Hizam Mohd Nurdin, who is Lebtech’s non-independent non-executive director.

Noor Azman and his wife Datin Nor Hayati Abd Malik control a 61.4% stake in Lebtech.

Meanwhile, Lebtech has RM10.81 million in trade receivables due from BASCO Sdn Bhd that exceeded the credit term by over five years, RM6.86 million by between three and five years, RM16.34 million by one to three years, and RM7.53 million by less than a year.

BASCO is 99.99%-owned by Norazlan Mohamad Nordin, who is the brother of Noor Azman.

The circular stated that no late payment charges are imposed on these outstanding trade receivables as there is no clause for late payment charges provided in the agreement between Lebtech and these related parties.

“The management has ongoing discussion and negotiation with the related parties to pursue for the early settlement of the outstanding amounts and to ascertain/finalise the other modes of settlement,” said Lebtech.

“Among steps that have already been implemented is the contra of properties owned by the related parties for part settlement of the related party receivables.

“The board of directors is of the opinion that the outstanding amounts will be fully recovered over time due to the steps taken and that there were collections from the related parties during the financial year,” it added.

Shareholders are due to vote for these RRPT on June 8.

For FY2022, the group reported a net profit of RM73,900, down 77% from RM326,007 in FY2021, while revenue fell 23.4% to RM20.17 million from RM26.33 million, as the group’s construction project was in the final stage of completion.

Commenting on FY2023 prospects, Lebtech said in its quarterly financial update that the outlook remains cautious as its board of directors foresees operational results to be “equally challenging”.

“The group expects the construction industry to record slower growth in 2023 amid revision of mega projects and in line with the slowdown in the global construction sector and the Covid-19 pandemic,” it said.

“The revenue generation mainly comes from the construction contracts of property development projects with significant effort being given to secure new construction jobs to improve the order book,” it added.

Shares of Lebtech closed unchanged at 75 sen on Friday (April 28), giving the group a market capitalisation of RM102.36 million.