KUALA LUMPUR (June 16): Practice Note 17 (PN17) group Bintai Kinden Corp Bhd, which acquired Johnson Medical International Sdn Bhd for RM50 million via a cash and share deal in 2021, has decided to call on the profit guarantee provided by the vendor after the unit reported a loss based on its unaudited results for the financial year ended March 31, 2023.

The mechanical and electrical engineering services provider said this in a bourse filing on Friday (June 16), after announcing that the share sale agreement and deed of profit guarantee it inked with the vendor Yeo Eng Lam (YEL) on April 28, 2021, remained valid and effective.

This was because it had decided to rescind the new agreements it inked with Rinani Care Sdn Bhd in end 2022 that would release and discharge YEL from further obligations to meet the profit guarantee as well as a trade receivables guarantee.

Bintai Kinden entered the new agreements with Rinani — an agreement to release, a new deed of profit guarantee and escrow, and a consultation agreement — after the latter agreed to assume YEL's role in providing Bintai a fresh profit guarantee and to appoint a new stakeholder to substitute YEL due to YEL's health issue at the time.

Prior to this proposed variation for Rinani to assume YEL's role in the profit guarantee, YEL had guaranteed and undertaken that Johnson Medical  would achieve a profit after tax of an aggregate amount of RM9.1 million by July 31, 2023.

"The board of directors of Bintai wishes to announce that the company had decided not to proceed with the proposed variation and therefore, there is no circular to shareholders to be issued.

"The board also wishes to inform that the company had decided to rescind the new agreements which [were] entered [into] with RCSB and therefore, the share sale agreement and deed of profit guarantee entered with YEL on 28 April 2021, are still valid and effective.

"In addition, the board has also decided to recall the profit guarantee of RM9.1 million from YEL due to Johnson Medical International Sdn Bhd reporting a loss result based on the unaudited report for the financial year ended March 31, 2023," Bintai Kinden's bourse filing on Friday (June 16) read.

The group incurred a net loss of RM51.99 million for its FY2023 compared to a net profit of RM4.27 million for FY2022, despite a significant increase in revenue to RM115.86 million from RM96.26 million, as it recorded "extraordinary costs" in its fourth quarter, including the further impairment of its concession receivable on a project related to financing from MBSB Bank Bhd, and a default payment.

Bintai Kinden has been making headlines since it fell into PN17 status in March after its subsidiary defaulted on a RM109 million financing facility.

This was followed by the resignation of three directors about a month ago — namely its then non-executive chairman Datuk Ibrahim Othman, executive director Noor Azri Noor Azerai, and non-executive vice/deputy chairman Ong Choon Lui — and its announcement that it was investigating some former directors, though it named no one.

It only disclosed that the scope of the probe included examining unauthorised trading of shares, potential insider trading, involvement of other directors or former company secretary, and the overall effectiveness of the group's corporate governance controls.

Shares in Bintai Kinden closed half a sen or 6.25% higher at 8.5 sen on Friday, for a market capitalisation of RM75.92 million.

On Thursday, Bintai Kinden ceased to be a substantial shareholder of Genomics Resource Centre Bhd (MGRC) after selling off 1.82 million shares.