KUALA LUMPUR (Oct 27): Practice Note 17 (PN17) company Khee San Bhd has reported that its auditor has expressed a qualified opinion on its financial statements as at the financial year ended June 30, 2023 (FY2023), due to material uncertainty related to its ability to continue as a going concern.

In a filing, Khee San said that its external auditor Messrs Kreston John & Gan noted that the candy and sweets manufacturer had incurred accumulated losses of RM204.81 million at the group level, and RM113.67 million at the company level during FY2023. Furthermore, current liabilities exceeded current assets by RM128.49 million at the group level, and RM4.98 million at the company level.

“[This] thereby indicates the existence of a material uncertainty, which may cast significant doubt on the group’s and the company’s ability to continue as a going concern,” the auditor stated.

According to the auditor’s report, Khee San submitted a regularisation plan to Bursa Securities on July 18, 2023, which included a scheme of arrangement aimed at addressing the financial condition of both the group and the company.

“[Khee San] believes that the regularisation plan, once implemented after obtaining the approval of relevant regulatory authorities, will enable the group and the company to generate sufficient cash flows to meet their obligations and continue sustainable and viable operations.

“[There is also] continuous financial support provided by substantial shareholders to the group and the company to meet their obligations.

“However, we have not been able to obtain sufficient appropriate audit evidence regarding the ability of the group and the company to successfully implement the regularisation plan, as it has yet to be approved by the relevant regulatory authorities,” the auditor added.

However, the auditor said the financial statements of the group had been prepared on a going concern basis, the validity of which is dependent on the above-mentioned regularisation plan and continuous financial support.

The substantial shareholders of Khee San are Datuk Seri Ngu Tieng Ung, through his vehicle Timur Enterprise Sdn Bhd which holds a 16.67% stake or 22.88 million shares, followed by Ng Meng Kee with 12.42% or 17.05 million shares, and Koh Chee Meng with 6.27% or 8.6 million shares.

“As at the date of this report, we have not been able to obtain sufficient appropriate audit evidence regarding the ability of the group and the company to successfully implement the regularisation plan, as it has yet to be approved by the relevant regulatory authorities.

“Should the going concern basis for the preparation of the financial statements be no longer appropriate, adjustments will have to be made to state the assets at their realisable values, and to provide for further liabilities which may arise,” the auditor said.

Khee San, meanwhile, said: “Barring any unforeseen circumstances, the group expects to resolve the issues relating to the material uncertainty related to [its ability to continue as a] going concern within the next financial year.”

As of the time of writing on Friday (Oct 27), shares in Khee San remained unchanged at 15 sen, giving the company a market capitalisation of RM20.59 million.

This article has been amended for accuracy.