KUALA LUMPUR (July 31): Avillion Bhd’s (KL:AVI) external auditor has flagged material uncertainty that would affect the hotel-and-travel company’s ability to continue as a going concern.

Messrs Baker Tilly Monteiro Heng PLT drew attention to a net loss of RM5.55 million at the group level, and RM6.81 million at the company level for the financial year ended March 31, 2024 (FY2024), even as Avillion’s hospitality and travel businesses operate at full capacity.

That indicates “the existence of a material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as a going concern,” the auditor said on Wednesday. “Our opinion is not modified in respect of this matter.”

“Going concern” is an auditing term to describe a company that has enough resources to remain solvent. An auditor may raise a going concern warning, if there are doubts over whether it could continue its operations into the foreseeable future.

Avillion is mostly known for its chain of luxury hotels and resorts in Port Dickson, Melaka, Kuang, Janda Baik and Kuala Lumpur, as well as in Bali. The company also has travel and property development businesses.

Avillion’s ability to continue as a going concern will be dependent on, among other matters, its efforts to further improve the occupancy and revenue of the hotel division, and the disposal of low- or non-yielding land bank, according to its annual report also released on Wednesday.

“In the event that these are not forthcoming, the group and the company may be unable to realise their assets and discharge their liabilities in the normal course of business,” the auditor said.

In response, Avillion said the preparation of the financial statements of the group and of the company on a going concern basis remains appropriate, as it believes business operations are gradually returning to pre-pandemic levels.

This is not the first time Baker Tilly raised doubts about Avillion’s prospects. In late July 2023, Baker Tilly noted that Avillion had incurred net losses of RM5.4 million at the group level, and RM4.84 million at the company level for FY2023.

In July 2022, Baker Tilly also cited a net loss of RM9.1 million at Avillion’s group level and RM10.96 million at the company level for FY2022.

The largest shareholder is Datuk Md Wira Dani Abdul Daim, the son of former finance minister Tun Daim Zainuddin, who holds a 21.82% stake through Ibu Kota Developments Sdn Bhd and Daza Holdings Sdn Bhd.

In January of this year, Avillion and 23 of its subsidiaries were listed among the 71 assets in the Malaysian Anti-Corruption Commission’s (MACC) charge sheet against Daim, who is accused of failing to declare his assets to the anti-corruption body.

Avillion has been suffering losses between FY2016 and FY2024. For FY2024, it widened its net loss to RM5.9 million, from RM4.76 million in the same period a year earlier.

As of the end of March 2024, its total borrowings amounted to RM83.53 million, of which RM36.6 million were short-term borrowings.

Shares of Avillion were unchanged at 5.5 sen at the time of writing on Wednesday, giving it a market capitalisation of RM62.33 million.