KUALA LUMPUR (April 29): Olympia Industries Bhd (KL:OLYMPIA) said its external auditor Messrs Ernst & Young PLT (EY) has issued an unqualified opinion with material uncertainty related to the group’s ability to continue as a going concern, as disclosed in the audited financial statements for the financial year ended Dec 31, 2024 (FY2024).

EY highlighted that as at end-December last year, the group incurred after-tax losses of RM13.58 million despite reporting net assets of RM323.05 million, and the company incurred after-tax losses of RM13.65 million despite reporting net assets of RM351.89 million.

The auditor also noted that the company has recorded consistent losses over the years, having posted consecutive annual losses since 2019.

Additionally, EY flagged a decline in the occupancy rate at Menara Olympia in FY2024, following the non-renewal of leases by certain tenants. Olympia Industries also reported negative net operating cash flows of RM13.8 million for FY2024.

As at Dec 31, the group’s current liabilities exceeded its current assets by RM42.2 million, EY said in Olympia Industries' filing with the stock exchange.

The group holds a secured term loan of RM110 million, with RM5 million due for repayment in 2025 and the remaining RM105 million due in August 2026. Olympia has been granted temporary indulgence from complying with the interest service coverage ratio covenant until Jan 1, 2026.

Should further indulgence not be granted, the group’s ability to comply with the loan covenant after Jan 1, 2026 will depend, among other factors, on improvements in market conditions for office leasing and management’s success in boosting tenancy rates of its investment property to return to profitable operations, said EY.

The group also holds unencumbered assets, including land held for development and completed inventories, which it plans to gradually dispose of to reduce its borrowings. However, EY cautioned that although the property market outlook remains stable, the group may not be able to liquidate these assets at full value within a short timeframe, if urgently needed.

Olympia Industries’ principal activities are investment holding and the provision of management services to its subsidiaries. Its business segments include leasing, property development, gaming, investment holding, and others. "Thus, the ability of the group and the company to continue as going concerns is dependent, among others, on the ability of the group’s subsidiaries to achieve profitable operations,” the auditor noted.

“These conditions indicate the existence of material uncertainties that may cast significant doubt on the ability of the group and the company to continue as going concerns,” EY said.

To address the material uncertainties raised in the auditor’s report, Olympia Industries said it has continued implementing various mitigation measures, including support for key tenants and suppliers through upgrades and improvements at Menara Olympia. These involve renovations and the replacement of essential machinery and parts, such as lifts, escalators, and mechanical and electrical systems, in support of its application for Malaysia Digital status certification.

The group is also intensifying its promotional efforts by offering attractive rent-free renovation periods, flexible renewal terms, and other incentives to retain existing tenants and attract new ones. At the same time, Olympia is continuing cost-cutting efforts, particularly in areas such as utilities, manpower, and other non-essential expenses.

Looking ahead to 2025, its gaming division will continue to seek regulatory approvals for new games and promote its “Sabah 88” brand.

In addition, Olympia has secured temporary indulgence from complying with certain financial covenants — namely the security maintenance margin and interest service coverage ratio — on its RM110 million secured term loan. This relief is valid until Jan 1, 2026.

To further strengthen its financial position, the group also plans to dispose of selected unencumbered assets, including land held for development and completed inventories, to gradually reduce borrowings. These disposals will depend on achieving acceptable pricing, with management mindful of the currently soft property market.

“The board and the management have identified that the group must improve its revenue, manage operational costs efficiently, strengthen its cash flows through better collections and dispose of some of its non-core assets in order to focus on its core business activities to ensure its sustainability,” said Olympia Industries.

“Barring any unforeseen circumstances, the group expects a timeline of 12 months from the date of this announcement in addressing the uncertainties on going concern issue of the group,” it added.

Shares of Olympia Industries closed unchanged at six sen on Tuesday, valuing it at RM61.4 million.