KUALA LUMPUR (July 31): Key Alliance Group's (KL:KGROUP) external auditor has issued a qualified opinion over the group's share of profit from an associate company in the financial statements for the year ended March 31, 2026 (FY2026).

In the independent auditors report, Russell Bedford LC PLT noted that Key Alliance's share of profit after taxation  from the associate, Modern Falcon Sdn Bhd, amounted to RM1.64 million as reflected in the consolidated income statement.

Russell Bedford issued its qualified opinion after it was unable to verify the amount by obtaining sufficient appropriate evidence due to restrictions by the associate’s management and auditor.

Key Alliance’s share of profit in its consolidated income statement for FY2026 was RM487,000.

Key Alliance, in a bourse filing on Friday, said it has started engaging with the associate to secure access to management and accounting records, initiated independent verification procedures, and strengthened oversight mechanisms.

"Measures are being implemented to align reporting timelines, and the board is considering contractual safeguards to ensure timely and accurate reporting in future periods," it added.

The group said it expects to substantially complete the remedial measures prior to the issuance of its next annual report.

Russell Bedford, in its report, also reviewed Key Alliance’s subsidiary in the data centre and cloud services segment, Progenet Innovations Sdn Bhd, which has been persistently making losses.

This, the auditor noted, is an indication that an impairment might have occurred on the plant and equipment and right of use assets of the subsidiary as at March 31.  

The carrying amount (before impairment) of the plant and equipment and right of use assets were RM27.91 million and RM1.42 million respectively, Russell Bedford noted, adding: "Management has performed an impairment review and no impairment is required as the recoverable amounts of these assets are higher than their carrying amounts."

Key Alliance has been loss-making in eight of the past 10 years. For FY2026, the group’s net loss widened to RM19.04 million from RM14.46 million in FY2025, with revenue falling to RM6.11 million from RM9.92 million.

Key Alliance shares closed unchanged at seven sen on Friday, with a market capitalisation of RM8.6 million. Year to date, the counter is down 22.22%.