ASL Marine: Auditor cites material uncertainty over going concern

Singapore five-dollar note Photo by Leslie Shaffer

ASL Marine Holdings’ auditor, Ernst & Young LLP, has cited a material uncertainty over the ability of the group to continue as a going concern in the auditor’s report on the fiscal 2021 financial statements, ASL Marine said in a filing to SGX Wednesday.

The auditor’s report noted ASL Marine posted a loss after tax of around S$36.90 million for the fiscal year ended 30 June 2021, and that the group’s current liabilities exceeded its current assets by S$609,000.

In addition, the group’s total borrowings amounted to S$328.63 million, of which S$43.61 million was classified as current liabilities, exceeding the group’s cash and cash equivalents, the auditor’s report said.

“These factors indicate the existence of a material uncertainty which may cast significant doubt on the ability of the Group and the Company to continue as going concern,” the auditor’s note said. “The ability of the group and the company to continue as going concern is dependent on the ability of the group to generate sufficient cash flows from operations and receive continued support from the lenders.”

If those sources don’t eventuate, the group and company may be unable to discharge their liabilities and adjustments may be needed to reflect a situation where assets may need to be realised at amounts which could differ significantly from the amounts they are currently recorded at in the financial statements, the auditor’s note said.

The auditor also noted ASL Marine’s business segments have remained weak in terms of volume and margins, further aggravated by the Covid-19 pandemic, giving rise to the risk of impairment to the group’s vessels, as well as the determination of the net realisable value of completed vessels and the recoverability of finance lease receivables and trade receivables.

In response, ASL Marine said the group believes it can continue as a going concern for the foreseeable future.

“The group is able to generate sufficient operating cash flows from operations to meet its working capital needs. This is supported by positive earnings before  interest, tax, depreciation and amortisation (ebitda),” ASL Marine said. “For the past two years, the consolidated net cash flows generated from operating activities have been positive, and the group has been meeting all its short-term obligations. The availability of the working capital banking facilities secured since August 2019 from its principal lenders provides the group with short term trade financing when needed.”

ASL Marine said its controlling shareholders remain supportive with the injection of funds during the company’s last two fundraising exercises in 2016 and in 2019, as well as providing an unsecured and interest-free loan of S$6.62 million in 2017, which is still unpaid.

“The board is of the opinion that the company and the group will be able to continue as a going concern, and therefore, trading of the company’s shares should not be suspended,” ASL Marine said, but it advised shareholders and potential investors to exercise caution in dealing with the shares.

ASL Marine is a marine services company, mainly in shipbuilding, ship repair and conversion, marine vessel chartering, marine engineering and related services.

Read ASL Marine’s filing to SGX.