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ASL Marine's independent auditor flags going concern doubts

ASL Marine Holdings' independent auditor has raised a "material uncertainty" about the group's ability to continue as a going concern, the marine and investment holding company announced on Friday. 

Auditor Ernst & Young (EY) highlighted that for the year ended June 30, 2019, the group incurred loss after tax of about S$145.9 million, with its current liabilities exceeding its current assets by S$20.8 million.

As at end June, the group's total borrowings, which included those of its subsidiaries, amounted to S$363.1 million, of which S$46.3 million were classified as current liabilities, while the company's total borrowings came up to S$173.3 million, with S$12 million classified as current liabilities. 

These factors indicate "material uncertainty" which may cast "significant doubt" on ASL Marine's ability to continue as a going concern, EY said. 

The independent auditor added that the industry in which the group operates "remains weak in terms of volume and margins", with poor demand for various classes of vessels in the chartering fleet, including offshore support vessels. 

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"This gives rise to financial statements risk, such as impairment of the group's vessels, as well as the determination of the net realisable value of finished goods, the recoverability of finance lease receivables, trade receivables and goodwill," EY explained. 

According to the independent auditor's report, amounts due from subsidiaries stood at S$259.3 million, while investments in subsidiaries were S$40.7 million as at June 30. The principal activities of these subsidiaries include vessel owning, and intermediate investment holding companies, EY said. 

However, the management and directors of ASL Marine believe that the company can continue as a going concern "for the foreseeable future", it said. 

Among other things, management noted that certain lenders have agreed to reschedule the group's existing loans, including a loan facility amounting to a face value of S$267.8 million as at June 30, with principal lenders granting revolving project financing, and trade lines of S$114 million for the subsequent financial year. 

In addition, the group had earlier in January this year received consent from noteholders to extend the tenure of its Series 006 and Series 007 notes by another five years to 2025 and 2026 respectively, with a reduced coupon at a base rate of 3 per cent per annum (pa), and a mandatory redemption rate at 1 per cent per annum, ASL Marine said. Its Series 006 and Series 007 notes have outstanding nominal value of S$92 million and S$46 million respectively as at Jan 30, 2019. 

Lastly, the group expects to generate adequate cash flows from operations to meet its working capital needs, and to receive continued financial support from lenders. 

In a separate filing with the Singapore Exchange (SGX) on Friday, ASL Marine flagged that it had racked up consecutive pre-tax losses for the three most recently completed financial years. As at Oct 8, its latest six-month average daily market cap stood at S$30.4 million, which is below the S$40 million threshold.

Thus, under the listing rules, the company will be placed on SGX's watch list under the financial entry criteria. 

As at 12.37pm on Friday, the counter was trading at four Singapore cents, down 2.4 per cent, or 0.1 cent.

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