Independent auditor issues disclaimer of opinion on Vibrant's FY2019 financials

THE independent auditor for logistics player Vibrant Group has issued a disclaimer of opinion on the firm's financial statements for FY2019.

KPMG explained that it has not been able to obtain sufficient and appropriate audit evidence to provide a basis for an opinion on these financial statements.

Among other things, KPMG noted that it identified irregularities and discrepancies in relation to certain invoices and receipts during its audit of Blackgold Group for the financial year ended April 30, 2018. 

Blackgold is a Chinese coal miner owned by mainboard-listed Vibrant. 

According to a bourse filing by KPMG on Thursday, "the accounting records of Blackgold were destroyed in a fire incident" in August last year. 

In addition, in a report by the company's investigating auditors, KPMG noted that there were "multiple potential material misstatements" in the financial position of Blackgold as at its acquisition on July 13, 2017, and in Blackgold's financial results for the period up to April 30, 2018.

Accordingly, KPMG said it was not able to complete its audit procedures, as it was unable to obtain sufficient and appropriate audit evidence over the account balances of Blackgold, as well as the transactions of Blackgold from the date of its acquisition till April 30, 2019. 

Moreover, Vibrant's management has not consolidated the balances and transactions relating to Blackgold in the group's consolidated financial statements for FY2018 and FY2019, KPMG said. As a result, the auditor said it is unable to determine the extent of adjustments necessary with regard to the group's consolidated financial statements for the years ended April 30, 2018 and April 30, 2019. 

In a separate regulatory filing on Thursday, Vibrant highlighted "certain reclassifications and material differences" between the group's audited and unaudited financial statements for FY2019. 

Figures from the group's audited financial statements show that net profit attributable to owners of the company for the financial year ended April 30 came in at S$7.7 million, up from S$5.6 million previously recorded in its unaudited financial statements, representing a difference of about S$2.1 million, or 37 per cent. 

While revenue remained the same, share of profit from its associates, net of tax surged to S$11.1 million in its audited financial statements, from just S$270,000 in its unaudited financial statements. Vibrant credited the variance to fair value gain on an investment property held by its associate Ececil. Nonetheless, this profit was partially offset by the share of loss from China Southwest Energy Corporation, as a result of the impairment loss on receivables, Vibrant said. 

Income tax expense stood higher at S$8.3 million in its audited financial statements, versus S$6 million recorded in its unaudited statements. The company attributed the S$2.3 million increase in expenses to "deferred tax liabilities from the temporary differences recognised by its subsidiaries".

Furthermore, there were also differences between its audited and unaudited financial statements due to the reclassification from "other income" and "other operating expenses" to "impairment loss on trade and other receivables", Vibrant noted. 

BT previously reported that Blackgold appeared to have falsified accounts and grossly inflated sales figures since the day it was acquired, causing Vibrant to report false financials in a possible breach of Singapore listing rules.

Blackgold's management may also have recorded fictitious mining fees from subcontractors prior to the acquisition by Vibrant in July 2017, suggesting that the false accounts date back to the time when it was still listed on the Australian Securities Exchange.

These findings were released in a special audit report by EY Advisory on Jan 24. EY commenced a probe into Blackgold's records in August last year, after auditors from KPMG discovered irregularities in the receipts and sales invoices arising from the coal mining and coal trading businesses carried on by some Blackgold units.

Subsequently in June, Vibrant said it was in discussion with relevant parties to evaluate the disposal of Blackgold.

As at 11.45am on Thursday, Vibrant shares were trading at 15.5 Singapore cents, up 3.3 per cent, or 0.5 cent.