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Nam Cheong says can still operate as going concern despite auditor report
OFFSHORE vessel builder Nam Cheong Limited on Thursday said it is still able to operate as a going concern, despite its independent auditors reporting that they cannot conclude whether the group can be assessed on a going concern basis.
The auditors, Foo Kon Tan LLP, said Nam Cheong's statements for the financial year ended Dec 31, 2018 were prepared on a going concern basis, premised on a key assumption that there are no claims from creditors, primarily the Non-Fujian Group Shipyards.
In assessing whether the group can meet its debt obligations as and when they fall due, Nam Cheong's management prepared a cash flow forecast of the group for at least the next 12 months from the end of the reporting period.
But the auditors said they were unable to obtain sufficient evidence for certain key assumptions supporting the cash flow forecast related to the 15 shipbuilding contracts that the group had directed the shipbuilders to suspend the construction thereon.
In response to queries from the Singapore Exchange, Nam Cheong said the auditors were unable to obtain sufficient evidence because negotiations with the subcontracted shipyards are ongoing.
It believes that it is able to restructure the debt obligations of the contracts based on recent discussions and the working relationship of more than five years with these subcontracted shipyards, as well as its experience and track record in concluding the settlement arrangements for the shipbuilding contracts for 48 vessels with other subcontracted shipyards.