KPMG questions KS Energy's ability to continue as a going concern

ENERGY services provider KS Energy's independent auditor, KPMG LLP, has expressed doubts over the company's ability to continue as a going concern.

It noted in its independent auditors' report that it has taken into account that the group incurred a net loss of S$53.9 million for FY2018 and, as at end-2018, the group's and company's current liabilities exceeded current assets by S$18.3 million and S$2.5 million respectively. The group and company also had deficits in shareholders' equity of S$10.3 million (excluding non-controlling interests) and S$11.7 million respectively.

Some S$31 million of the group's bonds are also subject to redemption through a proposed issuance of new shares to be approved by shareholders at an upcoming extraordinary general meeting. The group also has capital commitments of S$489 million at end-2018, and there are currently no financing arrangements put in place to meet the obligations.

"It is the intention of the group to continue to operate as a going concern. However, due to the above matters, there is significant doubt about the group's and the company's ability to continue as a going concern," KPMG said.

KS Energy has given various assurances of its ability to meet its obligations as and when they fall due within the next 12 months. But management has also acknowledged that there are uncertainties over the group's ability to generate the necessary cash flows to meet its debt obligations.

These uncertainties include the eventual conclusion and timing of execution of several rig charter contracts currently subject to ongoing negotiations with prospective customers, and the successful implementation of the financing and capital plans.

"If for any reason the group is unable to continue as a going concern, it could have an impact on its classification of assets and liabilities and the ability to realise assets at their recognised values and to extinguish liabilities in the normal course of business at the amounts stated in the financial statements," KPMG added.