Ipco board confirms going concern opinion

The board of Ipco International has affirmed its view that the company can remain a going concern and that all material disclosures have been provided to the market.

Those statements came on Tuesday after the market closed in response to queries by the Singapore Exchange.

The independent auditor of Ipco, a diversified holding company, in its latest audit report raised questions about Ipco's ability to continue as a business, citing the company's net current liability position and a lack of evidence to support expectations of future cash flows.

Ipco's board said in its announcement that its view that the going concern assumption was valid was based on optimism about three subsidiaries.

The first is Capri Investments, a fully owned property development outfit in the Seattle and Tacoma cities in the US state of Washington. That subsidiary expects to market 261 lots this year, and has negotiated to put them up for sale for US$13 million in total. Capri's management expects to realise proceeds within six months of listing if the real estate market remains favourable, the board said.

The second subsidiary is indirectly 85 per cent owned Hubei Zonglianhuan Energy Investment Management, which has contracts to supply natural gas to four cities in the Chinese province of Hubei for an average remaining contract life of 20 years. Hubei Zonglianhuan, whose capital expenditures have been primarily financed through bank loans, has seen revenue and net profit growth, Ipco's board said.

The third subsidiary is 81.25 per cent owned semiconductor equipment supplier ESA Electronics, which the company said has secured S$5.5 million of bookings for the first quarter of 2018.

Ipco's board said that the company is also trying to place out S$1.6 million of new shares.

Ipco's auditor, BDO, in its audit report acknowledged Ipco's assumptions about its subsidiaries and the proposed share placement. However, "as we have not been provided with sufficient appropriate evidence supporting the key assumptions used in the projected cash flows, we were unable to assess if the use of going concern basis in the preparation of these financial statements is appropriate", the auditor wrote.

Ipco's board on Tuesday also noted that the company's China subsidiary had granted two parties capital representing 5 per cent indirect interest in Hubei Zonglianhuan under an employee share scheme without discussion with or approval from Ipco's board. BDO noted that the two parties are not employees and therefore not entitled.

Ipco's board said that the company is in advanced discussions to resolve the matter amicably.

Kenneth Lim

22 August 2017