Listed Companies' Announcement
NH CERAMICS LTD
EMPHASIS OF MATTER BY AUDITOR ON FINANCIAL STATEMENTS
The Directors of NH Ceramics Ltd (the "Company"), pursuant to Rule 704(5), wish to inform an emphasis of matter stated in the Auditor's Report of the Company for the financial year ended 30 June 2004 which is reproduced below:-
Auditor's Report to the Members of
NH Ceramics Ltd and Subsidiary Companies
We have audited the financial statements of NH Ceramics Ltd (the "Company") and its subsidiary companies (the "Group") set out on pages 19 to 44 for the year ended 30 June 2004. These financial statements are the responsibility of the Company's Directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Without qualifying our opinion, we draw attention to Note 2 to the financial statements. As at 30 June 2004, the Group's current liabilities exceeded its current assets by $617,631 and the Group experienced negative cash flows during the year.
The ability of the Company and the Group to continue as going concerns is dependent on several factors, which inter alia include: -
(i) the profitability and cash flows of the Group over the next twelve months; and
(ii) the Group continuing to receive support from financial institutions in relation to the banking and credit facilities made available to the Group.
The validity of the going concern assumption on which the financial statements are prepared depends on the successful outcome of the factors set out above which cannot be determined at present. If the Group is unable to continue in operational existence for the foreseeable future, adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which may differ significantly from the amounts at which they are presently recorded in the balance sheets. In addition, the Group may have to reclassify non-current assets and liabilities as current assets and liabilities respectively. No adjustments have been made to these financial statements.
In our opinion,
(a) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act (the "Act") and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2004 and the results, changes in equity and cash flows of the Group for the financial year ended on that date; and
(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiary companies incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
ERNST & YOUNG
Certified Public Accountants
Singapore
14 September 2004
"Note 2 to the financial statements":-
2. Basis of presentation
The financial statements have been prepared on a going concern basis. As at 30 June 2004, the Group's current liabilities exceeded its current assets by $617,631 and the Group experienced negative cash flows during the financial year.
The ability of the Company and the Group to continue as going concerns is dependent on several factors, which inter alia include: -
(i) the profitability and cash flows of the Group over the next twelve months; and
(ii) the Group continuing to receive support from financial institutions in relation to the banking and credit facilities made available to the Group.
The validity of the going concern assumption on which the financial statements are prepared depends on the successful outcome of the factors set out above which cannot be determined at present. If the Group is unable to continue in operational existence for the foreseeable future, adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which may differ significantly from the amounts at which they are presently recorded in the balance sheets. In addition, the Group may have to reclassify non-current assets and liabilities as current assets and liabilities respectively. No adjustments have been made to these financial statements.
Comments by Directors on emphasis of matter by Auditor on Financial Statements are as follows:-
The Group has commenced business programmes to improve the operating performance and financial position of the Company and the Group:-
The operating subsidiaries of the Group are Nam Huat Tiling & Panelling Co Pte Ltd ("NHTP"), Nam Tat Pte Ltd ("NT") and Living Elements Pte Ltd ("LE").
NHTP, established in 1963 and currently in its 42nd year of operations, is a major supplier, stockist and distributor of ceramic and marble tile products and other building finishing materials to public and private sector projects & retailing to renovation contractors and homeowners.
NT, which commenced full operations in January 2004, is a distributor and supplier of economy ranges of ceramic tiles directly to interior design & renovation contractors in Retail residential and office renovations.
LE, which commenced full operations in February 2004, is a 'Design & Renovate' firm specialising in home and office renovations and refurbishments.
The Group, in view of weak but improving market conditions, whilst maintaining tight project management controls in fulfillment of contracts, began to reassert our Project bids for material supply contracts for new developments, which are expected to be secured by the financially stronger Contractors emerging from the shake up in the Industry.
The Directors are pleased to report that, despite weak results from low turnover for FY2004, NHTP has succeeded in reversing the decline in Project Orders, recorded over the past 24 months, with an increase in the Project Order Book as at the end of FY2004. This should be indicative of a better turnover over the coming months.
The Group expects improvements to its turnover and profitability for the current financial year, as demand for building finishes is anticipated to pick up from the doldrums of the past two years, against a significantly much improved business environment resulting from the fall out of competing firms.
The Group has also reviewed operational and financial policies and strategies, with new emphasis in maintaining an asset-light operating capability and further enhancing revenue capabilities.
Financial consolidation and re-structuring include disposal of fixed assets or investments which weigh heavily on the working capital and resources of the Group. An investment property of the Group had already been sold for $1.22 million during FY2004, with a marginal profit on disposal, thereby reducing Group bank borrowings. Other disposals of surplus or less efficient fixed assets would continue to be effected during the current financial year. The Directors expect the financial position and cash flow of the Group to be improved during the current financial year.
The Principal Bankers have continued their support of the Group, including an additional $0.7m temporary overdraft facility ("TOD") which was granted in March 2004. The TOD was scheduled to be repaid in monthly instalments between June – October 2004. The Group has duly repaid the earlier instalments as scheduled, with the final instalment to be made on 30 October 2004. The Directors do not anticipate any obstacle in clearing the TOD as scheduled.
By Order of the Board
Submitted by Ricky Paul Goh Moh Chye, Managing Director on 22/10/2004 to the SGX