This printed article is located at http://koon.listedcompany.com/chairman_statement.html

Chairman's Statement

Extracted from Annual Report 2019

"The Group has also received expression of interests from various potential investors on possible restructuring exercises. The ability of the Group and the Company to continue as a going concern is also dependent on the successful implementation of the corporate restructuring exercise."


Dear Shareholders,


RESTRUCTURING AND REALIGNMENT

The Company and its subsidiary, Koon Construction & Transport Co. Pte. Ltd. ("KCTC" and together with the Company, the "Applicants") have appointed Tan Kok Quan Partnership as their legal advisor and RSM Corporate Advisory Pte Ltd as their financial consultant and Scheme Manager to advise on strategies for restructuring the debts and liabilities of the Applicants so that the Group may continue as a going concern.

On 8 October 2019, applications were filed with the High Court of the Republic of Singapore ("Court") pursuant to section 211B of the Companies Act (Cap. 50) ("Act") to obtain an order, amongst other things, that no legal action or proceedings against the Applicants be commenced or continued against the Applicants for a period of 90 days from the date of the order to be granted ("Moratoria"), except by leave of the Court and subject to such terms as the Court may impose.

On 7 November 2019, the Applicants were granted Moratoria until 28 February 2020 to propose the schemes of arrangement to their creditors pursuant to section 210(1) of the Act ("Schemes"). The Moratoria have since been extended to 30 April 2020 on 3 January 2020, and further extended again to 30 June 2020 on 6 May 2020, to allow the Applicants sufficient time to put the Schemes in place.

The proposed schemes of arrangement to be made between the Company and its creditors (the "KHL Scheme") and between KCTC and its creditors (the "KCTC Scheme"), are necessary to address the various debt obligations owed by the Applicants to their respective creditors.

Pursuant to section 210 of the Companies Act, a scheme would be binding on the creditors of the company if a majority in number (over 50%) representing at least three-fourths (75%) in value of the creditors in every voting class, voting in person or by proxy, voted in favour of the scheme at the scheme meeting. Alternatively, the scheme meeting would be adjourned if the abovementioned proportions of the company's creditors voted for an adjournment.

Both the KHL Scheme meeting and KCTC Scheme meeting were held on 25 February 2020. The KHL Scheme meeting was adjourned after a major creditor's request for adjournment, as it would like to be provided with more information. The KCTC Scheme was approved by a majority in number representing at least three-fourths in value of the creditors present and voting at the KCTC Scheme meeting.

At the adjourned KHL Scheme meeting held on 27 March 2020, the KHL Scheme was approved by a majority in number representing at least threefourths in value of the creditors present and voting.

As both the Schemes have been approved by the Scheme creditors, applications will be filed with the Court to obtain the sanction required for the implementation of the respective Schemes.

The Group recognised a net loss of S$95.1 million for the financial year ended 31 December 2019 and, as of that date, the Group's current liabilities exceeded its current assets by S$45.7 million. As at 31 December 2019, the Group's total loans and borrowings and lease liabilities amounted to S$39.0 million, of which S$35.4 million were classified as current liabilities and exceeded the Group's cash and bank balances of S$0.8 million. The Group and the Company have deficiency in net assets of S$34.2 million and S$35.5 million, respectively as at 31 December 2019.

These factors and the challenging conditions affecting the construction and precast sectors in Singapore indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. Notwithstanding the above, the directors are of the view that it is appropriate to prepare the financial statements on a going concern basis.

The ability of the Group and the Company to continue in operation in the foreseeable future and to meet their financial obligations (both short term and long term) as and when they fall due is dependent mainly on:

  1. the Court sanctioning the Schemes;
  2. the successful implementation of the Schemes;
  3. the Group's ability to secure funding as and when required;
  4. the profitability of future operations of the Group; and
  5. the continuing support of financial institutions, suppliers of goods and services and all other stakeholders.

The Group has also received expression of interests from various potential investors on possible restructuring exercises. The ability of the Group and the Company to continue as a going concern is also dependent on the successful implementation of the corporate restructuring exercise.

The financial statements of the Group and the Company have been prepared on a going concern basis, which assumes that the Group and the Company will continue in operation at least for a period of twelve months from the reporting date. This means that the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary if the Group and the Company are unable to continue in operation in the foreseeable future. Should the going concern assumption be inappropriate, adjustments would 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 could differ significantly from the amounts at which they are recorded in the balance sheet. In addition, the Group and the Company may have to provide for further liabilities that may arise, and to reclassify non-current assets and noncurrent liabilities as current assets and current liabilities, respectively.

The amount of assets and liabilities currently recorded in the accounting records of the Company and its subsidiaries, including amounts recoverable from or payable to group companies, are based on claims and payables which have arisen in the ordinary course of business. It is currently difficult to assess and estimate, with any degree of certainty, the amounts at which the assets will ultimately be realised or recovered, and the amounts at which liabilities should be recorded, owing to the uncertainties caused by the current difficult operating conditions and the ongoing restructuring of the Group.

The directors consider that different possibilities regarding the future exist and that the differing outcomes can cause the financial statements as at 31 December 2019 to be materially different from what is currently presented in these financial statements. The directors also consider that there are no practical means available to resolve such difficulties in the preparation of these financial statements for the financial year under review. In this respect, the directors are of the opinion that, notwithstanding these difficulties, the preparation of these financial statements on a going concern basis provides sufficient information to serve the interests of all stakeholders who may read these financial statements.

BUSINESS OUTLOOK

The Building and Construction Authority estimated the total construction demand in 2020 to range between S$28.0 billion and S$33.0 billion, comparable to the S$33.4 billion awarded in 2019. Of this amount, public sector projects are expected to account for about 60% of total construction demand.(1)

As at 31 December 2019, the Group's Construction division have outstanding order books of approximately S$43.8 million.

The construction division continue to face a challenging operating environment, with intense competition and increased costs. This is exacerbated by the Group's tight liquidity which has resulted in higher costs and disruption to our various projects.

The restructuring and realignment exercise included the sale of its noncore business, namely the Property and Electric Power Generation division. Nonproductive or idling plant and equipment have also been progressively disposed or have been scheduled to be disposed. These will free up cash which is needed as working capital for existing projects as well as for repayment to existing creditors.

In addition, in order to return to profitability and improve operating cash flow, the Group has also undergone various costs-cutting measures such as reduction of its headcount and streamlining of its operations to improve efficiency and effectiveness.

IN APPRECIATION

We would like to take this opportunity to thank our Board of Directors ("Board"), management and staff for their hard work and contributions throughout the past year. Special thanks go to the legal advisors, corporate advisors and the Scheme Manager who work tirelessly on the restructuring and execution plans. On behalf of the Board, we would also like to express our gratitude to our customers, business associates, financial institutions and partners, for their continued support.


Yours Sincerely,

ANG SIN LIU

Non-Executive Chairman

  1. (1) "Singapore's construction demand for 2020 expected to remain strong", BCA, 8 January 2020

Please read our General Disclaimer & Warning carefully.
Use of this Website constitutes acceptance of the Terms of Website Use.
Copyright © 2021. ListedCompany.com. All Rights Reserved.