LCL Hit With 334 Million Losses!

LCL reported its earnings. It wasn't pretty!

Flashback:

In the posting, More Comments On LCL, I highlighted LCL's receivables.

• Trade receivables - 221.436 million
  Amount due from customers for contract works - 154.107 million
  Amount due from related companies - 41.641 million

Assuming and having faith that all these receivables are in order, I would be concerned which of these figures are from its work done in Dubai.

As the sum is rather substantial and with Dubai World current debt issue, surely one has to ask if the debts cannot be collected. And if they cannot be collected, these debts would have to be re-classified as bad debts, which would equate to losses.

And last but not least, given LCL's current financial position, can LCL afford any more delay in its collection of debts?

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Company said the following in its notes:

• Compared to the cumulative preceding year corresponding quarters, the Group’s revenue decreased by 33.3% to RM309.8 million as compared to RM465.0 million previously recorded. This is mainly due to the lower progress billing for most of the on-going Dubai projects which are close to completion by 4th quarter 2009. The Group has also recorded a loss before taxation of RM392.2 million as compared to profit before taxation of RM4.2 million as compared to the preceding year quarter. The losses were mainly attributed to the delay in the projects resulting in cost overrun arising from the prolongation of projects, additional costs incurred in down-sizing our operations in Dubai, ie retrenchment, logistics and pre-mature termination of accommodation arrangement, impairment of assets, writing down of contracts (work in progress) and allowance of doubtful debts.

From the company's balance sheet:

113 Million in provision of doubtful debts and 170 million write down of contracts!

And this again highlights why the trade receivables are so important. When the receivables snow balls so high, it usually means the company has a problem in collection of debts and when collection of debts cannot be made, provision is a must and the company earnings will be hit big time!

So how deep in trouble is LCL now?

Total loans is still high at 398.464 million!

And here are LCL's current asset.


The amount due from customers for contract works is now wiped clean to just 87 thousand as LCL wrote down some 170 million worth of contract works. Receivables are still high at 121 million.

Company's cash flow.

LCL paid some 24 million in financial costs!

How?


Do you think LCL can make it through this extremely tough patch?

On Star Business: LCL posts higher loss on lower progress billings

• Wednesday February 24, 2010
  
  LCL posts higher loss on lower progress billings
  
  PETALING JAYA: LCL Corp Bhd incurred a sharply higher net loss of RM334.72mil for its fourth quarter ended Dec 31 from a net loss of RM17.39mil in the previous corresponding period.
  
  Revenue for the quarter fell to RM66.11mil from RM115.89mil previously while basic loss per share was 233.85 sen against a loss of 12.15 sen before.
  
  For its financial year ended Dec 31, the company had a net loss of RM393.35mil compared with a net profit of RM9.35mil previously while revenue for the period fell to RM309.83mil versus RM464.98mil.
  
  In a filing with Bursa Malaysia yesterday, the company said the results were mainly due to lower progress billings for most of its ongoing Dubai projects.
  
  “The losses were mainly attributed to the delay in the projects resulting in cost overrun arising from the prolongation of projects and additional costs incurred in downsizing our operations in Dubai,” it said.
  
  LCL Corp said its classification as a PN17-status company, and the appointment of a receiver and manager to LCL Furniture Sdn Bhd, a major contributor to its operations, “had severely hampered the operations of the group on an ongoing concern basis.”
  
  “The board of directors is of the view that without the meaningful recovery of our debt from our customers and the success of the debt-restructuring scheme with all our lenders and creditors, the prospects of the group remain uncertain,” it said.
  
  Due to the fallout from the Dubai financial crisis, LCL Corp, which has several projects there, has been struggling to recoup its outstanding bills from its Middle East customers.
  
  As at Dec 31, it said the group had credit facilities from financial institutions totalling RM455.27mil which are guaranteed by LCL Corp.
  
  Accordingly, LCL Corp was contingently liable to the extent of credit facilities utilised by the subsidiary companies amounting to about RM269.67mil, the company said.