Deep Woes For Silver Bird

From the EdgeMalaysia.

• Silver Bird’s woes come to light
  Written by Chua Sue-Ann
  Thursday, 01 March 2012 10:43
  
  KUALA LUMPUR: Bread and confectionery maker Silver Bird Group Bhd yesterday confirmed the suspension of three key executives with effect from Feb 24.
  
  They are managing director Datuk Jackson Tan Han Kook, executive director Derek Ching Siew Cheong and general manager of accounts and finance Lai Poh Mei.
  
  Silver Bird said the suspension of the trio was to facilitate an internal probe into allegations of irregularities in the company’s accounts.
  
  The announcement confirms The Edge Financial Daily’s report yesterday that Silver Bird’s board had suspended Tan and two other managers to facilitate the internal investigation.
  
  Silver Bird’s board said it is currently unable to ascertain the extent of the financial and operational impact of the alleged irregularities but estimates the maximum exposure to be approximately RM111.5 million.
  
  Additionally, Silver Bird’s board has lodged a police report in relation to the alleged financial irregularities and reported the matter to the regulatory authorities.
  
  Adding to its woes is the classification of the company as a PN1 and PN17 counter. In a filing with Bursa Malaysia yesterday, Silver Bird said it had triggered the PN17 criteria given that its auditors Crowe Horwath had expressed a disclaimer opinion on the group’s latest audited accounts for its FY11 ended Oct 31.
  
  Furthermore, Silver Bird’s major subsidiaries were in default of banking facilities repayments, with the group currently unable to provide a solvency declaration to Bursa.
  
  The three wholly-owned units in default are baked goods manufacturer Standard Confectionery Sdn Bhd, bakery goods and telecommunications products distributor Stanson Marketing Sdn Bhd and bread maker Stanton Bakeries Sdn Bhd.
  
  The three units were in default of a total of RM5.36 million in bankers acceptance facilities from three lenders, Bank Islam Malaysia Bhd, Malayan Banking Bhd and CIMB Bank Bhd.
  
  The bulk of the amount in default was incurred by Stanson Marketing, which owes RM4.42 million to its lenders.
  
  Ironically, Silver Bird’s substantial shareholders include pilgrim fund Lembaga Tabung Haji with a 22.19% stake, tycoon Tan Sri Vincent Tan Chee Yioun’s Berjaya Corp Bhd (20.53%), Koperasi Permodalan Felda Malaysia Bhd (12.7%) and venture capital fund CVC Ltd (9.07%).
  
  Tan is Silver Bird’s fourth largest shareholder with his 10.84% direct equity interest and has been at the helm of the group for over 10 years.
  
  Silver Bird explained that the issues were brought to the board’s attention when the auditors expressed concerns over the validity and recording of certain transactions.
  
  According to Silver Bird, its auditors had expressed concern on eight main issues including a RM10.6 million contract to refurbish an existing warehouse and factory, payments of RM69 million made to an equipment supplier and the common parties relationships between the group’s customers and suppliers.
  
  Silver Bird added that its auditors also raised issues with the group’s new sweetened creamers trading business segment, the audit trail of all sales transactions and revenue recognition in the telecommunications segment.
  
  Its auditors had also pointed out that the credit period for trade receivables appeared to be unusually high and that the cash collected and payment made were cleared by the banks after more than seven days from the balance sheet date, Silver Bird said.
  
  What’s next for Silver Bird?
  Now that Silver Bird is an affected listed issuer, it will have to submit a regularisation plan to the authorities, failing which its shares and warrants will be suspended from trading and subsequently delisted.
  
  Nevertheless, Silver Bird said it intends to formulate a regularisation plan to address its PN17 status.
  
  On the operations front, Silver Bird’s board had formed a special committee comprising its five non-executive directors to oversee the group’s operations in the interim.
  
  Silver Bird also announced that it had appointed PKF Advisory Sdn Bhd to conduct a forensic review into the company’s affairs.
  
  It also appointed Messrs Wong Kian Kheong as legal advisors and intends to form an inquiry committee to look into the investigation of Silver Bird’s group accounts.
  
  The forensic accountants and inquiry committee have three months from Feb 29 to complete their investigations.
  
  Silver Bird’s cash dwindles
  In a separate announcement yesterday, Silver Bird’s board said that it had reversed its earlier decision to change its financial year end, opting to maintain it at Oct 31.
  
  The group yesterday also issued its annual audited accounts for its FY11 ended Oct 31, 2011 in which its auditors expressed a disclaimer opinion.
  
  In its FY11, Silver Bird’s net profit grew 35.12% to RM4.93 million from RM3.65 million a year ago, while revenue rose 22.13% to RM232.06 million from RM190.01 million.
  
  As at Oct 31, 2011, Silver Bird’s cash and cash equivalents had plunged to RM3.55 million from RM21.32 million.
  
  In its audited annual accounts, Silver Bird’s board warned that there may be bad debts and additional allowances that may need to be made for impairment losses on receivables.
  
  Silver Bird’s shares and warrants will resume trading today after it was suspended from Feb 24 at the group’s request.
  
  Prior to its suspension, Silver Bird’s shares took its steepest plunge in over two months, falling 5.81% to 40.5 sen on Feb 24 from 43 sen a day earlier.
  
  
  This article appeared in The Edge Financial Daily, March 1, 2012.

I had posted on Silver Bird many times before. You can read them here:  Silver Bird