What should the auditor note?
Data shows that last year, Novaland recorded net revenue of more than VND 11,134 billion, down 25.3% over the same period in 2021. Profit after tax reached more than VND 2,181 billion, down 36.8% over the previous year. The company completed more than 33% of the profit plan.
Compared to its own report, the revenue of this real estate giant did not change much but after-tax profit decreased by 111 billion VND.
Explaining the difference in after-tax profit, Novaland said it was due to a decrease in revenue compared to the same period.
Regarding the financial statements, PwC Auditing Company emphasized that although it did not give an exception opinion, it reminded readers of the significant impact of the real estate market and corporate bond liquidity on the business operations of this enterprise. The audit also mentioned that Novaland had violated a number of commitments to loan and bond contracts.
"The assumption of the group's continued operation depends on the group's ability to repay or restructure maturing loans and bonds, as well as implement other solutions to generate cash flows to finance the group's business activities as presented in Note 2.2.
These conditions, as well as the other matters set out in Note 2.2, indicate the existence of material uncertainties that may cast significant doubt about the group's ability to continue as a going concern," the auditors said.
Auditor's opinion on Novaland's consolidated financial statements (Screenshot).
Confident business continuity
Specifically, regarding the above-mentioned explanation, the enterprise said that the bond market in 2022 will face many difficulties, with increasing bank interest rates, decreasing investor confidence and domestic market liquidity, and investors' cautious sentiment in the face of uncertainties and negative prospects for the world's economic and political situation and the influence of information on the bond market. Novaland acknowledged that these impacts cause many difficulties and challenges in short-term cash flow management.
The consolidated financial statements have been prepared on a going concern basis, assuming that the Company will be able to pay or restructure its debts as they fall due and will generate sufficient cash flows to fund its normal operations for the foreseeable future. The Company has made six assumptions regarding its going concern operations.
First, releasing deposits that are being restricted by banks. As of December 31, 2022, the company has VND5,537 billion that is being restricted by lending banks. The company said that as of the date of the consolidated financial statements, it has reached an agreement with banks to release VND2,498 billion. The remaining amount is under discussion and Novaland's leaders believe that an agreement will be reached with the remaining banks.
Second, issue shares to increase capital. The company said it will issue 1.95 billion NVL shares to existing shareholders. The amount of VND19,500 billion will be used to restructure debt, pay salary expenses and invest in projects. In addition, the company plans to issue 975 million shares through private placement, expected to raise VND9,750 billion.
Third, restructuring debt and bond debt. As of December 31, 2022, the total debt and bond debt of the enterprise is VND 64,869 billion. As of the reporting date, the company has paid VND 1,985 billion of principal debt. The remaining principal debt is being negotiated for extension or will be partially paid by liquidating some assets owned by related parties. Some creditors have agreed to extend the maturity of the debt or receive payment in other assets.
Fourth, corporate restructuring. The company is undergoing a comprehensive restructuring, with the advice of professional units, to improve its financial health and focus more on core business areas.
Fifth, specific measures of the Government to support the recovery of the real estate market.
Sixth, financial support from major shareholders. Novaland said it received a commitment of financial support from Nova Group Joint Stock Company.
On March 27, this major shareholder registered to sell 38 million NVL shares. The transaction is aimed at balancing the investment portfolio and supporting debt restructuring. The transaction is expected to be carried out from March 30 to April 28 by negotiation and order matching.
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