KUCHING: Sarawak Consolidated Industries Bhd (SCIB) is expected to provide up to RM11mil for impairment of its investment in Sabah-based Carlton Gardens Sdn Bhd, which it has acquired.
Carlton Gardens owns an industrialised building system (IBS) factory in Beaufort district. The company became a wholly-owned subsidiary of SCIB following the completion of the acquisition in July 2017.
The additional provision came after Carlton Gardens appointed Wong Ching Yong as its interim liquidator as it “cannot by reasons of its liabilities continues its business.”
The directors of Carlton Gardens have made a statutory declaration to that effect under Section 440(1) of the Companies Act 2016 and notified SCIB on Jan 11.
“This is not expected to have material effect on the share capital of SCIB group, except for additional provision for impairment of investment in the subsidiary for up to RM11mil (including advances) that may affect earnings per share, gearing and net assets per share, subject to year end adjustment and auditor’s assessment for the financial year ending Dec 31, 2018.
“There is no material impact on SCIB group’s operating cashflow,” the company said in a recent filing with Bursa Malaysia.
SCIB bought Carlton Gardens for RM9.5mil from its shareholders – Gaya Belian Sdn Bhd, Brian Francis Ticcioni and Asgari Mohd Fuad Stephens (sellers) – under a conditional share sale agreement inked on Dec 28, 2016.
The sellers had given profit guarantee of not less than RM7.19mil from the completion date of the acquisition of Carlton Gardens to financial year ended Dec 31, 2018
The acquisition was paid by a combination of cash and 7.3 million new SCIB ordinary shares at 58 sen a piece.
Besides owning an interlocking block IBS factory, Carlton Gardens has been awarded a contract by Stone EPC (Sabah) Sdn Bhd (SEPC) for the supply and installation of interlocking blocks and associated structural and finishing works to SEPC for its project to construct 620 residential units with necessary amenities and infrastructure at Woodford Estate in Beauford.
Carlton Gardens has also secured work for the next 18 months for the Beaufort 1Malaysia People’s Housing Programme or Prima affordable housing project.
SCIB, which owns an IBS plant in Kuching, was using the acquisition of Carlton Gardens as a platform to expand to Sabah and to penetrate the latter’s residential sector of IBS supply and installation market where the government’s affordable housing programme offers significant opportunities.
About nine months after Carlton Gardens was acquired, SCIB issued a notice of termination of the SSA on April 19, 2018, citing a “breach” of contract by the sellers.
“SCIB’s solicitors were of the view that there is a breach by the sellers and SCIB has a cause of action for misrepresentation, hence SCIB is entitled to terminate the contract or void the contract for misrepresentation.
“As a result, SCIB was of the view that there is a good chance that all costs can be recovered,” the company had told Bursa Malaysia.
Following the termination, SCIB made several claims, including the sellers to refund the entire purchase consideration paid or advanced by SCIB, together with all the other monies paid by SCIB to the sellers or on the sellers’ behalf to any third party or parties pursuant to the said SSA. This includes payments made under four separate agreements: asset purchase, management, sub-contract and lease.
Another claim is for the sellers to re-transfer all the SCIB shares allotted to them as part of the purchase agreement.
SCIB’s IBS plant in Demak Laut Industrial Estate here is Sarawak’s largest that manufactures various prefabricated IBS components like hollowcore slab, wall panel, column and beam.
The group supplied IBS products for the reconstruction and extension of about 15 dilapidated schools in Sarawak in the past few years,and also other development projects.
SCIB has secured two contracts worth a combined RM10mil to supply IBS components to the on-going RM351mil Sarawak General Hospital redevelopment project and construction of Sungai Tapang School here.
According to general manager Chai Tze Khang, SCIB would bid for the supply of IBS components for the reconstruction of more dilapidated schools, construction of new schools and vocational schools across Sarawak. Last year, the Finance Ministry had announced RM1bil in allocation to fund the reconstruction of some 400 dilapidated schools in Sarawak, most of them in the rural areas.
SCIB group is principally engaged in the manufacturing of concrete products for supply to the construction and infrastructure sectors.
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