KUALA LUMPUR: The armed forces fund board (LTAT) said that there was no element of criminal intent when the retirement fund had discovered discrepancies with its accounts earlier.
LTAT’s chairman General Tan Sri Mohd Zahidi Zainuddin said that it has taken additional steps to strengthen the fund following this episode in hopes that it will not recur.
“It is not easy to face the press giving this type of announcement but I hope that for the FY2020 that I will be sitting here reporting better times, ” he said at a press conference earlier today.
LTAT reported an unaudited net profit of RM221mil for the FY18 ended Dec 31, a substantial decrease of 51.9% compared with the restated net profit of RM459.5mil for FY17.
It’s chief executive officer Nik Amlizan Mohamed said that there were several factors causing this decrease in net profit.
They were due to: a premature income recognition in FY16 and FY17 of RM238.8mil and RM202.7mil respectively, overpayment of dividends for both of those years, and this had impacted its retained earnings.
“The overpayment of dividends in the two years has impacted retained earnings which caused retained earnings for FY16 to nosedive from RM384.7mil to RM65.9mil. Retained earnings for FY17 further dropped to an accumulated loss of (RM170.8mil) from positive retained earnings of RM65.9mil previously, ” LTAT said in its press release.
It noted also that the high dividends which had been declared for FY17 by a number of subsidiaries were not paid in full and are still outstanding to date.
LTAT said it had also been negatively impacted by the implementation of the Malaysian Financial Reporting Standard which consequently resulted in an impairment amounting to RM116.7mil for FY18 including the impairment for a large investment totaling RM55mil and expected credit loss of RM61.5mil.
It added that there was also an impairment on BOUSTEAD HEAVY INDUSTRIES CORPoration Bhd of RM60.4mil.
Factors that caused the significant decline in LTAT FY18's results, according LTAT's press release:
1.Restatement of FY16 & FY17 accounts
LTAT was impacted by the qualified opinion issued by Jabatan Audit Negara (JAN) for its FY17 accounts. As a result, premature income recognition of RM238.8 million in FY16 from two uncompleted land sales resulted in the requirement to restate LTAT’s income for FY16 from RM595 million to RM356.2 million.
In addition, a premature income recognition of RM202.7 million due to two other uncompleted land sales in FY17 resulted in the income restatement for FY17 from RM662.2 million to RM459.5 million.
2.Overpayment of dividends for FY16 & FY17
LTAT’s five-year asset returns from FY14 to FY18 (after excluding one-off gains) were lower than the declared dividend rates which resulted in LTAT paying dividends at a rate that was higher than it could afford.
In FY16, the dividend paid was RM685.5 million against the restated income of RM356.2 million which signified an overpayment of dividend RM329.3 million. As for FY17, the dividend paid was RM686.8 million against the restated income of RM459.5 million which translated to an overpayment of dividend RM227.3 million.
3.Impact to retained earnings
Overpayment of dividend has impacted retained earnings which caused retained earnings for FY 16 to nosedive from RM384.7 million to RM65.9 million. Retained earnings for FY17 further dropped to an accumulated loss of (RM170.8 million) from positive retained earnings of RM65.9 million previously.
4.Negative impact from MFRS implementation
LTAT was also negatively impacted by the implementation of the Malaysian Financial Reporting Standard (MFRS) which consequently resulted in an impairment amounting to RM116.7 million for FY18 including the impairment for a large investment totaling RM55 million, and expected credit loss of RM 61.5 million. There was also an impairment on Boustead Heavy Industries Corporation Berhad of RM60.4 million.
5.Outstanding dividend from subsidiaries not received
High dividends declared for FY2017 by a number of subsidiaries were not paid in full and are still outstanding to date.