Maxwell International Holdings Bhd chairman and executive director Jenny Li Kwai Chun (right) and Chief financial officer Tan Swee Song told a press conference after the company's listing ceremony on Jan 6, 2010.
KUALA LUMPUR: Ferrier Hodgson MH Sdn Bhd is unable to verify and prove that sports footwear maker Maxwell International Holdings Bhd had benefitted from the 92.4 million yuan (RM64.62mil) which is said to have been spent by its unit Maxwell (Xiamen) Co Ltd for billboard and LED signboard advertising in China.
The auditor has given to Maxwell’s board its report on the six advertising contracts signed between Maxwell Xiamen and six contractors, and Maxwell in turn attached a copy of the report’s executive summary in a filing with Bursa Malaysia on Tuesday.
According to the executive summary, Ferrier Hodgson MH had launched a search of the six advertising contractors (similar to the company searches made with the Companies Commission of Malaysia) and found that two of these companies “were not in existence” while one was no longer operational.
Ferrier Hodgson MH noted that it hade made requests to the Maxwell International group’s management for assistance in arranging meetings with the said six contractors. However, the management said since the last 10% of the total 102.65 million yuan contract sum had not been paid to the contractors, its relationship with the contractors had gone sour. This meant it was unlikely that the contractors would agree to such a meeting.
Ferrier Hodgson MH was also unable to visit any of the 390 sites in China where the billboards were to have been erected. The billboards were said to have been dismantled in October last year -- prior to the auditor’s appointment in December -- for non-payment of the remaining 10% of the consideration.
The management’s reason for not paying the remaining 10% was that the advertising activities were not “positively contributing” to the sales of Maxwell Xiamen.
Ferrier Hodgson MH asked Maxwell International chief financial officer Tan Swee Song for actual on-site photographs of all the 390 billboards erected at the various sites before they were dismantled.
Tan, by email, forwarded 53 jpeg files which purportedly showed images of billboards of the relevant products being advertised.
“We had further conducted examination on the JPEG files particularly with respect to the properties and details of each of the JPEG files which suggests that the JPEG files have been created under Adobe Photoshop programme,” Ferrier Hodgson said.
To recap, in its results announcement to the exchange last November, Maxwell International’s management said higher ad expenses was the main reason for the higher “selling and distribution expenses” which contributed to the group’s net loss of RM45.925mil in the nine-month financial period ended Sept 30, 2015.
Then, in February this year, director and audit committee member Lee Chong Hoe resigned. In the boardroom change filing with Bursa Malaysia, he noted concerns over the ad spending disclosed in the Q3 2015 results for which “management has yet to provide satisfactory justification”.
Maxwell International subsequently disclosed that it had on Dec 18, 2015 -- on the recommendation of the audit committee -- approached Ferrier Hodgson MH to commission an extended scope of audit on the ad expenditure in addition to the normal audit.
In a separate announcement to Bursa on Tuesday, the company said it was still waiting for the legal advice/opinion on any potential litigation claims from its lawyers in China on a loan dispute involving its president and executive director Li Kwai Chun.
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