Maxwell’s actual loss 30% higher than first reported; PN17 triggered

Maxwell International Holdings Bhd chairman and executive director Jenny Li Kwai Chun (left) and executive director & chief executive officer Xie Zhen'an told a press conference after the company's listing ceremony on Jan 6, 2010.

KUALA LUMPUR: Maxwell International Holdings Bhd has fallen into the Practice Note 17 status after external auditor Baker Tilly Monteiro Heng expressed a disclaimer of  opinion in its audited financial statements for the financial year ended Dec 31, 2015 (FY15).

The China-based sports shoe manufacturer on Tuesday announced an audited net loss of RM65.16mil for the year, a deviation of 30.95% or RM15.4mil from the unaudited loss after tax and minority interest of RM49.76mil it had earlier reported.

Among the reasons for Baker Tilly’s disclaimer of opinion is that Maxwell was unable to provide complete supporting documents for the RM57.25mil advertising and promotion expenses incurred by subsidiary Maxwell (Xiamen) Co Ltd, whose office had ceased operations.

In addition, Baker Tilly said, the management of Maxwell’s subsidiary Jinjiang Zhenxing Shoes & Plastics Co Ltd was unable to provide the relevant information and supporting documents on its placement of RM337.21mil with asset management company Jinjiang Jin Chuang Private Capital Management Co Ltd (Jin Chuang).

The auditor was also unable to get sufficient and appropriate audit evidence on the completeness of the liabilities that might arise from legal suits filed against Maxwell’s subsidiary Jinjiang Zhenxing Shoes & Plastics Co Ltd and Maxwell president and executive director Li Kwai Chun on certain loan contracts. (Li, however, said the loan dispute involved herself only as a personal guarantor, not the subsidiary.)

In a separate filing with Bursa Malaysia, Maxwell explained the deviation of more than 10% between the audited and unaudited financial statements for FY15.

Of the RM15.4mil variance, the single biggest contributor was “directors’ other emoluments” of RM4.66mil. This refers to the payment of salary to Li for “services rendered to the group since the IPO listing in 2011 to 2015, as the president and executive director of the group did not receive any salary previously.”

The other items behind the variance were adjustments for impairment and write-off of items made due to Maxwell’s exit from the fashion retailing business. The company said that business “provides less synergistic and smaller value-added growth to the group’s overall long term development plan.”