Ireka warns of possible losses as it reverses decision to put unit under judicial management

• "Following the discontinuance of the Interim Judicial Management (IJM), the control on IECSB reverts to the company," Ireka explained. 

KUALA LUMPUR (Jan 12): Ireka Corp Bhd is giving a profit warning that its financials are expected to be dragged by the huge losses in its wholly-owned unit Ireka Engineering & Construction Sdn Bhd (IECSB) in the current third financial quarter ending March 31, 2023 (3QFY2023).

The reason is that Ireka Corp Bhd has decided to discontinue its application to place its loss-making unit under judicial management (JM OS), six months after it submitted the application in late July last year.

By doing that, it would be required to reconsolidate the financial results of IECSB in the third quarter ending March 31, 2023 (3QFY2023) if control of the unit remains with the company until then, according to the company's bourse filing.

"Following the discontinuance of the Interim Judicial Management (IJM), the control on IECSB reverts to the company," Ireka explained. 

Consequently, Ireka warned that the reconsolidation of IECSB's financials would result in a significant deterioration of the group’s financial position and results as the wholly-owned unit had been registering huge operational losses and substantial reduction in revenue for the past several years.

This will be in contrast to the whopping profit that it made in 1QFY2023 ended Sept 30, 2022. Ireka posted a net profit of RM173.3 million, or 82.98 sen per share, in the quarter compared to a net loss of RM14.89 million,  7.59 sen per share, a year ago. The large profit was due to the effect of deconsolidation of IECSB.

On Monday, Ireka announced to Bursa Malaysia that IECSB filed a notice to discontinue the JM OS in the High Court.

In the latest filing, Ireka noted that IECSB is not a major subsidiary of the company as defined under the Main Market Listing Requirements of Bursa Malaysia, adding that based on the audited financial statements as at June 30, 2022, the unit contributed 49.5% of the group’s revenue.

Ireka said it will continue discussions with its advisers to ensure the closure of the matter can be resolved expeditiously.

For the 15-month financial period ended June 30, 2022, Ireka incurred a net loss of RM185.07 million on revenue of RM124.85 million.