Recently there are much news about the financial irregularities in the public listed Air cargo operator Transmile Group Bhd. This is startling as the major shareholders are Robert Kuok Group and Khazanah. The chairman of Transmile is none other than the ex transport Minister Ling Liong Sik.
The Board of Director informed that Moores Rowland Risk Management Sdn.Bhd  who was appointed by the Board to lead a special audit concluded in its first interim report on May 25:

• Transmile may have overstated its profits for the year 2005 and 2006. Instead of a profit, there should be a recorded a pre-tax loss of RM126 million in 2006 and RM77 million for year 2005.
• Transmile’s group overstated some RM333 million in revenue for the financial year ended December 31 2006, and RM197 million for the year ended December 31 2005.
• The final numbers on profit before tax are subject to changes because the special audit and the statutory audit for the financial year ended December 31 2006 were ongoing. It also does not take into account tax implications.
• The said RM333 million overstatement for financial year 2006 came from invoices that were issued and recorded for services to 20 companies.
• Based on the unaudited consolidated financial statement as at December 31 2006, the trade receivables from the 20 companies totalled RM236 million.
• Of the 20 companies, 18 were those identified by Messrs. Deloitte & Touche, the auditors that spotted the irregularities, while Moores Rowland spotted another two.
• For financial year 2005, Moores Rowland found that invoices were issued to 19 companies for purported services. The names of the companies were not revealed in the report.
• The report also did not shed any light on the circumstances of the overstatement.

Incidentally prior to the above, in early May 07, the external auditor Deloitte & Touche wrote to the Transmile’s management informing them that:

• they were unable to obtain supporting documents from the management to satisfy it as to the fairness of the trade receivables and related sales to 18 companies.
• they were unable to obtain satisfactory supporting documents for purchases of property, plant and equipment which amount was correspondingly credited to the unpaid balance owing by the 18 companies identified by Deloitte & Touche.

Reported in the Star that Transmile spokesman said the company has no plans to hold a press conference following yesterday’s announcement.
Prior to this announcement, Transmile has been severely criticized by public investors for its inapt handling of the case whether in terms of:

• its response to the case eg by immediately holding a press conference after it raised concerns over the reliability of its unaudited results for the year ended December 31 2006.
• Transmile has also not yet come out with a statement on who is responsible for this oversight.
• Transmile’s four-day-long suspension of trading of its securities which will cause further anxiety among shareholders

All in all, Transmile’s inaction or delay to response quickly to the public reflected very  poor investor relations which the capital market cannot afford to tolerate. It also shows that the company’s directors are afraid to face the public and have something to hide