Clearer picture of 2GO accounting issue emerges
Logistics giant 2GO Group Inc. released its complete restated financial documents going back two years on Tuesday, showing, among other items, that the company was technically under default on some loans after applying changes in the way certain assets were accounted for under its previous auditor.
The release of added data prompted the Philippine Stock Exchange (PSE) yesterday to lift a two-day trading suspension on 2GO’s shares by Wednesday.
The development, nevertheless, revealed a clearer picture on the implications of a restatement of 2GO’s financials—including a big write-down in the company’s receivables—that were sought by its new owners, led by SM Investments Corp. and businessman Dennis Uy.
The special audit, conducted by SyCip Gorres Velayo & Co., showed that 2GO failed to meet key measures required under some of its loan agreements. It was referring to the current ratio and maximum debt-to-equity ratio as of end-March 2017 and end-December 2016.
The restatement caused the company’s long-term debts amounting to P3.17 billion and P2.7 billion in those respective years to be reclassified from non-current liabilities to current liabilities, meaning they were due in the next 12 months.
“However, the group has not received a notice of default from its creditors and the group continues to pay the long-term loans based on original credit terms,” 2GO said.
According to its audited results in the first quarter of 2017, its current long-term debt had ballooned to P3.9 billion from P92 million. The bulk of the debt is owed to the Sy family’s BDO Unibank Inc.
The unraveling issue emerged Friday after 2GO’s new owners said they tapped SGV & Co. to audit the company’s recent financials with the goal of “establishing accountabilities.”
The special audit led to a restatement of the company’s financial records from 2015 to 2016, which were previously audited by KPMG. The company’s local partner, R.G. Manabat & Co., stood by its audit, according to a statement this week.
Among the findings in the SGV audit were differences in 2GO’s equity, which stood at P3.66 billion in the first quarter of 2017. Previously, its equity was stated at P6.59 billion, a difference of 80 percent.
2GO’s profit was adjusted lower by almost P1 billion to P330 million in 2016 and P97 million in 2015. It reported a net loss of P265.8 million in the first quarter of 2017.
SGV’s review covered major items such as how 2GO books revenues and the recoverability of trade and other receivables. For the latter, SGV said 2GO had trade and receivables amounting to P3.86 billion in the first quarter of 2017 after removing “doubtful accounts” of P1.46 billion.
“We considered the recoverability of trade and other receivables as a key audit matter because the determination of the allowance for doubtful receivables involves significant management’s judgment and estimations,” SGV said.
