SINGAPORE (Nov 28): Hiap Seng Engineering before market open on Thursday called for a trading suspension, citing concerns over the group’s ability to operate as a going concern.

The 69-year-old company, which provides mechanical engineering services to the oil and gas, petrochemical and pharmaceutical industries, has fallen on hard times amid the industry downturn.

Shares in Hiap Seng closed flat at 2 cents per share on Nov 27 – a long way down from a recent peak of 19.2 cents in March 2017.

In its heyday, shares in Hiap Seng traded as high as $1.17 in July 2007. But now, it has been unable to escape from the Minimum Trading Price (MTP) watch-list.

The group had 36 months from its inclusion in the MTP watch-list on June 5, 2018, to turn its share price around.

With the deadline looming on Dec 4, 2019, Hiap Seng said in a regulatory filing on Wednesday that “having considered the critical factors such as the weak financial performance of the group against the current depressed market conditions, the board is inclined to defer any corporate actions at this point in time”.

For 2QFY2020 ended September, the group reported losses of $8.5 million, narrowing from losses of $22.3 million a year ago. This brings losses for 1HFY2020 to $10.6 million.

Singapore Exchange (SGX) on Monday had rejected the group’s application for an extension of time to announce its 2QFY2020 results.

Hiap Seng saw its turnover improve by 35.2% to $36.2 million during the quarter, but was unable to reverse out of the red as cost of sales continued to outpace revenue.

The group reported gross loss of $5.4 million and loss from operations of $9.4 million for 2QFY2020.

While the oil and gas industry is showing signs of improvement, the group says it continues to face a challenging operating environment with intense competition.

“The group has lost some new projects due to the fierce competition and its current financial position,” Hiap Seng said in a statement on its latest financial results.

As at end-September, the group’s current liabilities, including borrowings from banks of $32.2 million, exceeded its current assets by $30.1 million. Current assets stood at $46.6 million, while current liabilities stood at $76.7 million.

Part of the current liabilities comprised contract liabilities of $9.9 million which are invoiced to customers but has yet to be recognised as revenue.

In view of the current situation, the group says it is embarking on a restructuring and realignment exercise including the disposal of some of its assets.

The exercise is expected to free up cash, which is needed as working capital for existing projects, as well as for repayment to existing creditors.

The group says it has also undergone various costs-cutting measures such as reduction of its headcount and streamlining of its operating processes to improve efficiency and effectiveness.

The company has appointed a financial consultant to undertake a financial position review and viability assessment of the group.

“However, at this stage, the board is unable to conclude if the group can operate as a going concern,” the group said in a regulatory filing on Thursday.