ATA Ims which had its lucrative Dyson contract terminated is looking to downsize its plant and hostels catered specifically for the job in order to reserve its cash flow as it seeks new clients.
The group’s sales of products arms Jabco, generates approximately 100% of its revenues from Dyson while WSP generates 82% of the revenue from the vacuum maker. Collectively both represent approximately 42% of the Group’s revenue for the 6 months ended 30 September 2022.
Profit before tax for Jaboco was RM33.9 million to the Group’s Loss before tax of RM10.8 million, while WSP contributed a loss before tax of RM4.9 million. The Company estimates that the financial impact arising from the termination could be to have Dyson purchase back all stocks used amounting to approximately RM60 million and to ensure all stocks can be cleared before 31 March 2023 when the termination takes effect.
An impairment test of the goodwill on consolidation of RM76.4 million, discounted cash flow and sensitivity test will need to be performed on the new projection with the termination of the customer contract. ATA Ims says the net book value of Property, plant and equipment which are currently used for Dyson is estimated to be approximately RM80 million. It adds that the management is in the process of identifying the property, plant, and equipment that were acquired specifically for the orders of the customer and which could be subject to impairment, and also to identify those assets that can be modified and used for other customers’ orders or for new business opportunities.
It is also working with the customer and suppliers to identify any purchase orders raised by the Company for materials and components that are non-cancellable for delivery dates beyond 31 March 2023. ATA is also affected due by the termination of contracts, certain tenancy agreements for leasing of the production plant, warehouse and hostel may need to be reviewed for downsizing purposes.
“We are in process of estimating the write-down of right-of-use of assets as a result of the early termination of tenancy agreements Other than the above, the Company’s management team is still studying thoroughly other foreseeable areas of concern.”
The company has net current assets amounting to RM439 million, and cash, less borrowings of RM90 million, and says it will be able to meet its financial obligations when they become due. However, it said will need to undertake further downsizing and cost-cutting measures, and step up efforts to secure new customers and new business opportunities in response to the termination of contracts to ensure sustainability.
