Mara Inc’s Operational Flaws Result In Heavy Losses

According to the Auditor-General’s 2024 report released today, government-linked Mara Inc. has suffered RM286.30 million in losses due to inefficient business operations despite its efforts in property management.

The National Audit Department highlighted that overdue loans have significantly affected Mara Inc.’s current liabilities, preventing the company from distributing dividends to shareholders since its inception in 2014.

The report noted, “Mara Inc showed improved financial performance with a pre-tax profit of RM11.67 million for 2022, compared to losses in 2020 and 2021. This improvement was partly driven by gains from property investments recorded in 2022, resulting in a 3.8 per cent decrease in accumulated losses to RM286.30 million in 2022 compared to 2021.”

However, at the company level, Mara Inc. recorded shareholder deficits across the assessed periods, with RM115.73 million in 2022, RM114.06 million in 2021, and RM66.82 million in 2020. The adjustment of the intercompany balance of RM48.28 million significantly contributed to reducing accumulated losses in 2020.

The report explained, “The primary factors contributing to the shareholder deficits were the impairment of investment-related assets in subsidiary companies, intercompany balances, and trade creditors. This increase in deficits indicates the company’s operational struggles.”

Despite these issues, over the past three years, Mara Inc.’s total assets have consistently exceeded its liabilities by amounts ranging from RM23.32 million (8.7 per cent) to RM51.62 million (20 per cent). However, its current liabilities have been higher than its current assets, with ratios between 0.11 and 0.13.

The report warned that Mara Inc. might face challenges in meeting its financial obligations promptly due to insufficient financial resources. Current liabilities amounted to RM234.96 million, comprising 87 per cent of the total liabilities, including debts to Mara, Mara Corp, trade creditors, bank overdrafts, and taxes.

“Mara’s loans totalled RM190.60 million as of 2022, representing 81 per cent of the current liabilities. Cash and cash equivalents showed improvement, with Mara Inc holding RM0.74 million in 2022 compared to negative balances in 2020 and 2021,” the report added.

Overall, the report indicated that Mara Inc. did not fully adhere to five out of nine best practices in corporate governance, involving the chairman, board of directors, company secretary, company standard operating practices, and audit committee.

The report suggested that the Rural Development Ministry and Mara enhance overall monitoring of the performance of subsidiaries, including Mara Corp and Mara Inc. It also recommended that Mara Inc. review its objectives and main activities in profitable property management to benefit Mara Corp and improve the management and monitoring of property management agreements with tenants and operators to safeguard subsidiary interests.

“Mara should ensure corporate governance at Mara Corp and its subsidiaries aligns with best practices,” the report concluded.

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