How auditor raised alarm bells about Walton Construction
WALTON Construction in April reported losses of $14.569m for the 2011-12 financial year during which it had accepted intellectual property it valued at more than $4m as part repayment of a loan made to the Walton Family Trust.
The auditor GMK Partners' Antony Barnett raised issue with the value of the intellectual property valuation saying he had been unable to obtain sufficient appropriate audit evidence whether the attributed value was appropriate.
There appeared to be no doubt that the company was in deep financial trouble and had been for a considerable period of time.
The auditor noted that at the end of the 2011-12 financial year Walton's liabilities exceeded current assets by $5.58m and there was a $5.88m balance sheet asset deficiency.
Compounding its problems in a Part 2 financial report lodged with ASIC in April this year, Mr Barnett noted that Walton had incurred further losses of $6.905m according to unaudited management accounts for the eight months from July 1, 2012, to February 28 this year.
The company had also breached borrowing covenants it held with the banks.
Mr Barnett noted that the ability of the company to continue as a going concern was dependent on the resumption of profitable trading and it achieving a number of objectives.
However he made his doubts clear about its ability to do so.
"Were the company to lose the support of its financiers and that of a related party entity this may indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern,'' he wrote.
Mr Barnett, who resigned as Walton auditor in May, did not respond to the Daily's request to comment further.
Meanwhile sub contractors engaged on Walton projects in three states continued to expose themselves to liability for worker wages and materials.
Dave Reynolds the director of Coffs Harbour-based air conditioning business Faircloth and Reynolds which supplied and fitted systems for the Nambour Coles project said there had not been a hint of financial trouble until two weeks before Walton was placed in administration.
"We had to chase their Melbourne office for money,'' he said. "They said they would release it in the next few days but gave no reason for the delay.
"During the past three months they had become very difficult to deal with and argued over who should bear the cost of variations. In the four to six weeks before the store opened they were trying to change contract terms.''
What annoys Mr Reynolds is that he was sent contracts in August relating to the Masters Hardware store at Parkinson near Ipswich, when Walton must have known its situation.
"They had us spending money knowing they couldn't pay us,'' he said.