Embattled Group Lease Plc (GL) yesterday reported a consolidated net loss of 2.61 billion baht in the third quarter because of reserves set up for potential losses on asset revaluation and fraud charges.
"The decrease in net profit was mainly driven by [setting aside reserves] for potential losses on revaluation of assets," GL said in a filing with the Stock Exchange of Thailand.
The company posted a net profit of 260 million baht in last year's third quarter.
GL's auditor, Sophon Permsirivallop of EY, said there was an accounts receivable value recorded this year from companies related to GL's former chief executive, Mitsuji Konoshita, of US$9 million (298 million baht), from which an additional loss provision was also set aside, bringing the total provision for losses from charges in the quarter ended Sept 30 to a total of $65 million.
"Due to the legal process not being finalised yet and my limitations as a professional auditor to further examine the status of the borrowings, I am unable to provide a conclusive figure on the value of debt that is recoverable," Mr Sophon said in the auditor report.
But the loss was partially offset by increases in interest income from GL's main businesses, the company said.
These include hire-purchase interest income, asset-backed loan interest income, microfinance interest income and interest income from consumer finance under joint financing arrangements.
Operating results improved from 76.1 million baht in consolidated income in the third quarter of 2016 to 102 million this year.
GL's share price has fallen steeply amid an ongoing regulatory scandal. GL is a digital finance company specialising in hire purchase for Japanese motorcycle brands.
On Oct 16, the Securities and Exchange Commission (SEC) filed a criminal complaint against Mr Konoshita with the Department of Special Investigation alleging fraud, misappropriation of company assets and falsification of accounting records by executing concealed transactions through several associated companies abroad to exaggerate the company's operating results.
The regulator uncovered evidence that Group Lease Holding Co Ltd (GLH), a subsidiary of GL based in Singapore, had issued loans to four registered companies in Cyprus and another in Singapore worth $54 million, with Mr Konoshita serving as the controller and ultimate benefactor.
After receiving the loans from GLH, the five debtor companies transferred the money within companies of the lender's group to repay the interest and principal to GLH in instalments, the SEC said.
The interest payments were recorded as income in GLH's financial statements, which constitutes fabrication of accounting records and exaggeration of operating results, according to the SEC.
An analyst who requested anonymity said that GL's huge loss is in line with how the company set aside loans related to Mr Konoshita's transactions and asset impairment of a subsidiary in Sri Lanka.
The analyst said the auditor provided details of the complex transactions of GL's loan to its Cyprus subsidiary, activity that caused the company's net loss in the third quarter.
GL's share price rose yesterday as investors expected performance to return normal this quarter, the analyst said.
GL shares closed on the SET at 8.15 baht, up one baht, in trade worth 517 million baht.
