How will VNE get away from HoSE's control and warning?

VNE was placed under supervision and issued a warning after failing to submit audited financial reports for two years in a row and receiving a qualified opinion on the 2023 audited consolidated financial statements.

In a written explanation outlining a roadmap to address the warnings and control status, VNE stated that the 2023 audited financial report had been disclosed on April 11, 2024. The interim consolidated financial statements for Q1 and Q2/2024 have been prepared and disclosed on time as per regulations.

Additionally, the company has recently contacted clients to reconcile and confirm debts, as per usual practice. VNE has proactively reached out to, urged, and monitored customers through traditional channels by sending debt confirmation letters via mail, email, and other methods (Zalo, Viber, phone) to verify the existence of receivables and payables. For cases where customers cannot be contacted, VNE will continue to monitor receivables and payables according to accounting records as required.

Regarding measures and a roadmap to resolve the controlled stock status, VNE assured that it will timely disclose the reviewed financial statements for the first half of 2024, as well as Q3, Q4, and the 2024 annual financial statements, adhering to the deadlines. VNE also plans to continuously improve its information and data update system, from VNE to its subsidiaries, to ensure timely and effective financial reporting.

Furthermore, VNE aims to enhance the management capabilities of the personnel authorized to manage the capital in various units, as well as the financial accounting team from the parent company to the subsidiaries, to improve management effectiveness. The company intends to strictly comply with securities, accounting, auditing laws, information disclosure governance regulations, and other relevant laws. VNE is actively coordinating with the auditing firm to complete the audited financial statements promptly to ensure timely and accurate information disclosure.

Concerning the resolution of the warning status, VNE emphasized its ongoing efforts to proactively contact and urge clients through traditional channels by sending debt confirmation letters via mail, email, and other methods (Zalo, Viber, phone) to verify the existence of receivables and payables. Once contact with clients is established, VNE will proceed with debt reconciliation as usual. For cases where clients cannot be contacted, VNE will continue to monitor receivables and payables according to accounting records as required.

Earlier, in early August, VNE received a notice from the People’s Court of Da Nang regarding the acceptance of a bankruptcy filing against VNE due to its failure to promptly pay nearly 7 billion VND related to a cooperation deal with Song Da 11 JSC (HNX: SJE).

VNE explained that the company and SJE had signed a construction contract for Package 6, constructing the 500 kV transmission line connecting the Nghi Son 2 Thermal Power Plant to the national grid, with a settlement value of over 37 billion VND.

VNE has paid and offset more than 30 billion VND of debt, leaving nearly 7 billion VND unpaid, including overdue debt of nearly 4.4 billion VND and retained money of 8% awaiting payment of nearly 2.7 billion VND. The retained cash will be paid by the investor after the project settlement is approved.

According to VNE, since General Director Tran Quang Can received the decision to step down from the Board of Directors, he has yet to hand over the documents and procedures related to payment, debt settlement, and other issues during his tenure.

Therefore, the VNE Board of Directors has requested the Supervisory Board and the relevant departments to review each project that has been implemented or is in progress, along with the related documents and procedures, to ensure transparency and objectivity in business operations. This has led to delays in payments to various contractors.

The company further stated that it is continuing to settle its debt with SJE and will complete the payment soon after the review of the data and debt.

VNE, a major business in the electrical construction sector, has previously received good ratings from financial firms for its prospects, owing to Vietnam's strong demand for new construction and high-voltage transmission line and substation maintenance. After Power Plan 8 was authorized, the need for upgrading power grid infrastructure is estimated to account for approximately 11% of the overall capital requirement of the power industry from 2021 to 2030, equivalent to 1.48 billion USD per year.

The 500 kV third circuit transmission line project (Quang Trach - Pho Noi), with a total investment of 23 trillion VND, is being accelerated by regulatory authorities and is projected to begin in the last months of 2023 and finish in June 2024. MBS Securities believes VNE will gain from this project, which is now in the building phase.

However, in recent years, VNE's business results have been consistently declining, even resulting in losses. Specifically, VNE reported a loss for 2023. In the first half of this year, the company recorded 261 billion VND in revenue, half of what it achieved in the same period last year. Consequently, VNE continued to suffer a loss of 66 billion VND in the first six months of 2024, compared to a profit of more than 500 million VND in the same period last year.

VNE reported that some projects are still experiencing site clearance challenges and delayed payments from investors, which are causing delays in payments to contractors and material and equipment suppliers. As a result, VNE has been unable to speed construction in order to complete the job on time for investors, resulting in a significant decrease in overall income. Furthermore, a large increase in financial expenditures has added to the company's losses.