The pre-tax loss for the year ended 31 March 2014 of RM670m stands in sharp contrast to its pre-tax profit of RM878 in the previous financial year – a swing of some RM1.5bn.
Half of this swing came about because 1MDB’s finance cost shot up to RM2.4bn from RM1.6bn the previous year. In previous years, profits were made simply because land banks were revalued.
The loss this year came despite revenue rising 64 per cent from RM2.6bn last year to RM4.3bn this year.
Meanwhile, 1MDB’s debt grew from RM36bn to RM42bn.
The group claimed the higher finance cost was due to “its strategy to grow the assets base”.
Indeed, assets rose from RM45bn to RM51bn. But how much of this RM51bn consists of surpluses on revaluation of land sold (cheaply?) by the goverment to 1MDB, and does this RM51bn include the “goodwill” paid on 1MDB’s purchase of power assets? Does this include the funds in the Cayman Islands?
1MDB maintains it has “strong cash and cash equivalents reserves of RM16.7 billion”. (Does this include the RM7bn parked in the Cayman Islands? Opposition politicians had reportedly claimed that these funds were being managed by an obscure Hong Kong firm.)
Since March 2014, 1MDB said RM4bn (60 per cent of the RM7bn) had been “redeemed” from its “investments in Segregated Portfolio Companies registered in Cayman Islands” with a dividend of RM435m also received. The balance (40 per cent) is expected to be fully redeemed by November 2014.
1MDB Managing Director and CEO Mohd Hazem Abd Rahman said: “We have maintained our focus on growing the company’s asset base and investment capacity. This has been driven by significant capital expenditure in the short-term, which has resulted in an expected loss this financial year due to an increase in borrowings, but we are confident that the high quality nature of the assets acquired and projects secured will drive the business forward and ensure its growth in the long-term.”
Are you convinced?