Red flag raised

Red flag raised

Auditors raise red flag on SSL Venture financial health

Wednesday, September 30, 2020

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The auditors of listed company, SSL Venture Capital Jamaica Limited formerly C2W Music Limited have raised the red flag regarding the company's financial health.

In its independent audit report on SSL's consolidated and stand-alone financial statements as at June 30,2020, chartered accountants, Baker Tilly cited a number of material uncertainty regarding the company, in particular its ballooning losses. The auditors hinted that the company is insolvent.

In its report, which accompanied SSL Venture Capital's consolidated financial statements as at June 30, 2020, Baker Tilly declared that, “the audit evidence we have obtained is sufficient to provide a basis for our opinion.”

The Kingston-based auditors in their report to shareholders drew reference to the mounting losses each year by the company and the SSL Group, particularly over the last two years. The losses for the group moved from $45.59 million in 2019 to $152.82 million for 2020, while the losses for the company climbed from $23.37 million in 2019 to $55.13 million for the period under review.

According to Baker Tilly, the group as at June 30, 2020 had an accumulated deficit of $319.54 million coming from $180.60 million in 2019, while the deficit for the company was $222.55 million in 2020 coming from $167.41 million in 2019.


The auditors stated that, “as at June 30, 2020, the group's current liabilities exceeded its current assets by $18,304,014 (2019: $97,732,899) and the company's current liabilities exceeded its current assets by $41,933,477 in 2019. This indicates the existence of material uncertainty that may cast significant doubt about the group's ability to continue as a going concern.”

Continuing, Baker Tilly emphasised that “until the group and the company are able to sustain profitable operations, they remain dependent on their ultimate parent (SSL Growth Equity Limited) for continued financial support. SSL Growth Equity Limited has indicated that it has the intent and ability to provide financial support to the group and the company for the foreseeable future”.

Baker Tilly identified as a key audit matter, the carrying value of the group's goodwill and intangible assets may not be recoverable due to changes in the business and economic environment in which the subsidiaries operate.

In concluding, the auditors noted that these factors create inherent uncertainty in forecasting and require significant judgement in estimating and discounting future cash flows that support the assessment of recoverability.

The Business Observer reached out to SSL Group Chief Executive Officer (CEO) Zachary Harding regarding the red flag raised by his company's auditors. He conceded to the concerns raised by Baker Tilly but highlighted that SSL Venture Capital and the group are actually improving.

Harding stated that the financial position has improved by $80 million, noting that “additionally, the company has been able to secure a moratorium on outstanding current debts over the last few months associated with reducing cash inflows directly resulting from COVID-19”.

He hinted that the financial position of both SSL Venture Capital and the group would have been much better had it not been for the global pandemic.

Harding made the point that, “The ultimate parent, SSL Growth Equity, will continue to support the company throughout the COVID-19 crisis affecting the environment as well as the industries the subsidiaries operate in, until they are able to become viable and sustainable.”

He declared that, “SSL Growth Equity has committed to supporting the company throughout the COVID-19 crisis, which has had a devastating impact on the entertainment industry, which Bar Central Ltd, the main operational subsidiary relies on.”z

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