The auditor of Tse Sui Luen Jewellery (International) has issued a disclaimer over the accounts as the beleaguered retailer reported a $608.63 million net loss for the year to February 28. The auditor highlighted a $51.15 million 'deposit' paid to an unnamed potential business partner to help it expand in the mainland. The amount was paid to a minority shareholder of a subsidiary of the group, who was purported to be an agent for the potential partner. 'We were unable to obtain any evidence regarding the terms on which the deposit was made, including whether or not it is refundable,' the auditor said. It was unable to obtain written confirmation that the amount had been received and held by the potential business partner, or to determine the nature of the relationship between the group and the potential partner. As a result, it could not be satisfied the deposit was fairly stated as of February. Any adjustment to the figure would affect the company's net assets and net loss for the year, it said. In its opinion, the auditor also cited fundamental uncertainty over the company's future as a going concern. Tse Sui Luen Jewellery was in breach of certain financial covenants related to bank borrowings, and three bank creditors were demanding immediate repayment of $478 million, the auditor said. As a result, the company was dependent on the support of its banks. The company was in talks with bank creditors over a preliminary debt-restructuring plan but agreement had yet to be reached, it said. Total indebtedness stood at $900 million as of February 28. The company, which had made an attributable profit of $52.96 million the previous year, was hit by the property downturn in the financial year. It reported exceptional losses of $573.22 million stemming largely from deficits on revaluation of land and buildings, a loss on disposal of investment properties and provisions for loans receivable. Promotional sales of inventories caused a gross loss of $23.66 million. However, it made an operating profit from continuing operations before interest of $51.43 million, down from $213.25 million a year earlier. Turnover fell slightly to $2.42 billion from $2.59 billion previously. The basic loss per share was $1.58, against earnings per share of 14 cents the previous year. The company said it was off-loading non-core assets such as properties to reduce interest expenses. It had also closed certain retail outlets and non-profitable operations in Hong Kong and overseas, it said.