THE Singapore Exchange Regulation (SGX RegCo) will look into potential listing-rule breaches by GS Holdings and refer the matter to relevant authorities, after an independent review of the company flagged lapses in its handling of its branding, operation and procurement (BOP) business.

 

The review also noted potential breaches of directors&rsquo fiduciary duties.

 

GS Holdings&rsquo audit and risk committee had appointed Deloitte to conduct the independent review, after its statutory auditors subjected the company&rsquo s FY2020 financial statements to a disclaimer-of-audit opinion over issues surrounding the BOP business.

 

In March 2019, Wish Hospitality Holdings, a GS Holdings subsidiary, entered into a master service agreement with Henan Jufeel Technology Group.

 

Under the agreement, Wish was to provide BOP services to outlets, which were to be secured for it by Henan Jufeel.

 

By May 2019, agreed service fees with the outlets amounted to 50 million yuan (S$9.7 million) per quarter. In FY2019, the BOP business contributed to a majority of the group&rsquo s revenue and was its only profitable business segment.

 

But in FY2020, GS Holdings&rsquo statutory auditors subjected the company&rsquo s FY2020 financial statements to a disclaimer-of-audit opinion, as a significant amount of BOP service fees were outstanding.

 

The group claimed that 100 million yuan of BOP services fees were received and held in its bank account in China.

 

But the auditors believed that these should continue to be classified as outstanding trade receivables. This was in view of an encumbrance on the monies, which cast doubts on the group&rsquo s recourse to the receipt.

 

By August 2021, the business was terminated, as it was adversely affected by the Covid-19 situation in China.

 

The independent review, released on Friday (Apr 14), identified several issues with the company&rsquo s diversification into and management of the BOP business and collection of BOP fees.

 

It highlighted that the management did not meet conditions for diversification set by the board. The board had required management to conduct due diligence &ndash including site visits to investigate traffic and operations and desktop due diligence on contracting parties &ndash on all the BOP outlets before entering into service agreements.

 

The company also did not adequately conduct legal and financial due diligence on relevant parties before diversification, the review found.

 

Although the management considered the investment value of S$400 as not being substantial, Deloitte said that due diligence was still warranted, as the investment value does not reflect the risks of the new business, and the associated legal risk and contractual obligations.

 

The review also flagged a lack of management control and supervision over the BOP business and inadequate control over bank accounts.

 

In addition, it found that the BOP business lacked governing internal policies and procedures, such as the onboarding of new outlets, the monitoring of its operations and the performing of customer credit assessments.

 

It also inaccurately represented the terms of the master service agreement on the Singapore Exchange, announcing that the securing of 200 outlets was on a best-effort basis, when Henan Jufeel was in fact required to assign and secure at least 200 outlets. This was among other inaccuracies in GS Holdings&rsquo exchange filings relating to the BOP business.

 

SGX RegCo said: &ldquo Where investigations indicate any breaches of the listing rules, SGX RegCo will proceed to take disciplinary actions against the culpable parties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A DISCREPANCY worth S$3.7 million in losses was found in the audited FY2021 financial results for GS Holdings, which the company said was accrued for an impairment loss on outstanding branding, operations and procurement services in China.

 

This additional provision comes in view of the longer period and higher frequency of lockdowns in China, which adversely affected the businesses of the branding, operations and procurement outlets in the country. Prior to this, the company also made a full-year provision of S$7.6 million for impairment loss on the entire outstanding branding, operations and procurement services earlier in December 2021.

 

Further, GS Holdings also issued comments on the disclaimer of opinion released by its existing independent auditors, in a bourse filing on Tuesday (Jul 5).

 

In an independent auditor&rsquo s report dated Jun 30, the auditors issued a disclaimer of opinion on 2 matters.

 

One concerned the company&rsquo s revenue recognition and bank balance of S$20.47 million with an encumbrance and trade and other receivables arising from branding, operations and procurement services the other on a reclassification of 100 million yuan (S$20.8 million) from cash and cash equivalents to other receivables as amount due from Zhang Rongxuan, non-independent and non-executive chairman of the group.

 

GS Holdings said it has &ldquo taken the necessary actions to resolve the above audit issues during the preparation of the financial statements for FY2021&rdquo , including the reclassification of the S$20.47 million received from cash and bank balances to other receivables.

 

Further, the group also said it will not be recognising the   branding, operations and procurement services income earned during the financial year as it &ldquo does not meet the criteria in accordance with SFRS(I) 15 Revenue from Contracts with Customers&rdquo .

 

On the pending funds from Zhang, GS Holdings said Zhang has informed the board that he has earmarked &ldquo certain funds&rdquo and was expected to transfer 100 million listed shares to the company by Jun 15 and an additional 100 million to 200 million listed shares by the first week of July 2022. Zhang has also agreed to pay HK$1 million (S$178,037) to GS Holdings by Jun 15 as proof of his commitment to resolve the matter.

 

In the event that the value of the listed shares fall below 100 million yuan, the company said that Zhang would also pay up the shortfall via a monthly instalment of S$1 million for 12 months starting from the first week of August 2022.

 

However, as at Jul 5, GS Holdings said it has not received the HK$1 million or 100 million shares as agreed. The company added that it would be providing an update by Jul 8 on its next course of action if the funds and shares are not recovered by then.

 

Separately, GS Holdings said it would be conducting an impairment assessment of its property, plant and equipment and intangible assets after the auditors raised concerns over &ldquo certain assumptions used in the profit forecast and cash flow projections such as the growth rate and the implementation of expansion plans in the second half of financial year&rdquo .

 

GS Holdings also assured shareholders that it has adequate resources to pay its debts and continue generating &ldquo adequate cash flows from its operations for the foreseeable future&rdquo .

 

GS Holdings&rsquo indirect wholly-owned subsidiary, Sing Zhong Brands Management, is entering into a non-binding memorandum of understanding (MOU) with Long Chao Shenzhen, to develop new franchisees for the F& B brands that are owned by Sing Zhong and Long Chao.

 

This MOU aims to promote, through the F& B concepts, an exchange of cultural understanding across borders, and to enable prospective franchisees to grow their business portfolios in overseas markets mainly Singapore, China and other Asian countries with the support of the franchising programs created and operated by Sing Zhong.

 

Pursuant to the MOU, Sing Zhong is responsible for creating and developing 10 PRC-influenced F& B brands, and 10 Singapore-influenced F& B brands engaging a third-party consultant, Action Culture, for its expertise in the conceptualisation, branding, and marketing of the F& B brands marketing and selling of franchise of selected F& B brands owned by Long Chao Shenzhen to its existing and new clientele (franchisees) in the territories of the Asian countries and paying Long Chao Shenzhen service fees of 50% based on gross initial franchise fees generated and received from the franchise 

sales of brands owned by Long Chao Shenzhen to its existing and new clientele.

 

On the other hand, Long Chao Shenzhen will be responsible for marketing and selling of franchise of selected F& B brands owned by Sing Zhong to its existing and new clientele and paying Sing Zhong a service fees of 50% based on gross initial franchise fees generated and collected from the franchise sales of brands owned by Sing Zhong to its existing and new clientele.

 

The duo have agreed that throughout the course of sales of franchises from this joint effort, any subsequent royalty fees, sales of products, design, fees, and training fees that are charged to franchisees shall be received by the party providing the relevant services or products.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SINGAPORE, 1 November 2021 &ndash GS Holdings Limited (&ldquo GS Holdings&rdquo or the &ldquo Company&rdquo or &ldquo 伟 盛 有 限 公 司 &rdquo and together with its subsidiaries, the &ldquo Group&rdquo ), is pleased to announce that its indirect wholly-owned subsidiary, Hao Kou Wei Pte. Ltd. (&ldquo HKW&rdquo ), has signed a joint venture agreement with Singapore-based food manufacturer, Focaccia Foods Pte. Ltd. (&ldquo Focaccia Foods&rdquo ) to develop, franchise and manage various food & beverage brands, among others.

 

Established since 2003, Focaccia Foods is mainly involved in food manufacturing and distribution of frozen food products to food businesses and to local retail supermarkets.

 

Focaccia Foods also undertakes F& B outlet operations including canteen operations in a renowned overseas international school. All of Focaccia Foods&rsquo food preparation, cooking and baking activities are done in Singapore.

 

Manufacturing and distributing frozen food products to food businesses, local grocery retailers and major supermarkets, Focaccia Foods has expanded from pizza products, to produce Indian curry puffs and various Asian cuisine. Please refer to their website http://www.focacciafoods.com/ for more information.

 

New F& B Concept

 

For a start, the joint venture partners are planning for a new F& B concept that will be developed into a franchise model, targeted to be set up in coffeeshops and food courts across the heartlands of Singapore.

 

In 2018, expenditure on food constituted approximately 20.3% of the total average monthly household expenditure in Singapore, forming the second largest category of expenditure, behind just housing and related expenditure(1)

.

Under the joint venture agreement, both HKW and Focaccia Foods shall provide the relevant resources and experience to support the operations of the joint venture company

 

Mr Pang Pok (庞 威 ), Chief Executive Officer and Executive Director of the Company, said, &ldquo Leveraging our collective know-how and resources in a collaborative approach, we are excited to partner with Focaccia Foods to develop and franchise new F& B brands at greater scale in Singapore and beyond.

 

More importantly, we hope that the joint venture can create strong F& B brands that spur new employment opportunities in the community and develop new opportunities that nurture the next generation of F& B entrepreneurs.&rdquo

 

The new joint venture is not expected to have any material financial impact on the consolidated earnings per share and consolidated net tangible assets per share of the Company and its subsidiaries for the current financial year ending 31 December 2021.

 

&bull Qatar is one of the largest economies in the Middle East with a population of approximately 2.8 million and recorded a GDP per capita of USD 50,800 in 2020(1)(2)

 

&bull The first franchise &ldquo RASA CHICKEN by SING SWEE KEE&rdquo is a halal chicken rice brand that was created by the Group to serve Muslim consumers worldwide and it was launched in Brunei in November 2019

 

&bull SING SWEE KEE (新 瑞 记 ) is an established Hainanese chicken rice brand in Singapore with a heritage of more than 20 years, popular among Singaporeans and foreign visitors for its tender chicken meat, signature chilli sauce and fragrant chicken rice

 

SINGAPORE, 23 September 2021 &ndash GS Holdings Limited (&ldquo GS Holdings&rdquo or the &ldquo Company&rdquo or &ldquo 伟 盛 有 限 公 司 &rdquo and together with its subsidiaries, the &ldquo Group&rdquo ), is pleased to announce that its indirect wholly-owned subsidiary, Hao Kou Wei Food Group Pte Ltd, has signed a franchise agreement with Singapore F& B entrepreneurs, Mr. Tan Yan Shan and Mr. Lim Yee Min, where both of them have extensive experience and track record in managing and operating multiple F& B brands and concepts, including a successful chain of bubble tea stores, in Qatar.

 

Under this franchise agreement, Mr. Tan Yan Shan and Mr. Lim Yee Min will register a new entity in Qatar to develop and operate chicken rice outlets under the brand name of &ldquo SING SWEE KEE&rdquo in Qatar.

 

Heralded as Singapore' s &ldquo national dish&rdquo , the Hainanese chicken rice is one of the local dishes that resonate with Singaporeans and overseas visitors. Since the acquisition of SING SWEE KEE brand and operations in May 2019, the Group has embarked on creating new brands and concepts.

 

The brand &ldquo RASA CHICKEN by SING SWEE KEE&rdquo franchise was created to serve Hainanese chicken rice to Muslim consumers worldwide and it was launched in Brunei in November 2019.

 

Positive Market Prospects in Qatar and Neighbouring Countries

 

Globally, Qatar has maintained its position at the top of the international table for GDP per capita and it has an ambitious and long-term development plan under the National Vision 2030 to diversify its economy, with infrastructure spending related to transport, education, sports, healthcare, telecommunication and hospitality.

 

The new franchise agreement is not expected to have any material financial impact on the consolidated earnings per share and consolidated net tangible assets per share of the Group for the current financial year ending 31 December 2021.

 

Commenting on this new franchise agreement in Qatar, Mr Pang Pok (庞 威 ), Chief Executive Officer and Executive Director of the Company, said, &ldquo While the COVID-19 pandemic has impacted global mobility, it has not dampened consumers&rsquo appetite in Singapore&rsquo s cuisine.

 

Our RASA CHICKEN franchise has been well-received by consumers in Brunei and we have successfully demonstrated our ability to adapt standard operating procedures and training program for overseas franchisees.

 

With a high GDP per capita in Qatar, we believe that there are strong opportunities for our SING SWEE KEE franchise to expand in the country.

 

Furthermore, our latest franchise in Qatar can potentially provide a springboard for us to expand our brand and business outreach in the Middle East where there are more than 280 million Muslim consumers.&rdquo

Update on the proposed appointment of Kaifeng Jufeel as authorised representative to collect Outstanding Service Fee

 

In respect of the appointment of Kaifeng Jufeel as authorised representative to collect the Outstanding Service Fee as announced on 16 November 2020, the Company wishes to update shareholders that the relevant PRC legal advisers have informed the Company that the Mortgage has been duly registered by the relevant PRC regulatory authority to ensure its validity and enforceability under PRC law, as at the date of this announcement, and Wish has received the relevant copies of certificates of registration. Accordingly, the Mortgage has been signed by the parties.

 

The Company also wishes to inform that, pursuant to a valuation performed by the independent property valuers engaged by Wish in PRC, the valuation of the Mortgaged Properties, which consists of certain land and factory buildings in Kaifeng City, Henan, PRC held by Kaifeng Jufeel, amounts to approximately RMB 221 million. In appointing the independent property valuers, the Board has considered that the independent property valuer has adequate experience of more than 5 years, good credentials and track record.

 

Update on Tax Consultations

 

The Board also wishes to update the shareholders that the Tax Consultations for the remaining 11 Secured Outlets are still ongoing, to determine the requisite tax payable on the respective Outstanding Service Fee from such 11 Secured Outlets, amounting to RMB 96 million in aggregate. As stated in the Announcement dated 3 January 2021, the Group targets to complete such Tax Consultations by 31 March 2021. The Company wishes to inform that as the 14 Secured Outlets belong to different tax jurisdictions within PRC, the resolution of the Tax Consultations in relation to each Secured Outlet will occur at differing times.