GS Holdings reports S$3.7m loss in audited FY21 results, says due to provision for impairment loss

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’s report dated Jun 30, the auditors issued a disclaimer of opinion on 2 matters.

One concerned the company’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 “taken the necessary actions to resolve the above audit issues during the preparation of the financial statements for FY2021”, including the reclassification of the S$20.47 million received from cash and bank balances to other receivables.

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

On the pending funds from Zhang, GS Holdings said Zhang has informed the board that he has earmarked “certain funds” 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 “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”.

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

Shares of GS Holdings closed 4.7 per cent or S$0.007 higher at S$0.156 on Monday before the announcement.