GS Holdings yet to receive 120m yuan in fees from China F&B outlets

CATALIST-LISTED GS Holdings on Tuesday said it has not received 120 million yuan (S$23.5 million) in outstanding gross service fees from 14 food and beverage (F&B) outlets in China due to ongoing tax consultations.

GS Holdings' subsidiary Wish Hospitality Holdings is providing exclusive branding, operation and procurement (BOP) services for the 14 outlets, for an aggregate quarterly service fee of 50 million yuan.

The 120 million yuan in fees had become due and payable on Dec 31, 2019.

GS Holdings said that the delay in payment was because of ongoing consultations between Wish and China's tax authorities in relation to the amount of corporate income tax and/or withholding tax payable by Wish before the 14 outlets are allowed to remit the outstanding fees to Wish.

Wish has engaged one of the "Big Four" accounting firms as its professional tax advisers in Beijing to assist with the consultations.

GS Holdings said it hopes the tax issue will be resolved by mid-March this year, in view of the long Chinese New Year holidays in China and the recent virus outbreak in the country.

In addition, the 14 outlets have closed temporarily since the Chinese New Year break due to the outbreak, in compliance with directives issued by local authorities. Wish's team in China may also be unable to work due to restrictions on transportation and movements within China.

As such, the group's provision of BOP services will be affected, GS Holdings said.

"The group will continue to monitor the impact, if any, which the outbreak may have on its financial performance," GS Holdings added.

For now, it does not expect the service fees payable by the 14 outlets for the first quarter ending March 31 to be affected by the temporary closures.

In the same announcement on Tuesday night, GS Holdings said it expects to report a "significant increase" in its revenue and hence net profit for fiscal 2019 ended Dec 31, based on a preliminary review of the group's unaudited financial results. This is subject to the finalisation of the tax consultation.

The surge in revenue is due to the group earning 150 million yuan in total gross service fees for its BOP services during the year. This sum includes the outstanding 120 million yuan it has yet to receive from the outlets.

Shares of GS Holdings were trading flat at S$0.67 as at 9.12am on Wednesday.