United Food Holdings' independent auditor issues qualified opinion on FY2019 financial statements

LACK of information related to United Food Holdings' disposal of a group of wholly owned subsidiaries, as well as evidence of the occurrence and accuracy of payroll expenses for redundant employees incurred by a subsidiary, has resulted in the group's independent auditors giving a qualified opinion on its financial statement for the 15 months ended March 31, 2019.

United Food recorded a loss of 17.1 million yuan (S$3.4 million) on discontinued operations for the five-month period prior to disposing of subsidiaries Post-Ante Trading Limited, Globe Bright Limited, Linyi Shengquan Grease and Linyi Jiang Tian Trading Limited. The group also recorded a gain on the disposal of the subsidiaries totalling 27.2 million yuan.

But the independent auditor, Foo Kon Tan LLP, was denied access by the purchasers to the financial information and management accounts relating to the discontinued operations and the disposal in May 2018. It was therefore unable to determine the extent of the loss on discontinued operations and gain on disposal.

Separately, the auditor's report for the financial year ended Dec 31, 2017 contained a modified opinion because the auditor could not get evidence of the occurrence and accuracy of certain payroll expenses.

The expenses totalling 3.4 million yuan were for redundant employees, incurred by United Food's subsidiary. As the opening balances help determine the financial results for the current financial period ended March 31, 2019, the auditor could not ascertain whether any adjustments were required for the opening balances or the corresponding figures for the current financial period.

Based on unaudited financial statements filed on May 29, United Food saw net loss widen to 27.6 million yuan for the three months ended March 31, from a loss of 13.44 million yuan in the year-ago period. Its financial year had been changed to end on March 31 of each year, from previously ending on Dec 31.

Revenue rose to 10 million yuan, more than 3.5 times from a year ago, mainly from the group's trading segment. The firm is also a producer and supplier of soya bean products and animal feed in China.

United Food was placed on the Singapore Exchange's (SGX) watch list on June 6 as it failed to comply to both the minimum trading price (MTP) and financial entry criteria.

It failed the MTP criteria as it had a volume-weighted average price of less than S$0.20 per share and an average daily market capitalisation of less than S$40 million over the last six months. To fulfil the financial criteria, the firm cannot have pre-tax losses for its three most recently completed consecutive financial years, and must maintain an average daily market capitalisation of at least S$40 million over the last six months.