An accounting clean-up at YuuZoo Corp is forcing the social media firm to revise its 2016 net profit to a much lower figure than earlier announced.
After a more "prudent" treatment of receivables and assets, YuuZoo expects to report an audited net profit of about $16.3 million for the year ended Dec 31, it said in a bourse filing late on Thursday.
This represents a shortfall of nearly 53 per cent from the $34.6 million unaudited net profit announced in February.
YuuZoo will also revise its 2015 results to reflect a net loss of about $2.9 million, compared with an earlier profit of $15.9 million.
Investors appeared sanguine over the news, with the stock yesterday ending 4.35 per cent higher at 7.2 cents. But the stock's value has more than halved so far this year.
YuuZoo said the changes were made after discussions with its new auditor, RT, appointed in January to replace Moore Stephens.
Moore Stephens refused to continue as YuuZoo's auditor last May after raising concerns over the way the firm valued its franchisees' shares.
YuuZoo used to book as revenue the value of the franchisee shares it received as payment for the franchise packages it sold.
When it unveiled its unaudited 2016 results in February, it said it had switched to a more transparent method of booking revenue as a one-time franchise fee based not on valuation but on YuuZoo's cost of developing franchise packages.
While the unaudited revenue numbers are in line with the audited figures, YuuZoo's audited earnings had to be further adjusted for "major write-downs and write-offs", it said.
Executive chairman and temporary chief executive Thomas Zilliacus told The Straits Times yesterday: "We were criticised for having an accounting policy that (people) felt was too aggressive. After careful consideration, we have decided to adopt a significantly more conservative accounting policy."
YuuZoo stock has been volatile. On Feb 28, it canned a much-hyped investment in American movie studio Relativity Media. The proposed investment would have cost between US$15 million and US$150 million. YuuZoo has a market cap of just $55.6 million now.
At the time, the company attributed it to "conditions precedent to the investment had not been met". Yesterday, Mr Zilliacus said it was due to "some critical facts about their business and financials" that Yuuzoo had been unaware of.
YuuZoo will hold its annual general meeting before June 15. Its audit report will be sent to shareholders as part of its annual report before the end of this month.
