SINGAPORE - Sakae Holdings' non-executive independent director Foo Maw Shen has resigned over differing views on the follow-up action to the disclaimer of the independent auditor's disclaimer in Sakae's audited financial results for fiscal 2019 ended June 30, 2019.
Mr Foo, 52, also resigned as chairman of the nominating committee and a member of the audit committee, with effect from Oct 16, Sakae said in a bourse filing on Thursday (Oct 17).
He was appointed on Jan 28 this year, and his resignation leaves the sushi restaurant operator with two independent directors, one short of a minimum requirement of three.
Independent auditor Deloitte & Touche had issued a disclaimer of opinion as it could not obtain appropriate audit evidence and certain information related to Sakae's liquidated associates Griffin Real Estate Investment Holdings (GREIH) and Gryphon Capital Management (GCM), and Cocosa Export, a Chilean company in which the group acquired a stake in March 2016.
Deloitte said Sakae's non-equity accounting for its share of results and net assets of GREIH and GCM since FY2012 ended Dec 31, 2012 was not in accordance with SFRS(I) 1-28 Investments in Associates and Joint Ventures.
As the unaudited management accounts of GREIH and GCM were deemed unreliable by management, Deloitte could not determine the group's share of results and net assets of GREIH and GCM, and related disclosures if the equity accounting method was applied.
It could not get enough evidence on the recoverable amount of investments in GREIH and GCM to determine whether full reversal of allowance for impairment loss was appropriate and whether such reversals should have been recorded in previous years.
As the fair value of the investments have not been determined, Deloitte cannot confirm the carrying amounts of the investments at the year end and the effect on the current year's results.
It noted Sakae had provided full allowance for impairment loss on its investment in GREIH of S$6.4 million and S$10.1 million at the company and group level respectively since 2012 until the date of liquidation.
Sakae did the same for GCM, with impairment losses of $150,000 and $369,000 at the company and group level respectively.
GREIH commenced liquidation in April 2017, while GCM did so in August 2017.
Following the year end, Sakae received S$8.1 million from the liquidator as partial return of capital related to its investments in the two associates.
The $8.1 million was part of the Singapore High Court in September approving the partial return of capital totalling $33 million to the contributories of GREIH.
Sakae determined it had lost control of Cocosa Export with effect from March 31, 2019, even though it still had a majority stake.
The group recorded a loss on derecognition of $3.4 million, and a loss allowance of $2.8 million out of gross receivables due from Cocosa totalling $5.4 million.
Deloitte could not determine if Sakae had indeed lost control of Cocosa, nor ascertain the existence of the receivables due and whether the loss allowance is appropriate.
It also could not confirm a $1.3 million receivable from a non-controlling shareholder of Cocosa.
"Management is still in the process of resolving the differences arising from the intra-group balances amounting to $1.5 million," said Deloitte.
"We are unable to assess whether the group has devised and maintained appropriate internal control over financial reporting."
Sakae had previously declared a goodwill impairment of $3.2 million in connection with its purchase of a 51 per cent stake in Cocosa Export.
Watch-listed Sakae requested a trading halt on Thursday morning, and its shares closed unchanged at $0.09 on Wednesday.