Sakae Holdings' non-executive independent director Foo Maw Shen has resigned over differing views on the follow-up action to the independent auditor's disclaimer in Sakae's audited financial results for fiscal 2019 ended June 30 this year.
Mr Foo, 52, also resigned as chairman of the nominating committee and as a member of the audit committee, with effect from Wednesday, Sakae said in a bourse filing yesterday.
He was appointed on Jan 28 this year, and his resignation leaves the sushi restaurant operator with two independent directors, one short of the minimum requirement of three.
Independent auditor Deloitte & Touche had issued a disclaimer of opinion as it could not obtain appropriate audit evidence and information related to Sakae's liquidated associates, dating back to financial year 2012.
The assets are Griffin Real Estate Investment Holdings (GREIH) and Gryphon Capital Management (GCM), as well as Cocosa Export, a Chilean company in which the group acquired a stake in March 2016.
As the unaudited management accounts of GREIH and GCM were deemed unreliable by the 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 could not confirm the carrying amounts of the investments at the year end and the effect on the current year's results.
It noted that Sakae had provided full allowance for impairment loss on its investment in GREIH of $6.4 million and $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 that, Sakae received $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 partial return of capital totalling $33 million to the contributories of GREIH approved by the High Court last month.
Sakae determined it had lost control of Cocosa Export since March 31 this year, even though it still had a majority stake. The group recorded a loss from Cocosa Export totalling $5.4 million.
Deloitte could neither determine if Sakae had indeed lost control of Cocosa Export, nor ascertain the existence of the receivables due and whether the loss allowance was appropriate.
It also could not confirm a $1.3 million receivable from a non-controlling shareholder of Cocosa Export.
"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 yesterday morning, and its shares closed unchanged at nine Singapore cents on Wednesday.
