ST Group Food to liquidate loss-making Gong Cha business in UK

SINGAPORE - Catalist-listed ST Group Food plans to liquidate its loss-making subsidiary in Britain, GCTea Outlets 2B, which operates a food and beverage outlet under the Gong Cha brand in the country.

PappaRich, Ippudo and Hokkaido Baked Cheese Tart are other brands owned or franchised by the Australia-based company.

“It has been determined that it is no longer viable for GCTea Outlets 2B to continue its business due to among others, (its) liabilities... and the challenging economic situation in the UK,” the food and beverage company said on July 23.

While the liquidation will result in some losses on a pro forma basis, it will likely have a positive impact on the group’s consolidated net tangible assets (NTA) and earnings per share in the long run, due to the loss-making nature of GCTea Outlets 2B, ST Group Food said.

For illustrative purposes, and based on the group’s latest audited financials for the year ended June 2024, liquidating GCTea Outlets would lead to a slight drop in the group’s NTA, from A$19.65 million (S$16.6 million) to A$19.59 million. This would translate to its NTA per share remaining unchanged before and after liquidation at A$0.077.

Assuming GCTea Outlets was wound up on July 1, 2023, the group’s net profit would fall from A$858,979 before liquidation to A$803,433 after liquidation. This would translate to a drop in earnings per share from 35 Australian cents to 32 Australian cents.

ST Group Food’s interest in GCTea Outlets 2B is held through its subsidiary GC (England), in which it has an 84 per cent stake. GC (England) holds the entire equity interest of GCTea, which in turn fully owns GCTea Outlets 2B.

ST Group Food shares were unchanged at 14.5 cents as at 9.58am on July 24, after the announcement.

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