SELECTED COMBINED FINANCIAL INFORMATION

Transcription

1 SELECTED COMBINED FINANCIAL INFORMATION You should read the following selected combined financial information for the periods and as of the dates indicated in conjunction with the section of this Prospectus entitled Management s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements, the accompanying notes and the related independent auditors report included in this Prospectus. Our financial statements are reported in Singapore dollars and are prepared and presented in accordance with the FRS, which may differ in certain significant respects from generally accepted accounting principles in other countries. The selected financial information as of and for the years ended 31 December 2015, 2016 and 2017 have been derived from our audited financial statements included in this Prospectus and should be read together with those financial statements and the related notes thereto. AUDITED COMBINED STATEMENTS OF PROFIT OR LOSS For the year ended 31 December (S$ 000) (S$ 000) (S$ 000) Revenue 198, , ,679 Other income 3,930 4,715 4,051 Cost of inventories consumed (33,961) (35,888) (35,414) Staff costs (35,631) (38,838) (37,192) Depreciation of investment properties and property, plant and equipment (10,473) (10,244) (8,970) Property rentals and related expenses (90,946) (96,502) (95,855) Distribution and selling expenses (1,555) (1,865) (1,836) Administrative expenses (4,786) (4,754) (5,109) Other operating expenses (2,147) (2,106) (5,652) Results from operating activities 23,087 29,623 30,702 Finance income 1,462 1,394 1,470 Finance costs (530) (678) (351) Net finance income ,119 Share of profit of associates and partnership, net of tax Profit before tax 24,256 30,612 32,114 Tax expense (3,651) (4,730) (5,295) Profit for the year 20,605 25,882 26,819 Profit for the year attributable to: Owners of the Company 20,605 25,882 26,869 Non-controlling interest (50) 20,605 25,882 26,819 Earnings per Share (cents) Basic and diluted (1) Adjusted (2) Notes: (1) For comparative purposes, the basic and diluted EPS have been computed based on the profit for the year and 483,000,000 Shares immediately prior to the completion of the Offering and the issuance of the Cornerstone Shares. (2) For comparative purposes, the adjusted EPS have been computed based on the profit for the year and 555,163,000 Shares immediately following the completion of the Offering and the issuance of the Cornerstone Shares. 53

2 AUDITED COMBINED STATEMENTS OF COMPREHENSIVE INCOME For the year ended 31 December (S$ 000) (S$ 000) (S$ 000) Profit for the year 20,605 25,882 26,819 Other comprehensive income, net of tax Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation differences foreign operations (91) 85 (266) Net change in fair value of available-for-sale financial assets, net of tax (52) Total other comprehensive income for the year (143) 85 (266) Total comprehensive income for the year 20,462 25,967 26,553 Total comprehensive income for the year attributable to: Owners of the Company 20,462 25,967 26,603 Non-controlling interest (50) 20,462 25,967 26,553 54

3 AUDITED COMBINED STATEMENTS OF FINANCIAL POSITION For the year ended 31 December (S$ 000) (S$ 000) (S$ 000) ASSETS Non-current assets Property, plant and equipment 15,180 16,841 18,886 Intangible assets Investment properties 51,111 11,419 9,990 Associates and partnership 13, Other investments 20,068 8,288 1,600 Trade and other receivables 9,004 8,238 11,129 Deferred tax assets 112 Total non-current assets 108,997 45,447 42,186 Current assets Other investments 13,380 Inventories 1,175 1,459 1,295 Trade and other receivables 12,971 21,354 10,687 Cash and cash equivalents 38,317 49,043 53,043 Assets held for sale 56,163 Total current assets 52, ,399 65,025 Total assets 161, , ,211 LIABILITIES Current liabilities Trade and other payables 37,209 39,864 45,206 Loans and borrowings 10,561 9, Current tax liabilities 5,090 5,628 6,779 Provision for reinstatement cost 1,494 1,397 1,296 Liabilities held for sale 10,305 Total current liabilities 54,354 66,274 53,465 Non-current liabilities Trade and other payables 4,680 7,383 6,492 Loans and borrowings 17,357 7,673 1,573 Deferred tax liabilities Provision for reinstatement cost 2,016 2,630 2,551 Total non-current liabilities 24,085 17,686 10,630 Total liabilities 78,439 83,960 64,095 NET ASSETS 83, ,886 43,116 EQUITY Share capital 1,000 1,000 1,000 Reserves (214) (129) (395) Retained earnings 82, ,015 42,361 Equity attributable to owners of the Company 83, ,886 42,966 Non-controlling interest 150 Total equity 83, ,886 43,116 Total equity and liabilities 161, , ,211 55

4 AUDITED COMBINED STATEMENTS OF CASH FLOWS For the year ended 31 December (S$ 000) (S$ 000) (S$ 000) Cash flows from operating activities Profit for the year 20,605 25,882 26,819 Adjustments for: Amortisation of intangible assets Depreciation of investment properties 1,929 2, Depreciation of property, plant and equipment 8,544 7,861 8,425 Gain on disposal of available-for-sale financial assets (34) Gain on disposal of property, plant and equipment (77) (4) (444) Gain on disposal of financial assets at fair value through profit or loss (12) Impairment loss on assets and liabilities held for sale 1,227 Impairment loss on investment properties 884 Impairment loss on property, plant and equipment 152 1,301 Impairment loss on trade receivables (net) Net finance income (688) (716) (1,075) Share of profit of associates and partnership (237) (273) (293) Write off of intangible assets 77 Write off of property, plant and equipment Tax expense 3,651 4,730 5,295 34,029 40,370 43,365 Changes in working capital: Inventories (210) (284) 164 Trade and other receivables (60) (7,573) 7,200 Trade and other payables 3,974 5,003 4,231 Cash generated from operations 37,733 37,516 54,960 Tax paid (3,681) (4,062) (4,002) Net cash generated from operating activities 34,052 33,454 50,958 Cash flows from investing activities Dividend received 48 Net investments in associates (108) Interest received 741 1,262 1,427 Proceeds from disposal of: assets and liabilities held for sale 55,556 financial assets classified as fair value through profit or loss 459 property, plant and equipment financial assets classified as available-for-sale 1,034 20,068 Purchase of: unquoted debt securities (6,854) intangible assets (138) (158) (104) investment property (9,265) (2,790) other investments (1,600) property, plant and equipment (9,165) (8,613) (12,102) Net cash (used in)/from investing activities (23,035) (11,894) 65,227 56

5 AUDITED COMBINED STATEMENTS OF CASH FLOWS Cash flows from financing activities For the year ended 31 December (S$ 000) (S$ 000) (S$ 000) Capital injection from non-controlling interest 200 Distribution of profits to the then-existing owners of sole-proprietors and partnership (1,344) (890) (1,696) Dividends paid to equity holders of the Company (6,019) (5,212) (84,827) non-controlling interest (42) Proceeds from loans and borrowings 8,100 9, Repayments of loans and borrowings (5,837) (10,557) (25,554) Interest paid (530) (602) (351) Net cash used in financing activities (5,672) (7,961) (111,578) Net increase in cash and cash equivalents 5,345 13,599 4,607 Cash and cash equivalents at 1 January 30,549 36,220 49,043 Effect of exchange rate fluctuations on cash held 326 (19) (607) Reclassification to assets held for sale (757) Cash and cash equivalents at 31 December 36,220 49,043 53,043 57

6 You should read the following selected pro forma financial information for the periods and as at the dates indicated in conjunction with the sections entitled Management s Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Unaudited Pro Forma Statement of Financial Position as at 31 December 2017 of this Prospectus, as well as our financial statements, the accompanying notes and the related reporting accountants report included in this Prospectus. Our financial statements are reported in Singapore dollars and are prepared and presented in accordance with the FRS, which may differ in certain significant respects from generally accepted accounting principles in other countries. UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION ASSETS Non-current assets For the year ended 31 December 2017 (S$ 000) Property, plant and equipment 22,796 Intangible assets 180 Investment properties 9,990 Associates and partnership 401 Other investments 1,600 Trade and other receivables 11,129 Total non-current assets 46,096 Current assets Inventories 1,295 Trade and other receivables 10,257 Cash and cash equivalents 36,789 Total current assets (1) 48,341 Total assets 94,437 LIABILITIES Current liabilities Trade and other payables 44,932 Loans and borrowings 184 Current tax liabilities 6,779 Provision for reinstatement cost 1,296 Total current liabilities (1) 53,191 Non-current liabilities Trade and other payables 6,492 Loans and borrowings 1,573 Deferred tax liabilities 14 Provision for reinstatement cost 2,551 Total non-current liabilities 10,630 Total liabilities 63,821 58

7 EQUITY For the year ended 31 December 2017 (S$ 000) Share capital 1,000 Reserves (395) Retained earnings 29,861 Equity attributable to owners of the Company 30,466 Non-controlling interest 150 Total equity 30,616 Total equity and liabilities 94,437 Note: (1) The negative working capital recorded under the unaudited pro forma statement of financial position is primarily attributable to a decrease of approximately S$16.3 million in cash and cash equivalents which resulted in a corresponding decrease in current assets as a result of (a) the balance cash payment of S$3.8 million for the land premium for the property located at Woodlands Avenue 12 which was paid in February 2018 and (b) the interim dividend of S$12.5 million declared in February 2018, which was paid in March 2018, to the shareholders of Koufu. See the section entitled Management s Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Unaudited Pro Forma Statement of Financial Position as at 31 December 2017 Assets of this Prospectus. 59

8 UNAUDITED PRO FORMA STATEMENT OF CASH FLOWS For the year ended 31 December 2017 (S$ 000) Cash flows from operating activities Profit for the year 26,819 Adjustments for: Amortisation of intangible assets 108 Depreciation of investment properties 545 Depreciation of property, plant and equipment 8,425 Gain on disposal of property, plant and equipment (444) Impairment loss on assets and liabilities held for sale 1,227 Impairment loss on investment properties 884 Impairment loss on property, plant and equipment 1,301 Impairment loss on trade receivables (net) 402 Net finance income (1,075) Share of profit of associates and partnership (293) Write off of intangible assets 77 Write off of property, plant and equipment 94 Tax expense 5,295 43,365 Changes in working capital: Inventories 164 Trade and other receivables 7,200 Trade and other payables 4,231 Cash generated from operations 54,960 Tax paid (4,002) Net cash generated from operating activities 50,958 Cash flows from investing activities Net investments in associates (108) Interest received 1,427 Proceeds from disposal of: assets and liabilities held for sale 55,556 property, plant and equipment 490 financial assets classified as available-for-sale 20,068 Purchase of: intangible assets (104) property, plant and equipment (15,856) Net cash generated from investing activities 61,473 Cash flows from financing activities Capital injection from non-controlling interest 200 Distribution of profits to the then-existing owners of sole-proprietors and partnership (1,696) Dividends paid to equity holders of the Company (97,327) Proceeds from loans and borrowings 650 Repayments of loans and borrowings (25,554) Interest paid (351) Net cash used in financing activities (124,078) Net decrease in cash and cash equivalents (11,647) Cash and cash equivalents at 1 January 49,043 Effect of exchange rate fluctuations on cash held (607) Cash and cash equivalents at 31 December 36,789 60

9 BASIS OF PRESENTATION The unaudited pro forma financial information of our Group, as included in Appendix B Reporting Accountants Report and the Unaudited Pro Forma Financial Information for the Year ended 31 December 2017 of this Prospectus has been prepared for illustrative purposes, and is arrived at based on the following assumptions and after making certain adjustments to illustrate the impact of: (a) the balance cash payment of approximately S$3.8 million for the land premium for the property located at Woodlands Avenue 12, which was paid in February 2018; and (b) interim dividend of S$12.5 million declared in February 2018, which was paid in March 2018, to the shareholders of Koufu. The unaudited pro forma financial information has been compiled based on the audited combined financial statements for FY2017, as set out in Appendix A of this Prospectus. Due to the nature of the unaudited pro forma financial information, such unaudited pro forma financial information may not give a true picture of the actual financial position or performance of our Group. In arriving at the unaudited pro forma statement of profit or loss and unaudited pro forma statement of comprehensive income for the year ended 31 December 2017, no adjustment was made to the audited combined statement of profit or loss and the audited combined statement of comprehensive income for the year ended 31 December

10 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We discuss below our historical results of operations and financial condition as of and for the years ended 31 December 2015, 2016 and 2017, and our assessment of the factors that may affect our prospects and performance in future periods. You should read the following discussion together with our audited combined financial statements as of and for the years ended 31 December 2015, 2016 and We have prepared our financial statements in accordance with the FRS, which may differ in certain significant respects from generally accepted accounting principles in other countries. This discussion and analysis contains forward-looking statements that reflect our current views with respect to future events and our financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of any number of factors, including those set forth in this section and under the sections entitled Risk Factors and Notice to Investors Forward-Looking Statements of this Prospectus. Any discrepancies in the tables included herein between the listed amounts and totals thereof are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. OVERVIEW Our Group is one of the largest managers and operators of F&B establishments in Singapore comprising food courts, coffee shops, F&B stalls, F&B kiosks, QSRs, full-service restaurants and a hawker centre. We also manage a commercial mall. Our operations are concentrated mainly in Singapore with a presence in Macau. As at the date of this Prospectus, our Group comprises: our outlet & mall management business, under which we operate and/or manage 47 food courts, 14 coffee shops, one hawker centre and one commercial mall in Singapore, as well as one food court in Macau; and our F&B retail business, under which we operate 81 F&B stalls, five F&B kiosks, 11 QSRs and three full-service restaurants in Singapore, as well as two F&B stalls and one F&B kiosk in Macau. Our self-operated F&B stalls are either located within our food courts and coffee shops or within third party food courts. PRINCIPAL COMPONENTS OF OUR STATEMENTS OF PROFIT OR LOSS AND COMPREHENSIVE INCOME Revenue Our revenue is derived from the following two business segments namely: (a) Outlet & mall management business Revenue from the outlet & mall management business is recognised on a monthly basis when (i) fees and other charges are due from the stall operators of our food courts and coffee shops, (ii) rental and other charges are due from the tenants of our commercial mall and stall operators of our hawker centre, (iii) licence fees and other charges are due from the wet market operator in the commercial mall and (iv) management fees in respect of the food courts that are managed (and not operated) by our Group. 62

11 (b) F&B retail business Revenue from the sale of F&B products is recognised upon delivery and acceptance by customers, net of any sales discount. In FY2015, FY2016 and FY2017, our revenue amounted to S$198.7 million, S$215.1 million and S$216.7 million respectively. Outlet & Mall Management Business Most of the stall operators of our food courts are charged the higher of a fixed monthly fee or a variable monthly fee pegged to gross turnover, for each individual F&B stall. The monthly fee charged varies depending on the location of the food court or the mix of stall operators at that particular food court or the type of F&B products sold by the stall operators. Most of the stall operators in our coffee shops and hawker centre are charged a fixed monthly fee or rent respectively. The stall operators of our food courts, coffee shops and hawker centre are also charged other charges, which, depending on the particular food court, coffee shop or hawker centre the F&B stall is located in, may include miscellaneous fees, cleaning fees, outdoor refreshment area fees, conservancy and service charges, maintenance fees, POS system rental, insurance premium contributions, administrative fees and advertisement and promotion fees. Each of the two food courts that are managed (and not operated) by our Group has a different revenue model. We charge (a) a fixed management fee in respect of the food court at Block 548 Woodlands Drive 44, #02-34 Vista Point operated by Woodlands 548 Foodcourt, an associated entity of our Company in which we hold 49.0% equity interest, and (b) a percentage of the total fees and other charges that are charged to the stall operators, subject to a minimum management fee, in respect of the other food court at 21 Tampines North Drive 2, Level 3 Giant Building operated by a third party. As for the commercial mall that we manage, rental is collected based on a fixed rent for each tenant, other than the wet market operator, which is charged a fixed licence fee. In addition, our tenants and the wet market operator pay service charges, advertising and promotion fees and maintenance fees. F&B Retail Business Revenue from our F&B retail business is generated from the sale of F&B products through our (a) self-operated F&B stalls located within our food courts, coffee shops and hawker centre as well as third party food courts, (b) F&B kiosks, (c) QSRs and (d) full-service restaurants. Our revenue is mainly dependent on the following factors: (a) (b) (c) (d) (e) the number of F&B Outlets and self-operated F&B stalls we operate and our ability to source and secure strategic locations for our F&B Outlets; our ability to renew tenancy agreements with the landlords of our F&B Outlets and commercial mall, when such tenancy agreements expire; our ability to remain competitive in the F&B industry and the markets that we operate in; our ability to retain well-performing F&B stalls in our food courts and coffee shops and for them to take up new stalls in the event we operate new food courts or coffee shops; our ability to attract popular F&B stalls which have the potential to generate good customer patronage to be stall operators at our food courts and coffee shops; 63

12 (f) (g) (h) (i) sustained growth in patronage of our F&B Outlets, self-operated F&B stalls and F&B products; our brand image; changes in economic condition and consumer tastes affecting viability of our business; and outbreak of diseases relating to produce and raw materials, shortage of ingredients and contagious diseases affecting consumer willingness to consume. Other Income Other income comprises mainly government grants and incentives relating to Special Employment Credit, Wage Credit Scheme and Temporary Employment Credit, sponsorship income from suppliers and reimbursement of renovation fees charged to stall operators of our food courts, coffee shops and hawker centre. Other income was S$3.9 million, S$4.7 million and S$4.1 million for FY2015, FY2016 and FY2017 respectively. Cost of Inventories Consumed Our cost of inventories comprises purchases of raw ingredients for our F&B production, beverages and tobacco products for eventual sale at our F&B Outlets or self-operated F&B stalls. We have (a) a non-halal central kitchen which supplies non-halal food products such as dim sum to our self-operated F&B stalls located in our food courts and coffee shops, and (b) a Halal central kitchen which supplies food products such as kaya, bread, cakes, pastries, sauces, marinades and other hot kitchen food products to most of our F&B Outlets and self-operated F&B stalls. The cost of inventories consumed accounted for approximately 17.1%, 16.7% and 16.3% of our revenue in FY2015, FY2016 and FY2017 respectively. Our cost of inventories consumed may be affected by the following factors: (a) (b) (c) fluctuation in prices of raw materials and consumables purchased from our suppliers; our ability to obtain favourable pricing from bulk procurement of raw materials and consumables from our suppliers; and our ability to control and reduce wastage of raw materials and consumables. Staff Costs Our staff costs comprise salaries, wages, bonuses, CPF contributions, staff allowances, foreign workers levies, housing benefits, staff training and reimbursement for medical claims. Staff costs accounted for approximately 17.9%, 18.1% and 17.2% of our revenue in FY2015, FY2016 and FY2017 respectively. 64

13 Depreciation of Investment Properties, Property, Plant and Equipment Depreciation charges relate to the depreciation of our existing investment properties and property, plant and equipment over their useful lives, and are affected by additions to investment properties and property, plant and equipment which may be required in line with our continuing expansion as well as regular refurbishment. The property, plant and equipment comprise leasehold properties, renovation, furniture and fittings, office equipment and computers, plant and machinery, kitchen equipment and motor vehicles. The estimated useful lives based on our depreciation policy for such investment properties and property, plant and equipment are as follows: Investment properties Leasehold properties Renovation Furniture and fittings, office equipment and computers Plant and machinery Kitchen equipment Motor vehicles 17 to 30 years 20 to 30 years 3 years 3 years 3 years 3 years 5 years Depreciation of investment properties and property, plant and equipment accounted for approximately 5.3%, 4.8% and 4.1% of our revenue in FY2015, FY2016 and FY2017 respectively. Property Rentals and Related Expenses Property rentals and related expenses relate to expenses incurred for the (a) lease of our F&B Outlets, (b) licences for self-operated F&B stalls in third party food courts and (c) lease of our commercial mall, mainly comprising rental or fees (where applicable), conservancy and service charges, cleaning and utility charges. Property rentals for our F&B Outlets and commercial mall and licence fees for our self-operated F&B stalls over the tenure of the lease terms are either based on (a) a monthly fixed rent or fee, (b) a percentage of the gross turnover of the outlet subject to a minimum base rent or fee or (c) a monthly fixed rent or fee plus a percentage of the gross turnover. Utility charges comprise electricity, water and gas expenses. Property rentals and related expenses accounted for approximately 45.8%, 44.9% and 44.2% of our revenue for FY2015, FY2016 and FY2017 respectively. Distribution and Selling Expenses Distribution and selling expenses comprise advertising, marketing and promotional expenses, which vary depending on the scope and level of marketing and sales activities we conduct to generate awareness of our F&B Outlets, self-operated F&B stalls and commercial mall. Certain expenses are also incurred in connection with establishing our brands. Distribution and selling expenses accounted for approximately 0.8%, 0.9% and 0.8% of our revenue in FY2015, FY2016 and FY2017 respectively. Administrative Expenses Administrative expenses comprise expenses incurred for the day-to-day operations of our Group s business and comprise mainly insurance, transport and travelling expenses, consultancy and professional fees, property tax, land rent for our premises at 18 and 20 Woodlands Terrace, repairs and maintenance expenses and other office expenses. Administrative expenses accounted for approximately 2.4%, 2.2% and 2.4% of our revenue in FY2015, FY2016 and FY2017 respectively. 65

14 Other Operating Expenses Other operating expenses relate mainly to provision for impairment loss, kitchen supplies, provision for doubtful debts, licencing fees, amortisation of lease prepayment, stamp duty and fines and penalties. Our other operating expenses accounted for approximately 1.1%, 1.0% and 2.6% of our revenue for FY2015, FY2016 and FY2017 respectively. Finance Income Finance income comprises mainly interest income on cash and cash equivalents, foreign exchange gains and interest income on the Convertible Loan Notes, details of which are set out in the section entitled Corporate Structure and Ownership Corporate Reorganisation Novation of Convertible Loan and Investment Agreement of this Prospectus, which were novated to Jun Yuan Holdings in FY2017. Finance income was S$1.5 million, S$1.4 million and S$1.5 million in FY2015, FY2016 and FY2017 respectively. Finance Costs Finance costs comprise interest on bank loans and foreign exchange losses. Finance costs were S$0.5 million, S$0.7 million and S$0.4 million in FY2015, FY2016 and FY2017 respectively. Taxation The Singapore statutory corporate tax rate for FY2015, FY2016 and FY2017 was 17.0%. The Macau statutory corporate tax rate for FY2015, FY2016 and FY2017 was 12.0%. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Our audited combined financial statements as of and for the years ended 31 December 2015, 2016 and 2017 have been prepared in accordance with FRS. In the application of our Group s accounting policies, which are described in Note 3 to our audited combined financial statements included in Appendix A of this Prospectus, our management is required to make judgments, estimates and assumptions about the carrying amounts of assets that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical Judgments in Applying our Group s Accounting Policies There is no significant judgment made in applying accounting policies that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 66

15 Key Sources of Estimation Uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Useful Lives and Residual Values of Property, Plant and Equipment and Investment Properties We exercised our judgment in estimating the useful lives and residual values of the depreciable assets. The estimated useful lives reflect our estimates of the period that our Group intends to derive future economic benefits from the use of the depreciable assets. Depreciation is provided to write off the cost of property, plant and equipment and investment properties, adjusted for residual value, over their estimated useful lives, using the straight-line method. Impairment Losses of Property, Plant and Equipment Our Group regularly reviews the carrying amount of assets as at each reporting date to determine if there is any indication of impairment. Our Group has determined individual F&B Outlets or central kitchens of our Group as cash-generating units ( CGUs ). An impairment assessment of the property, plant and equipment of individual CGUs which are loss making is performed. The recoverable amount of the CGUs is based on discounted future cash flows projection which requires significant judgment and estimations of the management in determining the appropriateness and reasonability of the assumptions used. An impairment loss is recognised if the carrying amount of an asset or its related CGU exceeds its estimated recoverable amount. Estimation of Provision for Reinstatement Cost Our Group recognises the provision for reinstatement costs at the point when our Group enters into tenancy agreements for the premises. In determining the amount of the provision for reinstatement costs, estimates are made in relation to the best estimates of the expenditure with reference to quotations provided by third party contractors. CHANGES IN ACCOUNTING POLICIES We have not made any significant changes in our accounting policies during the years ended 31 December 2015, 2016 and 2017, except that during the financial years ended 31 December 2015, 2016 and 2017, we have adopted all the new and revised standards which are effective for annual periods beginning on or after 1 January 2015, 2016 and 2017 respectively. The adoption of these standards did not have any effect on the financial performance or position of our Group. Please refer to Note 3 to our audited combined financial statements included in Appendix A of this Prospectus for further details on our accounting policies. 67

16 FINANCIAL PERFORMANCE The number of F&B Outlets and self-operated F&B stalls operated and/or managed by our Group as at the end of each year for the Period Under Review are set out below. Outlet & mall management business segment FY2015 FY2016 FY2017 Food courts (1) Coffee shops Hawker centre 1 Commercial mall F&B retail business segment Self-operated F&B stalls (2) F&B kiosks QSRs Full-service restaurants Notes: (1) The decrease in the number of food courts from FY2016 to FY2017 was due to the closure of two underperforming food courts and the unsuccessful tender for renewal of one food court. This was offset by the commencement of operations of one food court in FY2017. (2) The decrease in the number of self-operated F&B stalls from FY2016 to FY2017 was due to the closure of six self-operated F&B stalls within three food courts and one coffee shop and two self-operated F&B stalls within third party food courts during FY2017. This was offset by three new self-operated F&B stalls in the one food court and one coffee shop which commenced operations during FY2017, as well as one new self-operated F&B stall within our existing food court. Breakdown of our Past Performance by Business Segments The following discussion of our business, financial position and financial performance has been prepared by our management and should be read in conjunction with our audited combined financial statements and the related notes as set out in Appendix A of this Prospectus. A breakdown of our revenue by business and geographical segment for FY2015, FY2016 and FY2017 is set out below: FY2015 FY2016 FY2017 Revenue (S$ 000) % (S$ 000) % (S$ 000) % Outlet & mall management 95, , , F&B retail 103, , , Total 198, , , FY2015 FY2016 FY2017 Revenue S$ 000 % S$ 000 % S$ 000 % Singapore 185, , , Macau 13, , , Total 198, , ,

17 A breakdown of our reportable segment profit before tax for FY2015, FY2016 and FY2017 is set out below: Reportable segment profit before tax FY2015 (S$ 000) % FY2016 (S$ 000) % FY2017 (S$ 000) % Outlet & mall management 5, , , F&B retail 25, , , Total 31, , , REVIEW OF PAST PERFORMANCE FY2015 vs FY2016 Revenue Our revenue increased by S$16.4 million or 8.3% from S$198.7 million in FY2015 to S$215.1 million in FY2016. This increase was mainly due to an increase in revenue contribution from our outlet & mall management and F&B retail business segments. The increase in the revenue contribution from our outlet & mall management business segment was S$7.2 million or 7.6%. This was mainly attributable to (a) the full year contributions from the three new food courts and coffee shops which commenced operations during FY2015 and (b) the partial year contributions from six new food courts and coffee shops which commenced operations during FY2016, and was partially offset by the closure of one food court. The increase in revenue contribution from our F&B retail business segment was S$9.2 million or 8.9%. This was mainly attributable to (a) the full year contributions from three self-operated F&B stalls at the three new food courts and coffee shops, two full-service restaurants and one QSR which commenced operations during FY2015, and (b) the partial year contributions from six self-operated F&B stalls in the six new food courts and coffee shops, two self-operated F&B stalls in existing food courts, two QSRs and one self-operated F&B stall in Macau which commenced operations during FY2016, and was partially offset by the closure of one self-operated F&B stall in one food court which was closed during FY2016. Other Income Other income increased by S$0.8 million or 20.0% from S$3.9 million in FY2015 to S$4.7 million in FY2016 mainly due to (a) an increase in sponsorship income from suppliers and (b) an increase in the reimbursement of renovation fees charged to the stall operators of our food courts arising from an increase in the number of food courts being renovated. This was offset by a decrease in government grants in FY2016 compared to FY2015 due to a reduction in the government s co-funding under the Wage Credit Scheme. Cost of Inventories Consumed Our cost of inventories increased by S$1.9 million or 5.7% from S$34.0 million in FY2015 to S$35.9 million in FY2016, largely in line with the increase in the revenue contribution of our F&B retail business. 69

18 Staff Costs Our staff costs increased by S$3.2 million or 9.0% from S$35.6 million in FY2015 to S$38.8 million in FY2016, mainly due to increases in wages and number of employees arising from an increase in the number of F&B Outlets and self-operated F&B stalls in FY2016. Depreciation of Investment Properties, Property, Plant and Equipment Our depreciation charges decreased by S$0.3 million or 2.2% from S$10.5 million in FY2015 to S$10.2 million in FY2016. This was mainly due to the assets of seven F&B Outlets being fully depreciated during FY2016, which was partially offset by the depreciation of an additional S$9.2 million in property, plant and equipment attributable to new F&B Outlets and self-operated F&B stalls in Singapore and Macau that were opened in FY2016. Property Rentals and Related Expenses Our property rentals and related expenses increased by S$5.6 million or 6.1% from S$90.9 million in FY2015 to S$96.5 million in FY2016 mainly due to an increase in the number of food courts and coffee shops in FY2016. Distribution and Selling Expenses Our distribution and selling expenses increased by S$0.3 million or 19.9% from S$1.6 million in FY2015 to S$1.9 million in FY2016 mainly due to an increase in advertising and promotional activities. Administrative Expenses Our administrative expenses remained constant at S$4.8 million in FY2015 and FY2016. Other Operating Expenses Our other operating expenses remained constant at S$2.1 million in FY2015 and FY2016. Finance Income Our finance income decreased by S$0.1 million or 4.7% from S$1.5 million in FY2015 to S$1.4 million in FY2016 mainly due to absence of foreign exchange gain in FY2016. Finance Costs Our finance costs increased by S$0.2 million or 27.9% from S$0.5 million in FY2015 to S$0.7 million in FY2016 mainly due to increase in interest expenses arising from additional bank loans for investment properties and foreign exchange loss. Profit before Income Tax Profit before taxation increased by S$6.3 million or 26.2% from S$24.3 million in FY2015 to S$30.6 million in FY2016 mainly due to the increase in revenue and partially offset by an increase in expenses. Our profit before tax margin increased from 12.2% in FY2015 to 14.2% in FY2016 as the increase in revenue outpaced the increase in expenses in FY2016, which was mainly due to the assets of seven F&B Outlets being fully depreciated during FY

19 Tax Expenses Due to the increase in our profits, our tax expenses correspondingly increased by S$1.0 million or 29.6% from S$3.7 million in FY2015 to S$4.7 million in FY2016. The effective tax rates were 15.1% and 15.5% in FY2015 and FY2016 respectively. The effective tax rate in FY2015 was lower mainly due to the adjustments made to the current tax expenses arising from the overprovision of prior years tax expenses. FY2016 vs FY2017 Revenue Our revenue increased by S$1.6 million or 0.7% from S$215.1 million in FY2016 to S$216.7 million in FY2017. This was mainly due to an increase in the revenue contribution from our outlet & mall management business segment of S$3.1 million or 3.1%. This was mainly attributable to (a) the full year contributions from the six new food courts and coffee shops which commenced operations during FY2016 and (b) the partial year contributions from one food court, one coffee shop and one hawker centre which commenced operations during FY2017, and was partially offset by the closure of three food courts and one coffee shop. This was partially offset by a decrease in revenue contribution from our F&B retail business segment of S$1.5 million or 1.4%. This was mainly attributable to the closure during FY2017 of six self-operated F&B stalls within our three food courts and one coffee shop and two self-operated F&B stalls within third party food courts. This decrease was partially offset by the opening of two F&B kiosks, two QSRs and one full-service restaurant and three self-operated F&B stalls in the one food court and one coffee shop which commenced operations during FY2017, as well as one self-operated F&B stall within an existing food court. Other Income Other income decreased by S$0.6 million or 14.1% from S$4.7 million in FY2016 to S$4.1 million in FY2017 mainly due to a decrease in government grants due to a reduction in the government s co-funding under the Wage Credit Scheme and a decrease in sponsorship income from suppliers, and partially offset by an increase in reimbursement of renovation fees charged to the stall operators mainly arising from the renovation of existing food courts. Cost of Inventories Consumed Our cost of inventories decreased by S$0.5 million or 1.3% from S$35.9 million in FY2016 to S$35.4 million in FY2017, largely in line with the decrease in the revenue contribution of our F&B retail business. Staff Costs Our staff costs decreased by S$1.6 million or 4.2% from S$38.8 million in FY2016 to S$37.2 million in FY2017, mainly due to over provision of prior years staff incentives written back in FY

20 Depreciation of Investment Properties, Property, Plant and Equipment Our depreciation charges decreased by S$1.2 million or 12.4% from S$10.2 million in FY2016 to S$9.0 million in FY2017. This was mainly due to the assets of six F&B Outlets being fully depreciated during FY2017, which was partially offset by the depreciation of an additional S$12.1 million in property, plant and equipment attributable to new F&B Outlets and self-operated F&B stalls that were opened in FY2017. Property Rentals and Related Expenses Our property rentals and related expenses decreased by S$0.6 million or 0.7% from S$96.5 million in FY2016 to S$95.9 million in FY2017 mainly due to a reduction in the number of food courts and self-operated F&B stalls in FY2017. Distribution and Selling Expenses Our distribution and selling expenses decreased slightly by S$0.1 million or 1.6% from S$1.9 million in FY2016 to S$1.8 million in FY2017 due to a decrease in advertising and promotional activities. Administrative Expenses Our administrative expenses increased by S$0.3 million or 7.5% from S$4.8 million in FY2016 to S$5.1 million in FY2017 mainly due to increase in property tax and professional fees. Other Operating Expenses Our other operating expenses increased by S$3.6 million or 168.4% from S$2.1 million in FY2016 to S$5.7 million in FY2017 mainly due to (a) provision for impairment loss and (b) impairment loss on assets and liabilities held for sale which relate to the one food court property and five coffee shop properties we sold to Abundance Realty, details of which are set out in the section entitled Corporate Structure and Ownership Corporate Reorganisation Sale of One Food Court Property and Five Coffee Shop Properties of this Prospectus. Finance Income Our finance income increased by S$0.1 million or 5.5% from S$1.4 million in FY2016 to S$1.5 million in FY2017 mainly due to increase in interest income from the Convertible Loan Notes. Finance Costs Our finance costs decreased by S$0.3 million or 48.2% from S$0.7 million in FY2016 to S$0.4 million in FY2017 due to decrease in interest expenses on bank loans for investment properties which were disposed of in FY2017. Profit before Income Tax Profit before taxation increased by S$1.5 million or 4.9% from S$30.6 million in FY2016 to S$32.1 million in FY2017 mainly due to the increase in revenue and a decrease in expenses. As a result, our profit before tax margin increased from 14.2% in FY2016 to 14.8% in FY

21 Tax Expenses Due to the increase in our profits, our tax expenses correspondingly increased by S$0.6 million or 11.9% from S$4.7 million in FY2016 to S$5.3 million in FY2017. The effective tax rates were 15.5% and 16.5% in FY2016 and FY2017 respectively. The effective tax rate in FY2017 was higher than FY2016 mainly due to the expiration of the Productivity and Innovation Credit tax deduction in FY2017. REVIEW OF FINANCIAL POSITION A review of our financial position as at 31 December 2017 is as follows: Non-Current Assets As at 31 December 2017, our non-current assets of S$42.2 million accounted for approximately 39.3% of our total assets. Our non-current assets mainly comprise property, plant and equipment, intangible assets, investment properties, associates and partnership, other investments and trade and other receivables, which amounted to S$18.9 million, S$0.2 million, S$10.0 million, S$0.4 million, S$1.6 million and S$11.1 million respectively. The net book value of property, plant and equipment, comprising leasehold properties, renovation, furniture and fittings, office equipment and computers, plant and machinery, kitchen equipment and motor vehicles amounted to S$18.9 million as at 31 December The increase in property, plant and equipment from FY2015 to FY2017 was mainly due to (a) additions to renovations, furniture and fittings and kitchen equipment with the opening of new F&B Outlets and selfoperated F&B stalls, (b) additions to computers which mainly comprise the development costs for our mobile ordering application and implementation costs for the self-ordering and payment kiosks and (c) additions to plant and machinery being tray return robots implemented at our food courts. Our investment properties comprise one coffee shop operated by us, which is located at 18 Jalan Membina, #01-01 Singapore , and one food court under construction, which is located at 1 Tampines North Drive 1, #01-34, T-Space, Singapore Unlike the other leased properties on which we operate our food courts and coffee shops, which typically have initial lease tenures of three to seven years, these two leased properties (which are classified as investment properties) are properties for which our Group has purchased the leasehold interests and have lease tenures of 30 years each, with a balance lease period of 14 years and 27 years respectively. Further details of our investment properties are set out in the section entitled History and Business Our Material Properties and Fixed Assets Properties Leased by our Group of this Prospectus. The carrying amount of investment properties amount to S$10.0 million as at 31 December The carrying amount of intangible assets comprise computer software of S$0.2 million as at 31 December Investment in associates and a partnership amounting to S$0.4 million relate to interests held in a number of individually immaterial associates and a partnership. Other investments relate to placement of structured deposit with a bank amounting to S$1.6 million as at 31 December Trade and other receivables amounting to S$11.1 million as at 31 December 2017 mainly relate to rental deposits placed with landlords. 73

22 Current Assets As at 31 December 2017, our current assets of S$65.0 million accounted for approximately 60.7% of our total assets. Our current assets consist of trade and other receivables, inventories and cash and cash equivalents. Trade receivables relate to amounts receivable mainly from stall operators which amounted to S$0.3 million as at 31 December As at 31 December 2017, our other receivables of S$10.4 million accounted for approximately 15.9% of our current assets, which mainly relate to receipts of our self-operated F&B stalls within third party food courts which were held by the landlords and due to us, rental deposits placed with landlords and prepayments. Prepayments relate to advance rental payments and the initial payment of S$0.4 million for the land premium in respect of the property located at Woodlands Avenue 12. Cash and cash equivalents as at 31 December 2017 amounted to S$53.0 million or 81.6% of total current assets. The amounts classified as assets and liabilities held for sale as at 31 December 2016 mainly relate to (a) the one food court property and five coffee shop properties sold to Abundance Realty in 2017 for an aggregate consideration of S$33,376,603, which was determined based on the net book value of the aforesaid properties as at 31 August 2017, and (b) the shares in Abundance Development, which was then a wholly-owned subsidiary of Koufu, sold to Jun Yuan Holdings in The amounts classified as other investments as at 31 December 2016 relate to the Convertible Loan Notes, which were novated to Jun Yuan Holdings in FY2017. See Corporate Structure and Ownership Corporate Reorganisation for further details of the foregoing transactions. As such, there were no amounts classified as assets and liabilities and other investments as at 31 December Non-Current Liabilities As at 31 December 2017, our non-current liabilities of S$10.6 million accounted for approximately 16.6% of our total liabilities. Our non-current liabilities consist of trade and other payables, loans and borrowings, provision for reinstatement cost and deferred tax liabilities. The non-current portion of trade and other payables, which amounted to S$6.5 million as at 31 December 2017, relate to accrued lease rental and refundable rental deposit from tenants and stall operators. These deposits are repayable upon termination or expiration of the leases. Loans and borrowings amounted to S$1.8 million (current and non-current) which relate to funding for investment properties. Provision for reinstatement costs relate to the estimated costs of reinstating our leased premises to their original state upon termination or expiration of the leases and amounted to S$3.8 million (current and non-current) as at 31 December Current Liabilities As at 31 December 2017, our current liabilities of S$53.5 million accounted for 83.4% of our total liabilities. Our current liabilities consisted of trade and other payables, current portion of loans and borrowings, current tax liabilities and provision for reinstatement cost. 74

23 Other payables amounted to S$41.0 million or 76.7% of current liabilities as at 31 December 2017 comprising accrued lease rental, accrued operating expenses, amounts payable for purchase of property, plant and equipment, GST payable, receipts of stall operators, which are held by us and due to such stall operators, rental deposits from tenants and a loan from a related party. Current tax liabilities amounted to S$6.8 million as at 31 December Shareholders Equity As at 31 December 2017, our shareholders equity amounted to S$43.1 million comprising share capital of S$1.0 million, translation reserve of S$0.4 million (negative), non-controlling interest of S$0.2 million and retained earnings of S$42.3 million. RECONCILIATION OF UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 Assets Based on the unaudited pro forma statement of financial position as at 31 December 2017, our Group s cash and cash equivalents would decrease as a result of (a) the balance cash payment of S$3.8 million for the land premium for the property located at Woodlands Avenue 12, which was paid in February 2018 and (b) the interim dividend of S$12.5 million declared in February 2018, which was paid in March 2018, to the shareholders of Koufu. Accordingly, our Group s cash and cash equivalents would amount to approximately S$36.8 million as at 31 December With the aforesaid balance cash payment, the initial payment of S$0.4 million for the land premium for the property located at Woodlands Avenue 12 which was paid in FY2017 was reclassified from prepayment to property, plant and equipment. Accordingly, the property, plant and equipment will be approximately S$22.8 million as at 31 December Current Liabilities Based on the unaudited pro forma statement of financial position as at 31 December 2017, our Group s current liabilities would decrease as a result of the payment in February 2018 of GST of approximately S$0.3 million on the land premium for the property located at Woodlands Avenue 12. Accordingly, our Group s trade and other payables would amount to approximately S$44.9 million as at 31 December Shareholders Equity Based on the unaudited pro forma statement of comprehensive income for the financial year ended 31 December 2017, our Group s shareholders equity would amount to S$30.6 million as at 31 December 2017, representing a decrease of S$12.5 million, due to a decrease in retained earnings of S$12.5 million as a result of the interim dividend declared in February 2018, which was paid in March 2018, to the shareholders of Koufu. RECONCILIATION OF UNAUDITED PRO FORMA STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017 Based on the unaudited pro forma statement of cash flows for the financial year ended 31 December 2017, our cash and cash equivalents would amount to S$36.8 million as at 31 December 2017, representing a net decrease of S$16.2 million as compared to the audited cash and cash equivalents as at 31 December This decrease was due to the balance cash payment of approximately S$3.8 million for the land premium for the property located at Woodlands Avenue 12 which was paid in February 2018 and the interim dividend of S$12.5 million declared in February 2018, which was paid in March 2018, to the shareholders of Koufu. 75