Fuji Food and Catering (1175 HK)

Fuji was listed in 2004. Its main businesses were food catering and restaurant operation. Its revenue grew at a compound rate of more than 70% per year between 2002 and 2008. At its peak, in 2007, FU JI had a market cap of around US$1bn. No major concerns were revealed in its half-year results announced in December 2008. While the company’s debt was substantial, it was not especially high. The main concern was the build-up of construction in progress.

The first sign of any problem was in July 2009 when the company requested a suspension in its shares and announced a delay in reporting its 2009 results (year to end March). No explanation was given. In September, with still no sign of any results, the delay was blamed on the illness of a member of the company’s finance team. One of the INEDs resigned at the end of September complaining of lack of information. In October, the company announced it had appointed Deloitte (not its auditor) as an independent financial adviser to assist in finalising the 2009 results and analysing the company’s financial position. Less than two weeks later, FU JI announced that it started the process of winding up the company. A partial explanation was subsequently provided[1]: the company reported that Deloitte had identified “significant financial challenges”, particularly in the main catering business “the financial position and outlook of which had been deteriorating quite rapidly”. Issues included insufficient working capital, lost contracts and legal proceedings from suppliers and contractors.

The company made no further announcements to the Hong Kong Exchange for nearly five months until the end of March 2010, when it announced another INED had resigned, citing “her tight work schedule”, back in November the previous year although it had only just been brought to the liquidators’ attention. One of the four executive directors had resigned at the beginning of January due to “personal reasons”. The finance director (not a board member) had also been dismissed in January “as part of the cost cutting measures”. The company’s husband and wife founders and controlling shareholders had both resigned as executive directors in early March for “health reasons” and “family commitments” respectively. None had anything that they felt needed to be brought to the attention of shareholders or creditors. The auditors also resigned in March, citing disagreement over fees; they too felt nothing needed to be brought to the attention of shareholders or creditors. A third INED resigned in April due to ill health, leaving just one INED. The final executive director resigned in May as a result of “personal health concerns”.

Very little information has subsequently emerged as to what actually happened with the company. The company eventually published results for 2009 in 2011[2]. It appears that control over the company’s main operating subsidiaries in mainland China were lost at some point during the 2009 financial years. These subsidiaries were deconsolidated; revenue recorded in 2009 was less than a tenth of that in 2008. The strong suspicion is that the rapid voluntary liquidation was used to avoid repayment of offshore debt, mainly in the form of zero coupon convertible bonds. The first of these bonds was due to be repaid in November 2009, just after the winding up petition was filed.

[1] Fu Ji: Background to the Decision of the Company to file Winding Up Petition and Status Update, 30 October 2009

[2] Fu Ji: Final Results Announcement for the year ended 31 Mar 2009, 10 August 2011

Fu Ji: Annual Report 2008

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