Singapore-listed YuuZoo Corporation (YuuZoo) announced, on 12 July 2017, the resignation of its sixth chief financial officer (CFO) in three years. The announcement came at a time when the company’s shares are being beaten down to historically low levels despite having reported a net profit as compared to net losses in the first two years of listing, following a reverse takeover, in September 2014.
CFOs Too Busy To Work
Prior to the latest resignation of Raul Ikonen, who had been in the role for just over four months before deciding to move back to Finland for personal reasons, the group had five other CFOs.
YuuZoo’s previous CFO, Lim Aik Bin, left in February 2017 after just six months with the company, due to non-compliance with his employment agreement.
Before that, Michael Parker, who served the longest term of 14 months, left in August 2016, as the management felt he had operational and territorial limitations for the charge of YuuZoo’s growth and expansion aspirations.
In May 2015, interim CFO Olivier Richard, left the company after four months in the role to pursue other interests.
Richard had replaced Linda Hoglund, who was CFO for less than two months before leaving, also to pursue other personal commitments.
The first in the series of resignations was Billy Ho, who quit in December 2014 after less than four months on the job, also to pursue other commitments.
In short, YuuZoo’s first three and sixth CFOs cited a large amount of other commitments, or interest outside of their official duties, as reasons for their departure. Are they being “irresponsible” or are there other reasons that we are not privy to?
Typically, key management personnel, unlike a normal employee, would need a longer period of time to settle into the position. This involves understanding the businesses of the company, the policies in place and getting to know their subordinates. Hence, it would not be a far-fetched to say that the first three CFOs would probably not have done much work before passing on the baton.
How Much To Impair?
After the completion of its delayed audit, YuuZoo posted a net profit of $14 million for FY16, down from its earlier report of $34.6 million. The audited results also resulted in a net loss of $5 million for FY15, which was initially restated as net profit of $15.9 million in its latest unaudited financial statements for FY16.
YuuZoo had fully impaired an available-for-sale investment in China-based TV media group RS Media and Entertainment Group Holding, which had been valued at $4.7 million, in the absence of verifiable information that the investment could be recovered. It also took a $7.5 million impairment loss on its investment in and receivables from gaming company Infocomm Asia Holdings, and fully impaired $2.3 million on intangible assets held in relation to Etisalat.
Hiring A Better CFO
We feel that the main reason behind the group’s poor corporate governance reputation lies in the frequent management changes. The frequent changes would mean that there would be frequent handing over of tasks, which could even result in having CFOs which are not familiar with his job scope. These changes have also resulted in low investor confidence, in turn, driving the company’s share price to an all-time low.
As a first step to cleaning up the mess and regaining investors’ confidence, YuuZoo would need to make the effort to engage the services of a CFO who is able to meet the group’s growth and expansion aspirations, comply with his employment agreement and not have an exciting personal life filled with various commitments.