Press Statement: Incredible Holdings’ Clarifications on SIAS’ Commentary dated 18 July 2022

Date: July 25, 2022

We refer to our Commentary in the Business Times dated 18 July 2022 titled “Regulators Can Do More About Governance Lapses At Incredible Holdings And” (“Commentary”) and the responses by Incredible Holdings (“Incredible”) in their announcement on SGXNet dated 21 July 2022 titled “Clarification in relation to the Business Times article on 17 July 2022” (“SGX Announcement”) and in an unpublished email to Business Times and SIAS with similar content dated 21 July 2022.

In the Commentary, SIAS’ point was that there are reasonable grounds for questions to be raised in relation to corporate governance in Incredible and

Although there was a factual error in the Commentary about Incredible not having replied to SIAS’ letter and there was an unfortunate oversight in not referring to SIAS’ response to Incredible’s reply, SIAS continues to take the position that there are reasonable grounds for questions to be raised in relation to corporate governance in these two companies.

After a closer scrutiny of Incredible’s reply, it appears that Incredible has not addressed the concerns satisfactorily.

By way of illustration:

  1. SGX RegCo’s queries on the HB 2021 acquisition mostly preceded the Independent Audit, except for the queries dated 14 June 2022 in relation to the Independent Auditors’ qualified opinion for FY2021 and their decision not to seek reappointment. The Commentary was based, among other things, on the professional findings of the recently concluded audit as contained in the Independent Auditors’ Report dated 7 June 2022.
  2. In Incredible’s 2021 Annual Report, the Independent Auditors stated, as the basis for qualified opinion, that they were unable to obtain sufficient appropriate audit evidence on several transactions, including being unable to obtain sufficient appropriate audit evidence on the business rationale for the Group’s acquisition of HB 2021. Incredible informed SGX RegCo and stated in the SGX Announcement that it had provided “all supporting documents to the auditors during the audit and upon request”. Yet, the Independent Auditors stated on Pages 54 to 56 that they were unable to obtain sufficient appropriate audit evidence. Incredible’s reply to SIAS did not provide any further evidence or information. When asked to review the HB 2021 acquisition, the board re-iterated its belief that the acquisition is in the interest of the company despite the qualified opinion of the auditor on the matter.
  3. Incredible’s reply that the Audit Committee has reviewed and concurred with management does not address the concerns of the Independent Auditors. The Independent Auditors have categorically stated that they were unable to determine whether any additional adjustments to and/or disclosures are needed in relation to Incredible’s acquisition of HB 2021.

Incredible has said in its reply to SIAS that it will not upload its reply to SGXNet. SIAS urges the company to reconsider its position. It is important that Incredible publicly and promptly discloses all material information to its shareholders and stakeholders to enable them to make their own informed judgments and decisions in relation to Incredible.

Apart from the reply, SIAS notes that, among other things, Incredible has not satisfactorily provided clarity on the underlying reasons that led to the variance between $1.06 million in goodwill based on the negotiated purchase consideration of DKK5.2 million for HB 2021 at the point of the acquisition in June 2021 and the recoverable amount of goodwill of $0 that resulted in the write off of the entire goodwill based on financial budgets approved by management as at the end of the financial year in December 2021.

Similarly, SIAS finds it challenging to reconcile management’s estimate that the replacement cost of the “good quality furnishing and fittings armed with bullet-proof display cabinets and drawers as well as advanced security system” is “a few million DKK” and the accounting treatment of HB 2021 in the audited financial statements. An independent valuation can be undertaken to provide more assurance to shareholders on the realisable value.

Further, on the questions relating to $1.6 million in remuneration (including a $1 million bonus) for the executive director, Mr Christian Kwok-Leun Yau Heilesen, the view of the remuneration committee (“RC”) was that it was fair “given the efforts and contribution to the commercial aspects of the Group for the expansion as well as diversification of the Group business”. SIAS notes that the Group reported higher losses of $6.3 million in FY2021, up from a loss of $4.1 million in FY2020. The 5-year financial highlights in Incredible’s 2021 Annual report showed that the company reported losses in all 5 years totalling $17.3 million in losses. In fact, the group has been loss making since the financial year ended 31 December 2015 with losses adding up to $22.3 million. Considering the track record and the approximate market capitalisation of $6 million, the RC’s explanation does not give SIAS assurance that the level and structure of remuneration are appropriate and proportionate to the sustained performance and value creation, a key principle guiding remuneration practices in the Code of Corporate Governance 2018.

SIAS continues to remain concerned about the subject and implications of the Notice of Compliance, the queries by SGX RegCo to Incredible and the Independent Auditors’ qualification and its reasons.


David Gerald
Founder, President & CEO