THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt about any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.
If you have sold or transferred all your shares in A-Living Smart City Services Co., Ltd., you should at once hand this circular together with the enclosed proxy form to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
A-LIVING SMART CITY SERVICES CO., LTD.*
ඩ͛ݺ౽ᅆ̹۬ਕٰ΅Ϟࠢʮ̡
(a joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 3319)
VERY SUBSTANTIAL ACQUISITION IN RELATION TO
THE ACQUISITION OF 60% EQUITY INTEREST IN NEW CMIG PM
AND NOTICE OF THE 2021 FIRST EXTRAORDINARY GENERAL
MEETING
Financial Adviser to A-Living
Capitalised terms used on this cover shall have the same meanings as those defined in the section headed "Definitions" in this circular, unless the context requires otherwise.
A letter from the Board is set out on pages 7 to 23 of this circular.
A notice convening the A-Living EGM to be held at Conference Room, 33/F, Agile Center, 26 Huaxia Road, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, PRC on Tuesday, 13 April 2021 at 3:00 p.m. is set out on pages EGM-1 to EGM-2 of this circular. A proxy form for use at the A-Living EGM is also enclosed in this circular. Such proxy form is also published on the websites of the Stock Exchange (http://www.hkexnews.hk) and A-Living (http://www.agileliving.com.cn).
A-Living Shareholders who intend to appoint a proxy to attend the A-Living EGM shall complete and return the enclosed proxy form in accordance with the instructions printed thereon not less than 24 hours before the time fixed for holding the A-Living EGM or any adjournment thereof (as the case may be). Completion and return of the proxy form will not preclude A-Living Shareholders from attending and voting in person at the A-Living EGM or any adjourned meeting thereof if they so wish.
* For identification purposes only
26 February 2021
CONTENTS | |
Page | |
Definitions ........................................................ | 1 |
Precautionary Measures for the A-Living EGM ........................... | 6 |
Letter from the Board ............................................... | 7 |
Appendix I | - | Financial Information of the A-Living Group .......... | I-1 |
Appendix II | - | Accountant's Report on the New CMIG PM Group ..... | II-1 |
Appendix III | - | Unaudited Pro Forma Financial Information of the | |
Enlarged Group ................................ | III-1 | ||
Appendix IV | - | Management Discussion and Analysis of the New CMIG | |
PM Group .................................... | IV-1 | ||
Appendix V | - | General Information .............................. | V-1 |
Notice of A-Living EGM ............................................. EGM-1
-i-
In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:
"A-Living"
A-Living Smart City Services Co., Ltd.* (ඩ͛ݺ౽ᅆ۬ ̹ਕٰ΅Ϟࠢʮ̡ ), a joint stock company incorporated in the PRC with limited liability, the H shares of which are listed on the main board of the Stock Exchange
"A-Living Board"
"A-Living Director(s)"
board of directors of A-Living the director(s) of A-Living
"A-Living EGM"
the 2021 first extraordinary general meeting of A-Living to be held and convened at Conference Room, 33/F, Agile Center, 26 Huaxia Road, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, PRC on Tuesday, 13 April 2021 at 3:00 p.m. or any adjournment thereof (as the case may be) to consider and, if thought fit, approve the New CMIG PM Agreement (as supplemented) and the transactions contemplated thereunder
"A-Living Group"
"A-Living Shareholder(s)"
"A-Living Supervisor(s)"
A-Living and its subsidiaries holder(s) of the shares of A-Living the supervisor(s) of A-Living
"Acquisitions"
the CMIG PM Acquisition and the New CMIG PM Acquisition
"Announcements"
the announcements of A-Living dated 25 September 2019 in relation to the CMIG PM Acquisition and 12 December 2019, 30 November 2020 and 22 February 2021 in relation to the New CMIG PM Acquisition
"associate"
"CMIG PM"
has the meaning as ascribed to it under the Listing Rules ʕ͏͊ԸيุਕϞࠢʮ̡ (CMIG Futurelife Property Management Limited*), a limited liability company established in the PRC and is owned as to 60% by the Purchaser and as to 40% by the Remaining Shareholder
"CMIG PM Acquisition"
the acquisition of the 60% equity interest in CMIG PM held by the Vendor as contemplated under the CMIG PM Agreement, which had been completed as at the Latest Practicable Date
"CMIG PM Agreement"
the equity transfer agreement dated 25 September 2019 entered into between the Purchaser and the Vendor in relation to the sale and purchase of (i) the 60% equity interest in CMIG PM held by the Vendor; and (ii) the New CMIG PM Interests, the particulars of which are set out in the section headed "(1) THE CMIG PM AGREEMENT" in the announcement of A-Living dated 25 September 2019
"CMIG PM Circular"
the circular of A-Living dated 24 February 2020 in relation to the CMIG PM Acquisition
"CMIG PM Group"
CMIG PM and its subsidiaries, the financial results of which has been consolidated into the financial statements of A-Living
"connected person"
"Enlarged Group"
has the meaning ascribed to it under the Listing Rules the A-Living Group as enlarged by the New CMIG PM Group
"Entrusted Loan Agreement"
the entrusted loan agreement entered into between Kerui PM as borrower and ʕڦڦৄϞࠢபʮ̡ (Zhongxin Trust Company Limited*) as lender for an entrusted loan facility up to RMB2,020,000,000
"Final Consideration"
the consideration for the New CMIG PM Acquisition in the amount of RMB344,250,000
"Formula"
the formula adopted to determine the Final Consideration, being the Kerui Guaranteed Profit x P/E Ratio of 12.5 x 60%
"GFA"
gross floor area
"HK$"
"Hong Kong"
Hong Kong dollar, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the People's Republic of China
"Independent Third Party"
a person, or in the case of a company, such company or its ultimate beneficial owner(s), who is/are independent of and not connected with A-Living and its subsidiaries and their respective connected persons and their respective ultimate beneficial owner(s) or their respective associates
"Kerui Guaranteed Profit"
the net profit after taxation and excluding extraordinary items attributable to New CMIG PM for the year ending 31 December 2020 in the amount of RMB45,900,000 irrevocably warranted and guaranteed by the Vendor to the Purchaser
"Kerui PM"
"Kerui PM Audited Net Profit"
ɪऎ߅يุ၍ଣ೯࢝Ϟࠢʮ̡ (Shanghai Kerui
Property Management Development Co., Ltd.*), a company established in the PRC with limited liability and is owned as to 51% by New CMIG PM
the audited net profit after taxation and excluding extraordinary items attributable to New CMIG PM for the Relevant Year
"Latest Practicable Date"
25 February 2021, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
"Listing Rules"
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"New CMIG PM"
͏يุਕ(ɪऎ)Ϟࠢʮ̡ (Minrui Property Management (Shanghai) Co., Ltd.), a company established in the PRC with limited liability and is owned as to 60% by the Vendor and as to 40% by the Remaining Shareholder
"New CMIG PM Acquisition"
the New CMIG PM Acquisition as contemplated under the New CMIG PM Agreement (as supplemented)
"New CMIG PM Agreement"
the equity transfer agreement dated 12 December 2019 entered into between the Purchaser and the Vendor in relation to the sale and purchase of the New CMIG PM Interests
"New CMIG PM Completion"
completion of the New CMIG PM Acquisition
DEFINITIONS | |
"New CMIG PM Group" | New CMIG PM and Kerui PM |
"New CMIG PM Interests" | the 60% equity interest in New CMIG PM held by the |
Vendor | |
"P/E Ratio" | price to earnings ratio |
"PRC" | the People's Republic of China, for the purpose of this |
circular, shall exclude Hong Kong, the Macau Special | |
Administrative Region of the People's Republic of China | |
and Taiwan | |
"Purchaser" | ˂ݵඩᆓΆุ၍ଣፔ༔Ϟࠢʮ̡ (Tianjin Yachao |
Enterprise Management Consulting Co., Ltd.*), a | |
company established in the PRC with limited liability and | |
is an indirect wholly-owned subsidiary of A-Living | |
"Relevant Year" | the financial year of 2020 |
"Remaining Shareholder"
পइ(ɪऎ)Άุ၍ଣϞࠢʮ̡ (Mingtai
Enterprise Management Co., Ltd.*), a established in the PRC with limited liability
(Shanghai)
company
"RMB"
Renminbi, the lawful currency of the PRC
"Second Supplemental
Agreement"
the second supplemental agreement dated 22 February 2021 entered into between the Purchaser and the Vendor to supplement the New CMIG PM Agreement
"Securities Dealing Codes"
a code for securities transactions by the A-Living Directors and a code for securities transactions by the A-Living Supervisors adopted by A-Living as its own codes of conduct governing A-Living Directors' and A-Living Supervisors' dealings in A-Living's securities on terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules
"SFO"
the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
"Stock Exchange"
The Stock Exchange of Hong Kong Limited
"subsidiary"
has the meaning as ascribed to it under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)
"Supplemental Agreement"
the supplemental agreement dated 30 November 2020 entered into between the Purchaser and the Vendor to supplement the New CMIG PM Agreement
"Transactional Documents"
the New CMIG PM Agreement (as supplemented) and all other documents and agreements necessary for the acquisition of the New CMIG PM Interests (including but not limited to the constitutional documents of New CMIG PM)
"Valuation Report"
a valuation report prepared by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (JLL), an independent professional valuer, in relation to the P/E Ratio of 12.5 as of 30 August 2019
"Vendor"
"Waiver Letter"
ᄿ؇ᔮڦޮඤٰᛆҳ༟ΥྫΆุ(ϞࠢΥྫ) (Guangdong
Fengxin Yinglong Equity Investment Partnership (Limited Partnership)*), a limited partnership established in accordance with the Partnership Laws of the PRC
a letter to be executed by the Remaining Shareholder to waive its pre-emptive right to purchase the New CMIG PM Interests from the Vendor
"Working Day"
any day which banks in the PRC are open for business, except Saturdays, Sundays and statutory holidays as announced by the PRC government
"%"
per cent.
"sq.m."
square meter
PRECAUTIONARY MEASURES FOR THE A-LIVING EGM
In view of the outbreak of coronavirus disease (COVID-19) pandemic (the "COVID-19 Pandemic"), to safeguard the health and safety of A-Living Shareholders who might be attending the A-Living EGM in person, A-Living will implement the following precautionary measures at the A-Living EGM:
• Each attendee will be required to undergo a mandatory body temperature check and sign a health declaration form before entering the A-Living EGM venue. Any person with a body temperature above 37.4 degree Celsius, or is exhibiting flu-like symptoms, may be denied entry into the A-Living EGM venue and be required to leave the A-Living EGM venue.
• A-Living Shareholders, proxies and other attendees are required to comply with the latest epidemic prevention policy requirements of the PRC government and present the corresponding health certificate. Any person who does not comply with this requirement will be required to leave the A-Living EGM venue.
• A-Living Shareholders, proxies and other attendees are required to wear surgical face masks inside the A-Living EGM venue at all times. Any person who does not comply with this requirement will be required to leave the A-Living EGM venue.
• No refreshments will be served at the A-Living EGM.
A-Living Shareholders who are feeling unwell are advised not to attend the A-Living EGM.
For the health and safety of A-Living Shareholders, A-Living would like to encourage A-Living Shareholders to appoint the chairman of the A-Living EGM as their proxy to vote on the relevant resolution at the A-Living EGM, instead of attending the A-Living EGM in person.
As the COVID-19 Pandemic continues to evolve, A-Living will closely monitor the situation and reserves the right to take further measures as appropriate in order to minimise any risk to A-Living Shareholders and others attending the A-Living EGM and to comply with any requirements or recommendations of any government agencies from time to time. A-Living Shareholders are advised to check A-Living's website athttp://www.agileliving.com.cnfor further announcements and updates on the A-Living EGM arrangements that may be issued.
A-Living seeks the understanding and cooperation of all A-Living Shareholders to minimise the risk of community spread of COVID-19 Pandemic.
A-LIVING SMART CITY SERVICES CO., LTD.*
ඩ͛ݺ౽ᅆ̹۬ਕٰ΅Ϟࠢʮ̡
(a joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 3319)
Executive Directors: | Registered Office in the PRC: |
Mr. Chan Cheuk Hung (Co-chairman) | Management Building, Xingye Road |
Mr. Huang Fengchao (Co-chairman) | Agile Garden, Sanxiang Town |
Mr. Li Dalong | Zhongshan |
(President (General Manager) | Guangdong Province, PRC |
and Chief Executive Officer) | |
Principal Place of Office in the PRC: | |
Non-Executive Directors: | 35/F, Agile Center |
Mr. Wei Xianzhong | 26 Huaxia Road |
Ms. Yue Yuan | Zhujiang New Town |
Tianhe District, Guangzhou | |
Independent Non-executive Directors: | Guangdong Province, PRC |
Mr. Wan Kam To | |
Ms. Wong Chui Ping Cassie | Principal Place of Business in Hong Kong: |
Mr. Wang Peng | Level 54, Hopewell Centre |
183 Queen's Road East | |
Hong Kong | |
To the A-Living Shareholders | |
Dear Sir or Madam, |
26 February 2021
VERY SUBSTANTIAL ACQUISITION IN RELATION TO
THE ACQUISITION OF 60% EQUITY INTEREST IN NEW CMIG PM AND NOTICE OF THE 2021 FIRST EXTRAORDINARY GENERAL MEETING
THE NEW CMIG PM ACQUISITION
Reference is made to the Announcements. As disclosed in the announcements of A-Living dated 12 December 2019, 30 November 2020 and 22 February 2021, the Purchaser entered into the New CMIG PM Agreement, the Supplemental Agreement and the Second Supplemental Agreement with the Vendor pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to dispose of, 60% of the equity interest in New CMIG PM at the Final Consideration. Accordingly, certain terms in relation to the New CMIG PM Acquisition originally set out in the CMIG PM Agreement have been superseded by the New CMIG PM Agreement (as supplemented).
Pursuant to the Supplemental Agreement, the conditions precedent to the payment of the Variable Consideration (as defined in the Announcements) were split into the conditions precedent to the payment of the refundable deposit and the conditions precedent to the paymentof the remaining balance of the Variable Consideration. The conditions precedent to the term "Relevant Year" were also amended. As all the revised conditions precedent to the Relevant Year were fulfilled, the terms "Relevant Year", "Kerui Guaranteed Profit", "Formula", "Variable Consideration" were determined under the Supplemental Agreement. The Supplemental Agreement also provided for amendments to the payment manner as to the Variable Consideration.
Pursuant to the Second Supplemental Agreement, the remaining balance of the Final Consideration was adjusted as a result of the combined effect of the debt in the amount of RMB235,138,000 owed by New CMIG PM to CMIG PM and the New CMIG PM Interests.
For details of the terms amendment of the New CMIG PM Agreement, please refer to the announcements of A-Living dated 30 November 2020 and 22 February 2021.
The purpose of this circular is to provide you with, among others, (i) further details of the New CMIG PM Acquisition; (ii) financial information of the A-Living Group; (iii) the accountant's report on the financial information of the New CMIG PM Group; (iv) the unaudited pro forma financial information of the Enlarged Group; (v) management discussion and analysis of the New CMIG PM Group; and (vi) the notice of the A-Living EGM.
(1) The New CMIG PM Agreement (As Supplemented)
The principal terms of the New CMIG PM Agreement (as supplemented) are as follows:
Date
12 December 2019, 30 November 2020 and 22 February 2021
Parties
(1) ˂ݵඩᆓΆุ၍ଣፔ༔Ϟࠢʮ̡ (Tianjin
YachaoEnterpriseManagement
Consulting Co., Ltd.*), as the Purchaser; and
(2)
ᄿ؇ᔮڦޮඤٰᛆҳ༟ΥྫΆุ(ϞࠢΥྫ) (Guangdong Fengxin Yinglong Equity Investment Partnership (Limited Partnership)*), as the Vendor.
To the best of the knowledge, information and belief of the A-Living Board, after making all reasonable enquiries, the Vendor, its limited partners, its general partners and their respective ultimate beneficial owners are Independent Third Parties as at the Latest Practicable Date.
Assets to be acquired
Pursuant to the New CMIG PM Agreement (as supplemented), the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to dispose of, the New CMIG PM Interests at the Final Consideration.
The Final Consideration
The Final Consideration, in the amount of RMB344,250,000 is determined in accordance with the Formula, being the Kerui Guaranteed Profit (being RMB45,900,000) x P/E Ratio of 12.5 x 60%.
As disclosed in the announcement of A-Living dated 22 February 2021, New CMIG PM is indebted to CMIG PM in the amount of RMB235,138,000. Pursuant to the Second Supplemental Agreement, the remaining balance of the Final Consideration in the amount of RMB240,975,000 shall be adjusted by deducting an amount equivalent to RMB235,138,000 times the New CMIG PM Interests of 60%, being RMB141,082,800 and the Purchaser shall only be obliged to pay the remaining balance of the Final Consideration in the amount of RMB99,892,200. Save for the Supplemental Agreement and the Second Supplemental Agreement, all other terms and conditions of the New CMIG PM Agreement shall remain unchanged and shall continue to be in full force and effect.
Accordingly, the Final Consideration shall be payable by the Purchaser to the Vendor in the following manners:
(i) as to RMB103,275,000 as refundable deposit to an escrow account opened by the Vendor with joint signatories of the Vendor and the Purchaser and maintained with a licensed bank in the PRC within 10 Working Days upon fulfilment (or waiver as the case may be) of the conditions precedent (a) to (c) and (f) to (i) set out in the paragraph headed "Conditions precedent to the payment of the Final Consideration" below; and
(ii) as to the remaining balance of RMB99,892,200 to the Vendor within 20 Working Days upon fulfilment (or waiver as the case may be) of the conditions precedent (d) and (e) set out in the paragraph headed "Conditions precedent to the payment of the Final Consideration" below and the refundable deposit in the amount of RMB103,275,000 shall be released to the Vendor as part payment of the Final Consideration.
In the event that (1) condition precedent (d) is not fulfilled; or (2) condition precedent (d) is fulfilled but condition precedent (e) is not fulfilled by the default of the Vendor, such refundable deposit shall be refunded to the Purchaser in full. In the event that condition precedent (d) is fulfilled but condition precedent (e) is not fulfilled by the default of the Purchaser, the Purchaser shall forfeit the deposit in full.
Conditions precedent to the payment of the Final Consideration
(a) the loan and the interests accrued under the Entrusted Loan Agreement having been repaid in full by Kerui PM;
(b) all internal resolutions and procedures of New CMIG PM for approving the transfer of the New CMIG PM Interests having been passed and completed and the Transactional Documents having been executed and performed by New CMIG PM under the New CMIG PM Agreement (as supplemented);
(c) the Remaining Shareholder having provided to the Purchaser the Waiver Letter;
(d) the passing by the A-Living Shareholders who are entitled to vote and not required to abstain from voting under the Listing Rules at the A-Living EGM to be convened and held, of the necessary special resolution(s) to approve, among other things, the New CMIG PM Agreement (as supplemented) and the transactions contemplated thereunder;
(e) subject to the fulfillment of the condition precedent (d) above, New CMIG PM having completed the registration procedure for the transfer of the New CMIG PM Interests to the Purchaser and the renewal of the business licence of New CMIG PM;
(f) all representations and warranties made by the Vendor under the New CMIG PM Agreement (as supplemented) remaining true, complete, accurate, not misleading and with no material omission from the date of the New CMIG PM Agreement (as supplemented) up to the payment date of the Final Consideration;
(g) all obligations as set out in the New CMIG PM Agreement (as supplemented) having been duly observed and performed in all respects by the Vendor from the date of the New CMIG PM Agreement (as supplemented) up to the payment date of the Final Consideration;
(h) there having been no judgment, order, decision or prohibition which would prohibit, restrict or cancel the acquisition of the New CMIG PM Interests and there having been no litigation, arbitration, judgment, order, decision or prohibition that is existing but not determined or pending and which have or will have a material adverse effect on New CMIG PM or the New CMIG PM Acquisition from the date of the New CMIG PM Agreement (as supplemented) up to the payment date of the Final Consideration; and
(i) there having been no material adverse change to the operational results, management condition, business, assets and financial conditions of the New CMIG PM Group from the date of the New CMIG PM Agreement (as supplemented) up to the payment date of the Final Consideration and there has not occurred one or more events that individually or collectively have caused material adverse effect and it is reasonably expected that no such event(s) individually or collectively will occur which would cause material adverse effect.
As at the Latest Practicable Date, conditions precedent (a) to (c) and (f) to (i) have been fulfilled and the refundable deposit in the amount of RMB103,275,000 has been paid to an escrow account opened by the Vendor in accordance with the Supplemental Agreement and the remaining balance of RMB99,892,200 is yet to be paid.
(2) Basis of the Formula for Determining the Final Consideration
The Formula, and in particular the P/E ratio of 12.5 within the Formula, has been determined after arm's length negotiations between the Purchaser and the Vendor on normal commercial terms with reference to, among other things, (i) the Valuation Report (which has been set as a reference for the valuation of the New CMIG PM Group); (ii) the future business prospect of the New CMIG PM Group and the industry in which the New CMIG PM Group operates; and (iii) other reasons and benefits of the New CMIG PM Acquisition as stated under the paragraph headed "REASONS FOR AND BENEFITS OF THE NEW CMIG PM ACQUISITION" below. In view of the above, the A-Living Directors consider that the P/E Ratio of 12.5 applied in the Formula is fair and reasonable.
With reference to the Valuation Report, the indicated P/E ratio as of 30 August 2019 (the "Reference Date") was around 14.67. The indicated P/E ratio was derived through the selection and investigation of comparable companies, which (a) have been actively traded on the Stock Exchange for no less than six months preceding the Reference Date, (b) are mainly engaged in provision of property management services in the PRC, and (c) are with sufficient market and financial data. The exhaustive list of comparable companies that satisfied the aforementioned criteria are set out as below.
Ticker Name
1778 HK Equity
Colour Life Services
Group Co., Limited
Colour Life Services Group Co., Ltd. is a real estate management company in the People's Republic of China.
2669 HK Equity
China Overseas
Property Holdings Limited
China Overseas Property Holdings Limited operates as a property management firm. The company manages residential communities, commercial properties and government properties in China.
1538 HK EquityZhong Ao Home
Group LimitedZhong Ao Home Group Limited is an independent property management company in China. The company provides property developers and owners with management services to residential properties. Zhong Ao Home Group also offers sales assistance by deploying on-site staff.
Ticker
Name
2869 HK Equity
Greentown Service
Group Co. Ltd.
Greentown Service Group Co. Ltd. operates in the real estate service industry. The company provides property management, consulting, and community value-added services.
1417 HK EquityRiverine China
Holdings Limited
Riverine China Holdings Limited operates as a property management company. The company offers engineering, repair and maintenance, security, and cleaning and gardening services. Riverine China Holdings serves office buildings, cultural venues, stadiums, exhibition halls, government properties, and industrial areas in China.
3319 HK EquityA-Living Services
Co., Ltd.
A-Living Services Co., Ltd. offers property management services. The company provides hydropower maintenance, interior decoration works, landscaping works, parking management, home cleaning services, and other services. A-Living Services offers services in China.
6098 HK EquityCountry Garden
Services Holdings Company Limited
Country Garden Services Holdings
Company Limited provides real estate development services. The company offers services to residential apartments, multi-functional complex buildings, government and public facilities, industrial parks, highway service stations, and schools. Country Garden Services Holdings serves clients in China.
2168 HK EquityKaisa Prosperity
Holdings Limited
Kaisa Prosperity Holdings Limited provides real estate services. The company offers services to mid-to-high-end communities, commercial complexes, office buildings, cultural and sports venues, municipal public buildings, public facilities and industrial parks.
Ticker Name
1995 HK Equity
Ever Sunshine
Ever Sunshine Lifestyle Services Group
Lifestyle Services Group Limited
Limited operates as an investment holding company. The company and its subsidiaries principally engage in provision of property management and value-added services to non-property owners. Ever Sunshine Lifestyle Services Group serves customers in China.
Based on the investigation of Jones Lang LaSalle Corporate Appraisal and Advisory Limited (JLL), as the above companies are engaged in providing property management services, these comparable companies, together with New CMIG PM, might be similarly subject to fluctuations in the economy and performance of the industry, among other factors. Therefore, they are confronted with similar market and industrial risks and rewards. The selected companies have represented a complete comparable pool and are sufficient to form a fair and reasonable valuation opinion.
The calculation also takes into consideration (a) the control premium (being 10.02%), with reference to public transactions which were completed within five years preceding the Reference Date, by comparing the observed prices paid for controlling interests in publicly-traded securities to the publicly-traded price before such a transaction is announced (often referred to as market participant acquisition premiums, or MPAPs), and (b) the liquidity discount (being 27.7%), with reference to the Job Aid issued by Internal Revenue Service for valuation professionals (for reference only:https://www.irs.gov/businesses/valuation-of-assets).
(3) Completion
New CMIG PM Completion will take place upon fulfillment of condition precedent (e) in the section headed "(1) THE NEW CMIG PM AGREEMENT (AS SUPPLEMENTED) - Conditions precedent to the payment of the Final Consideration" above and the issuance of the new business licence by the relevant governmental authority in the PRC.
Upon the New CMIG PM Completion, the A-Living Group will be interested in 60% equity interest in New CMIG PM and New CMIG PM will become a non-wholly owned subsidiary of A-Living. The financial results of New CMIG PM will be consolidated into the A-Living Group's financial statements.
PROFIT GUARANTEE
The Vendor has irrevocably warranted and guaranteed to the Purchaser that the Kerui PM Audited Net Profit will not be less than the Kerui Guaranteed Profit.
If the Kerui PM Audited Net Profit is less than the Kerui Guaranteed Profit, the Vendor shall pay a compensation amount to the Purchaser calculated as follows:
B = (the Kerui Guaranteed Profit - the Kerui PM Audited Net Profit) x 12.5 x 60% x (1 + R x M/360)
where:
R = Benchmark interest rate for loans for the corresponding period stipulated by the
People's Bank of China
M = Number of days lapsed since the date of the payment of the Final Consideration
Should Kerui PM record a loss in the Relevant Year, the Kerui PM Audited Net Profit shall be deemed to be zero.
The Purchaser shall nominate auditors to complete the audited accounts of New CMIG PM Group for the Relevant Year within six months after end of the Relevant Year.
In such event, the Vendor shall pay the compensation amount equivalent to "B" above to the Purchaser within five Working Days after notice of compensation has been served by the Purchaser to the Vendor.
REASONS FOR AND BENEFITS OF THE NEW CMIG PM ACQUISITION
Through the New CMIG PM Acquisition, A-Living will further consolidate its leading position and increase the market share especially in Shanghai and East China.
Consolidating market-leading position, increasing market share in tier-one cities
Kerui PM is a renowned leading comprehensive property management company in China and one of the largest third-party property management companies in Shanghai. As of 31 August 2020, Kerui PM had 284 projects with GFA under management of approximately 41.57 million sq.m..
Through 18 years of solid development, Kerui PM has taken hold in Shanghai and expanded its business nationwide. Over 50% of its projects are located in Shanghai and Yangtze River Delta. With the strong business presence of Kerui PM in such regions, the geographic blanks of the A-Living Group will be complemented and the A-Living Group's market share in East China will be increased rapidly. As an independent third-party property management company, Kerui PM has built strong third-party expansion capability as well as marketing networks. Upon the New CMIG PM Completion, the A-Living Group will further enhance its expansion capability in third-party market.
Further diversifying business portfolios, managing numerous landmark projects
After the consolidation of the CMIG PM Group in 2020, the A-Living Group has become a comprehensive property management platform company with nationwide layout and diversified business portfolios. Kerui PM also provides services for the projects in different niche markets with high entry barriers, such as mid-to high-end residential properties, super high-rise commercial buildings, office buildings and complex, rail transits and schools, etc.
Backed by its leading service standard, profound experience in multiple business portfolios and strong brand competitiveness, Kerui PM is appointed to manage numbers of landmark projects nationwide, including the tallest building in Jiangsu - Zifeng Tower in Nanjing, the tallest building in Central China - Qianxi Square in Zhengzhou, Greenland Central Plaza in Shanghai, notable education institutions such as East China University of Political Science and Law, public buildings such as Shanghai Metro Line 1, 3 and 9 and Memorial Site of the Second National Congress of the Communist Party of China, etc.
With high quality service standards, overall brand strengths will be further enhanced
Kerui PM is positioned as a mid-to high-end brand and provides services mainly in economically developed regions, which is in line with A-Living's brand positioning. It is one of the "Top 100 Property Management Companies in China" and has been ranked as the 1st or 2nd of "Top 100 Property Management Companies in Shanghai" for past 10 years. Upon the New CMIG PM Completion, a brand matrix of 18 leading brands of the A-Living Group will be formed, which will further improve the comprehensive competitive edges and enhance overall brand influence of A-Living.
Kerui PM has initiated informatization development strategy since 2013, equipped with advanced and comprehensive information systems. As an expert of modern property services, Kerui PM takes the lead in the industry to adopt an integrated management model of "separate management from execution". Kerui PM contributes to compiling various national standards of property management and takes the lead in compiling and revising local industry standards in Shanghai. During 2007 to 2017, Kerui PM was ranked on the top of the list in terms of the public satisfaction rate in Shanghai and granted with "Golden Property Management Enterprise". Due to the high satisfaction rate of clients through extraordinary service experience, the average contract renewal rate of its projects for previous three years was as high as 96.9%.
Improving operating efficiency and controlling cost through post-acquisition empowerment works, and accelerating growth with synergy in market expansion
The A-Living Group has gained profound experience in participating industry consolidation and post-acquisition empowerment and established systematic framework of post-acquisition integration works. Upon the New CMIG PM Completion, the A-Living Group will replicate its successful experience in post-acquisition integration to further enhance the operating efficiency of Kerui PM. After the New CMIG PM Acquisition, both parties will unifymanagement information systems, optimize operation management mechanism, share quality supplier resources and conduct centralized procurement to further improve operating and management efficiency, thus to create economies of scale. Meanwhile, the A-Living Group will fully support the development of Kerui PM by taking advantage of Kerui PM's brand strengths, and continuously improving its market expansion capability to achieve breakthrough in geographic layout and business portfolio coverage.
REASONS FOR AND BENEFITS OF THE SUPPLEMENTAL AGREEMENT AND THE SECOND SUPPLEMENTAL AGREEMENT
As the Variable Consideration (as defined in the Announcements) and other variable parameters are determined pursuant to the Supplemental Agreement, the parties to the New CMIG PM Agreement has a fuller picture of the acquisition of the New CMIG PM Interests. Therefore, the Purchaser and the Vendor have agreed to, on an arm's length basis, vary the payment terms of the Variable Consideration into two instalments which largely mirror the payments terms set out under the CMIG PM Agreement and as disclosed in the CMIG PM Circular. Furthermore, the refundable deposit shall be deposited in an escrow account with the joint signatories of the Vendor and the Purchaser and the Vendor is not entitled to use or otherwise deal with such deposit without the written consent from the Purchaser.
Further, as New CMIG PM is indebted to CMIG PM in the amount of RMB235,138,000. Pursuant to the Second Supplemental Agreement, the A-Living Board is of the view that the remaining balance of the Final Consideration in the amount of RMB240,975,000 shall be adjusted to RMB99,892,200. The A-Living Board therefore is of the view that such variations under the Supplemental Agreement and the Second Supplemental Agreement are on normal commercial terms, fair and reasonable, and are sufficient to safeguard the interests of A-Living and A-Living Shareholders as a whole.
INFORMATION ON A-LIVING AND THE PURCHASER
A-Living
A-Living is a reputable property management service provider focusing on mid-to high-end properties. The A-Living Group ranks the 4th of the "Top 100 Property Management Companies in China" with five major business segments, namely "property management services", "asset management services", "public services", "city services" and "community commercial services". Capitalizing on the integrated resources advantage of seven regional offices, acquired companies and joint ventures, the A-Living Group strives to realize the vision of expanding its business coverage into the whole industry chain with diversified business portfolio.
The Purchaser
The Purchaser is a company established in the PRC with limited liability and is principally engaged in business management advisory. The Purchaser is an indirect wholly-owned subsidiary of A-Living.
INFORMATION ON THE VENDOR AND THE REMAINING SHAREHOLDER
The Vendor
The Vendor is a limited partnership established in accordance with the Partnership Laws of the PRC with the business scope of equity investment and related consulting services.
Based on public information available:
(a) the Vendor is owned as to 99.95% by its limited partner, namely Guangzhou Huiying Capital Management Co., Ltd.* (ᄿψිޮ༟͉၍ଣϞࠢʮ̡), and 0.05% by its general partner, namely Guangdong Huada Venture Capital Investment Management
Co., Ltd.* (ᄿ؇ശɽ௴ҳҳ༟၍ଣϞࠢʮ̡);
(b) Guangzhou Huiying Capital Management Co., Ltd.* (ᄿψිޮ༟͉၍ଣϞࠢʮ̡) is owned as to 80% by Chen Xiaofeng and 20% by Lu Jinghui;
(c) Guangdong Huada Venture Capital Investment Management Co., Ltd.* (ᄿ؇ശɽ௴ ҳҳ༟၍ଣϞࠢʮ̡) is owned as to 30% by Guangdong Huadazhi Technology Investment Co, Ltd.* (ᄿ؇ശɽ౽߅Ҧҳ༟Ϟࠢʮ̡), 15% by Shenzhen Huaxin Resources Investment Management Co., Ltd.* (ଉέശڦ༟๕ҳ༟၍ଣٰ΅Ϟࠢʮ ̡), 15% by Guangdong Boxin Investment Partnership (Limited Partnership)* (ᄿ؇ པ㒥ҳ༟ΥྫΆุ(ϞࠢΥྫ)), 11% by Xu Binbin, 8% by Fu You, 7.5% by Guangdong Wenqu Yaoguang Technology Innovation Research Partnership (Limited Partnership)* (ᄿ؇˖ϜာΈ߅Ҧ௴อӺΥྫΆุ(ϞࠢΥྫ)), 7.5% by Gong Fengjuan and 6% by Jiang Hao;
(d) Guangdong Huadazhi Technology Investment Co, Ltd.* (ᄿ؇ശɽ౽߅Ҧҳ༟Ϟࠢ ʮ̡) is owned as to 38% by Lin Zexin, 18% by He Hong, 16% by Xie Shaoying, 14% by Li Hui, 10% by Zhou Shenglan and 4% by Xie Bolan;
(e) Shenzhen Huaxin Resources Investment Management Co., Ltd.* (ଉέശڦ༟๕ҳ༟ ၍ଣٰ΅Ϟࠢʮ̡) is owned as to 88.3117% by Guangzhou Resources Investment
Group Co., Ltd.* (ᄿψ༟๕ҳ༟ණྠϞࠢʮ̡) and 11.6883% by Zeng Jianning;
(f) Guangdong Boxin Investment Partnership (Limited Partnership)* (ᄿ؇པ㒥ҳ༟ ΥྫΆุ(ϞࠢΥྫ)) is owned as to 99% by Wang Xiaorong and 1% by Guangzhou Yiyuyun Technology Consulting Co., Ltd.* (ᄿψ̹අρථҦஔፔ༔Ϟࠢʮ̡);
(g) Guangdong Wenqu Yaoguang Technology Innovation Research Partnership (Limited Partnership)* (ᄿ؇˖ϜာΈ߅Ҧ௴อӺΥྫΆุ(ϞࠢΥྫ)) is owned as to 80% by Guangzhou Yuheng Industrial Research Study Technology Innovation Development Center Limited Partnership* (ᄿψ͗ፅପኪ߅Ҧ௴อ೯࢝ʕː(Ϟ ࠢΥྫ)) and 20% by Guangzhou Wenqu Yaoguang Investment Limited Partnership*
(ᄿψ˖ϜာΈҳ༟ΥྫΆุ(ϞࠢΥྫ));
(h) Guangzhou Resources Investment Group Co., Ltd.* (ᄿψ༟๕ҳ༟ණྠϞࠢʮ̡ )is owned as to 46.5160% by Zeng Jianning, 24.2420% by Zhang Xiaojian, 12.5990% by Cao Cuicui, 7.1460% by Deng Wenqiu, 5.5760% by Sun Jiang, 2% by Wu Gang, 1% by Nanchang Zhengzong Industrial Co., Ltd. (ی͍֚ྼุϞࠢʮ̡), 0.5% by Zhou Gang and 0.4210% by Duan Zhenkui;
(i) Guangzhou Yiyuyun Technology Consulting Co., Ltd.* (ᄿψ̹අρථҦஔፔ༔Ϟ ࠢʮ̡) is wholly-owned by Wu Yunfung;
(j) Guangzhou Yuheng Industrial Research Study Technology Innovation Development Center Limited Partnership* (ᄿψ͗ፅପኪ߅Ҧ௴อ೯࢝ʕː(ϞࠢΥྫ)) is owned as to 90% by Gongqingcheng Ruikenai Investment Management Limited Partnership* (ڡ۬ٵߗҳ༟၍ଣΥྫΆุ(ϞࠢΥྫ )) and 10% by Gongqingcheng Pralis Investment Co., Ltd.* (ڡ۬౷זлҳ༟Ϟࠢʮ̡);
(k) Nanchang Zhengzong Industrial Co., Ltd. (ی͍֚ྼุϞࠢʮ̡) is wholly-owned by Chen Junhong;
(l) Guangzhou Wenqu Yaoguang Investment Limited Partnership* (ᄿψ˖ϜာΈҳ༟ ΥྫΆุ(ϞࠢΥྫ)) is owned as to 97.5% by Qu Ran and 2.5% by Qu Lianli;
(m) Gongqingcheng Ruikenai Investment Management Limited Partnership* (ڡ۬ ٵߗҳ༟၍ଣΥྫΆุ(ϞࠢΥྫ)) is owned as to 90% by Zhang Lei and 10% by Gongqingcheng Pralis Investment Co., Ltd.* (ڡ۬౷זлҳ༟Ϟࠢʮ̡); and
(n) Gongqingcheng Pralis Investment Co., Ltd.* (ڡ۬౷זлҳ༟Ϟࠢʮ̡ ) is owned as to 90% by Zhang Lei and 10% by Lin Jian.
To the best of the knowledge, information and belief of the A-Living Board, after making all reasonable enquiries, the Vendor, its limited partners and its general partners and their respective ultimate beneficial owners are Independent Third Parties as at the Latest Practicable Date.
The Remaining Shareholder
In or about April 2020, ʕ͏͊ԸછٰණྠϞࠢʮ̡ (CMIG Futurelife Holdings Group Company Limited*) (being the remaining shareholder disclosed in the Announcements) transferred all its 40% equity interests to the Remaining Shareholder which is a wholly-owned subsidiary of ʕ͏͊ԸછٰණྠϞࠢʮ̡ (CMIG Futurelife Holdings Group Company Limited*). The Remaining Shareholder is a company established in the PRC with limited liability and is principally engaged in investment management.
Based on public information available, ʕ͏͊ԸછٰණྠϞࠢʮ̡ (CMIG Futurelife Holdings Group Company Limited*) is owned as to 65% by China Minsheng Investment Corp., Ltd and 35% by ᄿ؇ޮߕͭ᳅ҳ༟ΥྫΆุ(ϞࠢΥྫ) (Guangdong Yingmei Licheng Investment Limited Partnership*). ᄿ؇ޮߕͭ᳅ҳ༟ΥྫΆุ(ϞࠢΥྫ) (Guangdong Yingmei Licheng Investment Limited Partnership*) is owned as to 80% by Chen Xiaofeng and 20% by Lu Jinghui.
To the best of the knowledge, information and belief of the A-Living Board after making all reasonable enquiries, China Minsheng Investment Corp., Ltd. is a leading international private investment group founded in Shanghai which was initiated by the All-China Federation of Industry and Commerce in China and launched by 59 large-scale private enterprises in the PRC, some of which are among the PRC's top 500 companies. China Minsheng Investment Corp., Ltd. is a conglomerate with a wide variety of businesses including equity investment, equity investment management, business consulting, financial consulting, industrial investment, asset management, and investment consulting.
As at the Latest Practicable Date, the Remaining Shareholder, ʕ͏͊ԸછٰණྠϞࠢʮ ̡ (CMIG Futurelife Holdings Group Company Limited*) and China Minsheng Investment Corp., Ltd are connected persons of A-Living at subsidiary level. Save for the above, to the best of the knowledge, information and belief of the A-Living Board after making all reasonable enquiries, other ultimate beneficial owners of the Remaining Shareholder are Independent Third Parties as at the Latest Practicable Date.
INFORMATION OF THE NEW CMIG PM GROUP
New CMIG PM is a company established in the PRC with limited liability with the business scope of property management. New CMIG PM is owned as to 60% by the Vendor and as to 40% by the Remaining Shareholder.
Kerui PM is a company established in the PRC with limited liability and is principally engaged in property management. Kerui PM is owned as to 51% by New CMIG PM.
FINANCIAL INFORMATION OF THE NEW CMIG PM GROUP
Set out below is the audited consolidated financial information of the New CMIG PM Group for the three years ended 31 December 2019 and the eight months ended 31 August 2020 (the "Track Record Period") as extracted from Appendix II to this circular:
For the eight | |
months ended | |
For the year ended 31 December | 31 August |
2017 2018 2019 | 2020 |
RMB'000 RMB'000 RMB'000 | RMB'000 |
Revenue | 807,464 | 946,465 | 1,042,927 | 743,606 |
Profit before income tax | 60,294 | 81,494 | 100,458 | 96,066 |
Profit for the year/period | 45,533 | 59,780 | 74,526 | 71,932 |
Based on the audited consolidated financial information of the New CMIG PM Group, the audited consolidated net asset value of the New CMIG PM Group was approximately RMB186.1 million as at 31 August 2020.
Reconciliation of financial information of the New CMIG PM Group
Set out below is a reconciliation of net profit after taxation of the New CMIG PM Group between the audited consolidated financial information of the New CMIG PM Group for the Track Record Period as disclosed in the Appendix II to this circular and the unaudited financial information of the New CMIG PM Group as disclosed in the Announcements, which was prepared based on the unaudited management accounts of Kerui PM:
For the eight months ended
For the year ended 31 December
2017 2018
2019
31 August 2020
RMB'000 RMB'000
RMB'000
RMB'000
Net profit after taxation per audited financial information as extracted from Appendix II to this circular
45,533
59,780
74,526 71,932
Add back/(minus):
Amortisation of the intangible assets(Note 1)
9,063
9,284
9,394 6,263
Unallocated and non-recurring corporate expenses(Note 2)
Other adjustments(Note 3) Net profit after taxation and excluding non-recurring items per unaudited financial information as disclosed in the Announcements/prepared on the same basis as disclosed in the Announcements
1,644 31,432
6,026 8,359
2,194 -
(3,443)
-
87,672
83,449 86,114(Note 4)
74,752(Note 4)
Notes:
(1) Such amount arose from the recognition of intangible assets upon the purchase price allocation as a result of historical acquisition of Kerui PM in 2016.
(2) Such amount primarily include net non-recurring items such as interest expenses on asset-backed securities, net of the interest income on amounts due from related companies, and other one-off items.
(3) The adjustment arose primarily due to differences in the accounting policies adopted in the preparation of the audited financial information as extracted from Appendix II to this circular and that for the unaudited financial information as disclosed in the Announcements.
(4) Such amount has not been included in the Announcements. For illustrative purpose, such amount represents the net profit after taxation and excluding non-recurring items of the New CMIG PM Group for the year ended 31 December 2019 and eight months ended 31 August 2020 prepared based on the same basis as those disclosed in the Announcements, which is based on the unaudited management accounts of Kerui PM.
FINANCIAL EFFECTS OF THE NEW CMIG PM ACQUISITION ON THE A-LIVING GROUP
Earnings
The audited net profit after tax of the A-Living Group for the financial year ended 31 December 2019, as disclosed in 2019 annual report of A-Living, was approximately RMB1,292 million.
As set out in Appendix II - ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP to this circular, the New CMIG PM Group recorded an audited net profit after tax of approximately RMB74.5 million for the financial year ended 31 December 2019 and approximately RMB71.9 million for the eight months ended 31 August 2020.
Excluding the adjusting items in the reconciliations, the New CMIG PM Group recorded net profit after tax of approximately RMB86.1 million for the financial year ended 31
December 2019 and approximately RMB74.8 million for the eight months ended 31 August 2020.
The A-Living Directors consider that the New CMIG PM Acquisition will bring positive contribution to the earnings of the Enlarged Group but the quantification of such contribution will depend on the respective future performance of the New CMIG PM Group.
Assets and liabilities
As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix III to this circular, if the New CMIG PM Acquisition had been taken place as at 30
June 2020, the A-Living Group's total assets would increase from approximately RMB12.8 billion to approximately RMB13.9 billion and total liabilities would increase from approximately RMB5.2 billion to approximately RMB6.2 billion, representing an increase of total consolidated net assets position of approximately RMB0.1 billion upon New CMIG PM Completion.
Further details of the financial effect of the New CMIG PM Acquisition together with the bases and assumptions taken into account in preparing the unaudited pro forma financial information of the Enlarged Group are set out, for illustration purpose only, in Appendix III to this circular.
LISTING RULES IMPLICATIONS
As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Acquisitions on an aggregated basis, exceed(s) 100%, the Acquisitions constitute a very substantial acquisition for A-Living under Chapter 14 of the Listing Rules subject to the reporting, announcement, circular requirements and shareholders' approval requirements under Chapter 14 of the Listing Rules.
A-LIVING EGM
A notice convening the A-Living EGM is set out on pages EGM-1 to EGM-2 of this circular. The A-Living EGM will be convened and held at Conference Room, 33/F, Agile Center, 26 Huaxia Road, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, PRC on Tuesday, 13 April 2021 at 3:00 p.m. to consider and, if thought fit, approve the special resolution in relation to, among other things, the New CMIG PM Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the transaction contemplated thereunder by the A-Living Shareholders who are entitled to vote and not required to be abstained from voting under the Listing Rules.
The proxy form of the A-Living EGM is also enclosed in this circular.
For determining the entitlement to attend and vote at the A-Living EGM, the register of members of A-Living will be closed from Saturday, 13 March 2021 to Tuesday, 13 April 2021, both dates inclusive, during which period no transfer of Shares will be registered. In order to qualify for attending and voting at the A-Living EGM, holders of H Shares whose transfer documents have not been registered are required to submit the share certificates together with the properly completed share transfer forms to A-Living's H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:30 p.m. on Friday, 12 March 2021 for registration. Holders of H Shares who are registered with Tricor Investor Services Limited on or before the aforementioned date are entitled to attend the A-Living EGM.
If you intend to appoint a proxy to attend the A-Living EGM, you are required to complete and return the accompanying proxy form in accordance with the instructions printed thereon. For holders of H Shares, the proxy form should be returned to A-Living's H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong. For holders of Domestic Shares, the proxy form should be returned to A-Living's principal place of office in the PRC at 35th Floor, Agile Center, 26 Huaxia Road, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, PRC by personal delivery or by postnot less than 24 hours before the time fixed for holding the A-Living EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the A-Living EGM or at any other adjourned meeting should you so wish.
Pursuant to Rule 13.39(4) of the Listing Rules, any vote of A-Living Shareholders at a general meeting must be taken by poll. Therefore, voting on all resolutions set out in the notice of A-Living EGM shall be taken by way of poll. Any A-Living Shareholders who are involved in or interested in the New CMIG PM Acquisition are required to abstain from voting on the relevant special resolution(s) approving the New CMIG PM Acquisition.
As at the Latest Practicable Date, to the best of A-Living Directors' knowledge, information and belief after having made all reasonable enquiries, no A-Living Shareholder has a material interest in the New CMIG PM Acquisition and is required to abstain from voting on the relevant resolution(s) to be proposed at the A-Living EGM.
RECOMMENDATION
The A-Living Directors consider that the New CMIG PM Acquisition is made on normal commercial terms, fair and reasonable and in the interests of A-Living and the A-Living Shareholders as a whole. Accordingly, the A-Living Directors recommend the A-Living Shareholders to vote in favour of the resolution to be proposed at the A-Living EGM to approve the New CMIG PM Acquisition.
ADDITIONAL INFORMATION
Your attention is also drawn to the additional information set out in the appendices to this circular.
Yours faithfully,
By order of the Board
A-Living Smart City Services Co., Ltd.
Li Dalong
Executive Director, President (General Manager)
and Chief Executive Officer
1. SUMMARY OF FINANCIAL INFORMATION
The consolidated financial information of the A-Living Group for the year ended 31 December 2017, 2018 and 2019 and for the six months ended 30 June 2020 are disclosed in the following documents which have been published on the respective websites of the Stock Exchange (www.hkexnews.hk) and A-Living (www.agileliving.com.cn) and are incorporated by reference into this circular:
(i) annual report of A-Living for the year ended 31 December 2018 published on 9 April 2019 (pages 91 to 172) (https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0409/ltn20190409485.pdf);
(ii) annual report of A-Living for the year ended 31 December 2019 published on 7 April 2020 (pages 96 to 202) (https://www1.hkexnews.hk/listedco/listconews/sehk/2020/ 0407/2020040700576.pdf); and
(iii) interim report of A-Living for the six months ended 30 June 2020 published on 21 September 2020 (pages 39 to 86) (https://www1.hkexnews.hk/listedco/listconews/ sehk/2020/0921/2020092100478.pdf).
For the consolidated financial information of the CMIG PM Group for the year ended 31 December 2017 and 2018 and for the nine months ended 30 September 2019, please refer to the CMIG PM Circular (https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0224/ 2020022400655.pdf)
2. INDEBTEDNESS
As at the close of business on 31 December 2020, being the most recent practicable date for the purpose of the statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding borrowings and lease liabilities of RMB293,055,000, details of which are set out as follows:
The New | |||
CMIG PM | |||
The Group | Group | Total | |
RMB'000 | RMB'000 | RMB'000 | |
Borrowings | 255,992 | - | 255,992 |
Bank borrowings | |||
- Secured | 21,950 | - | 21,950 |
- Unsecured | 5,000 | - | 5,000 |
Asset-backed securities | |||
- Secured | 206,000 | - | 206,000 |
Other borrowings | |||
- Secured | 786 | - | 786 |
Non-controlling shareholder loans | |||
- Unsecured | 22,256 | - | 22,256 |
Lease liabilities | 37,063 | - | 37,063 |
Total* | 293,055 | - | 293,055 |
*Note: As set out in the Letter from the Board, New CMIG PM was indebted to CMIG PM (a subsidiary of the A-Living Group) in the amount of RMB235,138,000. The outstanding borrowings of the Enlarged Group did not include the debt of RMB235,138,000 due to CMIG PM by New CMIG PM, which was eliminated upon consolidation.
The A-Living Directors confirm that, save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as at the close of business on 31 December 2020, the Enlarged Group did not have any material debt securities issued and outstanding, and authorised or otherwise created but unissued, or term loans or other borrowings or indebtedness in the nature of borrowing of the Enlarged Group including bank overdrafts and liabilities under acceptances or acceptance credits or hire purchase commitments or outstanding mortgages and charges or guarantees or other material contingent liabilities.
3. WORKING CAPITAL
The A-Living Directors are of the opinion that, after taking into account of the financial resources available to the Enlarged Group, including internally generated funds, existing bank and other borrowings, the Enlarged Group has sufficient working capital for its requirements for the next twelve (12) months from the date of this circular.
4. FINANCIAL AND TRADING PROSPECTS OF THE A-LIVING GROUP
The A-Living Group is a reputable property management service provider focusing on mid-to high-end properties. It offers a comprehensive portfolio of services and has developed three business lines, namely property management services, community value-added services and extended value-added services. The A-Living Group has expanded its business coverage into whole industry chain with diversified business portfolio, and has formed the synergetic development of five major business segments, namely "property management services", "asset management services", "public services", "city services" and "community commercial services".
Kerui PM is a renowned leading comprehensive property management company in China and one of the largest third-party property management companies in Shanghai. As of 31 August 2020, Kerui PM had 284 projects with GFA under management of approximately 41.57 million sq.m..
Kerui PM has leading market share in its headquarters, Shanghai, and has expanded its business nationwide after 18 years of solid development. Over 50% of its projects are located in Shanghai and Yangtze River Delta. The geographic layout of Kerui PM can largely complement the blanks of A-Living and increase the market share of A-Living in East China rapidly. Joint hands with Kerui PM, A-Living's third-party expansion capability will be further strengthened.
Kerui PM also manages projects in diversified business portfolios with high entry barriers, including mid-to high-end residential properties, super high-rise commercial buildings, office buildings, complex, transits and schools, etc. With its industry-leading service standard, extensive management experience in various business portfolios and strong brand, Kerui PM manages lots of landmark projects, including city landmark, super high-rise buildings and complex such as the tallest building in Jiangsu - Zifeng Tower in Nanjing, the tallest building in Central China - Qianxi Square in Zhengzhou, Greenland Central Plaza in Shanghai, notable education institutions such as East China University of Political Science and Law, public buildings such as Shanghai Metro Line 1, 3 and 9 and Memorial Site of the Second National Congress of the Communist Party of China, etc. The advanced experience gained in the benchmark projects of Kerui PM will be replicated and promoted to other and upcoming projects of A-Living.
Upon New CMIG PM Completion, the current business portfolio and geographic layout of A-Living will be complemented effectively, while consolidating the existing leading position of A-Living and creating synergies. In addition, the New CMIG PM Acquisition can largely improve the management scale, profitability and brand competitiveness of A-Living, thereby strengthening A-Living's position as a leading property management services enterprise with nationwide layout, comprehensive business portfolios and reputable brands.
Looking forward, adhering to the development strategy of 'consolidating footholds in Beijing, Shanghai and Guangzhou, and serving the whole nation of China', A-Living will continuously pursue the balanced layout with national geographic coverages and diversified business portfolio. Following the New CMIG PM Acquisition, A-Living will focus on the consolidation with New CMIG PM, solidifying its leading position and creating synergies. A-Living will further expand market shares in property management service segment of residential, public, commercial and office buildings, exploring the potential of community value-added services, improving operating efficiency, so as to create better and longer-term returns for A-Living Shareholders.
5. MATERIAL ADVERSE CHANGE
The A-Living Directors confirm that there had been no material adverse change in the financial or trading position of the A-Living Group since 31 December 2019, being the date to which the latest published audited financial statements of A-Living were made up, up to the Latest Practicable Date.
6. COMPANIES ACQUIRED AFTER THE DATE TO WHICH THE LATEST PUBLISHED AUDITED ACCOUNTS WERE MADE UP
The CMIG PM Acquisition
As disclosed in the Announcements and the CMIG PM Circular, on 25 September 2019, the Purchaser entered into the CMIG PM Agreement with the Vendor pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to dispose of, inter alia, the 60% equity interest in CMIG PM at a cash consideration of RMB1,560,000,000.
CMIG PM is a company established in the PRC with limited liability and is principally engaged in property management services. For further details, please refer to the CMIG PM Circular.
As at the Latest Practicable Date, the CMIG PM Acquisition has been completed. There will be no variation in the aggregate of the remuneration payable to and benefits in kind receivable by the directors of the acquiring company in consequence of such acquisition.
The following is the text of a report set out on pages II-1 to II-3, received from the Company's reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular
ACCOUNTANT'S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF A-LIVING SMART CITY SERVICES CO., LTD.
Introduction
We report on the historical financial information of Minrui Property Management (Shanghai) Co., Ltd. (the "New CMIG PM") and its subsidiaries (together, the "New CMIG PM Group") set out on pages II-4 to II-66, which comprises the consolidated statements of financial position of the New CMIG PM Group as at 31 December 2017, 2018 and 2019 and 31 August 2020, the statements of financial position of the New CMIG PM as at 31 December 2019 and 31 August 2020, and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years/period then ended (the "Track Record Period") and a summary of significant accounting policies and other explanatory information (together, the "Historical Financial Information"). The Historical Financial Information set out on pages II-4 to II-66 forms an integral part of this report, which has been prepared for inclusion in the circular of A-Living Smart City Services Co., Ltd. (the "Company") dated 26 February 2021 (the "Circular") in connection with the proposed acquisition of the New CMIG PM by the Company.
Directors' responsibility for the Historical Financial Information
The directors of the Company and the New CMIG PM are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.
Reporting accountant's responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants' Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant's judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity's preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the accountant's report, a true and fair view of the financial position of the New CMIG PM as at 31 December 2019 and 31 August 2020 and the consolidated financial position of the New CMIG PM Group as at 31 December 2017, 2018 and 2019 and 31 August 2020 and of its consolidated financial performance and its consolidated cash flows for the Track Record Period in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.
Review of stub period comparative financial information
We have reviewed the stub period comparative financial information of the New CMIG PM Group which comprises the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the eight months ended 31 August 2019 and other explanatory information (the "Stub Period Comparative Financial Information"). The directors of the Company are responsible for the presentation and preparation of the Stub Period Comparative Financial Information in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to theHistorical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued by the
HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountant's report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
Adjustments
In preparing the Historical Financial Information, no adjustments to the financial statements of the New CMIG PM Group for the Track Record Period on which the Historical Financial Information is based ("Underlying Financial Statements") have been made.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 26 February 2021
I HISTORICAL FINANCIAL INFORMATION OF THE NEW CMIG PM GROUP
Set out below is the Historical Financial Information which forms an integral part of this accountant's report.
The Underlying Financial Statements of the New CMIG PM Group for the Track Record Period, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with Hong Kong Standards on Auditing issued by Hong Kong Institute of Certified Public Accountants.
The Historical Financial Information is presented in Renminbi ("RMB") and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(a)Consolidated statements of comprehensive income
Year ended 31 DecemberEight months ended 31 AugustGross profit
Revenue Cost of sales
Administrative expenses (Impairment losses)/reversal of impairment losses on financial assets
Other income Other gains - net
Operating profit
Finance income Finance costsFinance costs - net
Profit before income tax
Income tax expense
Profit and total comprehensive income for the year/period
Profit and total comprehensive income for the year/period is attributable to:
- Owners of the New CMIG PM
- Non-controlling interests
3.1.2
Note
10
11
7
9 9
6 7
2017 2018 2019 | 2019 | 2020 |
RMB'000 RMB'000 RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | ||
699,777 | 743,606 | |
(583,491) | (607,203) | |
116,286 | 136,403 | |
(51,570) | (60,216) | |
(1,945) | (5,151) | |
2,511 | 7,953 | |
6,249 | 19,658 | |
71,531 | 98,647 | |
70,543 | 52,432 | |
(76,872) | (55,013) | |
(6,329) | (2,581) | |
65,202 | 96,066 | |
(16,614) | (24,134) | |
48,588 | 71,932 | |
20,405 | 34,512 | |
28,183 | 37,420 | |
48,588 | 71,932 |
(5,418) 4,691 1,638 5,796 1,463 11,406
807,464 (687,383)
120,081
(54,889)
946,465 (792,960)
1,042,927 (881,122)
153,505
161,805
(63,075) (77,586)
(4,083) 1,300 486 62,895 53,409 (56,010)
88,113 106,112 122,978 101,217
(129,597) (106,871)
(2,601)
(6,619) (5,654)
60,294 (14,761)
81,494
100,458
(21,714) (25,932)
45,533
59,780 74,526
20,326 25,207 45,533
26,731 36,448
33,049 38,078
59,780 74,526
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(b)Consolidated statements of financial position
ASSETS Non-current assets
Property, plant and equipment Right-of-use assets Investment properties Intangible assets
Financial assets at fair value through other comprehensive income
Deferred income tax assets
Loans and interest receivables due from a related company Prepayments, deposits and other receivables
Total non-current assetsCurrent assets Inventories Trade receivables
Prepayments, deposits and other receivables
Financial assets at fair value through profit or loss
Loans and interest receivables due from a related company
Cash and cash equivalents
Total current assets 804,821 877,028
Total assets
Note
13 14 15 16
18 27 22
19 20 21 22 23
20
1,620,800
2,978,622
74,608 2,173,801
As at | ||
As at 31 December | 31 August | |
2017 2018 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 |
51,147 | 49,055 | |
58 | - | |
81,645 | 55,305 | |
280,800 | 272,247 | |
5,025 | 5,025 | |
3,958 | 5,246 | |
- | - | |
154,296 | 210,188 | |
576,929 | 597,066 | |
14 | 15 | |
197,739 | 253,558 | |
79,323 | 94,222 | |
33,500 | 6,432 | |
1,399,431 | 180,800 | |
209,100 | 118,830 | |
1,919,107 | 653,857 | |
2,496,036 | 1,250,923 |
49,733 523
52,415 291
113,373 115,859 305,990 293,628
5,000 5,025 3,774 5,128
1,362,800
93,547 1,928,693
370
15
232,674 276,462 79,285 78,461 35,000 34,000 312,048 330,551 145,444 157,539
2,805,721
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
As at
Note | |||
Equity attributable to owners of | |||
the New CMIG PM | |||
Paid-in capital | 1.2 | - | - |
Other reserves | 24 | 247,653 | 247,653 |
Retained earnings | 13,135 | 34,766 | |
260,788 | 282,419 | ||
Non-controlling interests | 86,239 | 110,815 | |
Total equity | 347,027 | 393,234 | |
LIABILITIES | |||
Non-current liabilities | |||
Long-term borrowings | 26 | 1,749,480 | 1,458,920 |
Other payable | 1.2, 25 | - | - |
Deferred income tax liabilities | 27 | 30,434 | 27,222 |
Lease liabilities | 14 | 331 | 69 |
Total non-current liabilities | 1,780,245 | 1,486,211 | |
Current liabilities | |||
Trade and other payables | 25 | 486,749 | 523,850 |
Borrowings | 26 | 261,560 | 290,560 |
Dividend payables | 28 | 1,819 | 6,556 |
Contract liabilities | 6 | 90,184 | 98,447 |
Lease liabilities | 14 | 244 | 262 |
Current income tax liabilities | 10,794 | 6,601 | |
Total current liabilities | 851,350 | 926,276 | |
Total liabilities | 2,631,595 | 2,412,487 | |
Total equity and liabilities | 2,978,622 | 2,805,721 | |
Net current liabilities | (46,529) | (49,248) | |
Total assets less current | |||
liabilities | 2,127,272 | 1,879,445 | |
- II-7 - |
EQUITY
As at 31 December | 31 August | |
2017 2018 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 |
- | - | |
12,515 | 12,515 | |
12,416 | 46,928 | |
24,931 | 59,443 | |
89,268 | 126,688 | |
114,199 | 186,131 | |
3,360 | 2,080 | |
- | 235,138 | |
24,010 | 21,869 | |
- | - | |
27,370 | 259,087 | |
690,796 | 473,744 | |
1,455,560 | 226,560 | |
108,072 | 43,918 | |
93,227 | 47,205 | |
69 | - | |
6,743 | 14,278 | |
2,354,467 | 805,705 | |
2,381,837 | 1,064,792 | |
2,496,036 | 1,250,923 | |
(435,360) | (151,848) | |
141,569 | 445,218 |
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(c)Statements of financial position of New CMIG PM
ASSETS | |
Non-current assets | |
Investment in a subsidiary | 1, 12 |
Total non-current assets and total assets | |
EQUITY | |
Paid in capital | 1.2 |
Total equity | |
LIABILITIES | |
Non-current liabilities | |
Other payable | 1.2, 25 |
Current liabilities | |
Other payable | 1.2, 25 |
Total liabilities | |
Total equity and liabilities |
As at | As at | |
31 December | 31 August | |
Note | 2019 | 2020 |
RMB'000 | RMB'000 | |
235,138 | 235,138 | |
235,138 | 235,138 | |
- | - | |
- | - | |
- | 235,138 | |
235,138 | - | |
235,138 | 235,138 | |
235,138 | 235,138 |
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(d) Consolidated statements of changes in equity
Attributable to owners of the New CMIG PM
Note
Other reserves RMB'000
Retained earnings RMB'000
Total RMB'000
Non-controlling interests RMB'000
Total equity RMB'000
Balance at 1 January 2017
240,422
1,392
241,814
60,559 302,373
Comprehensive income Profit for the year
-
20,326
20,326
25,207 45,533
Transactions with owners in their capacity as owners Appropriation of statutory reserves
Non-controlling interests on acquisition of subsidiaries Capital contribution from non-controlling shareholders Dividends declared
30
7,231
(7,231)
-
- -
-
- -
-
-
28
(1,352) (1,352)
-
-
1,625
1,625
980
980
(2,132) (3,484)
Balance at 31 December 2017 and 1 January 2018 Comprehensive income Profit for the year
247,653
13,135 26,731
260,788
86,239 347,027
-
26,731
33,049 59,780
Transactions with owners in their capacity as owners Dividends declared
28
-
(5,100)
(5,100)
(8,473) (13,573)
Balance at 31 December 2018 and 1 January 2019 Comprehensive income Profit for the year
247,653
34,766 36,448
282,419
110,815 393,234
-
36,448
38,078 74,526
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Attributable to owners of the New CMIG PM
Non-
Note
Other reserves RMB'000
Retained earnings RMB'000
Total RMB'000
controlling interests RMB'000
Total equity RMB'000
Transactions with owners in their capacity as owners Decrease in capital Transaction with non-controlling interests Deemed distribution to the owner in relation to an acquisition of subsidiaries Dividends declared
-
-
-
(485)
(485)
12
-
(1,373)
(1,373)
(627) (2,000)
24 28
(235,138)
- (57,425)
(235,138) (57,425)
- (235,138)
-
(58,513) (115,938)
Balance at 31 December 2019
12,515
12,416
24,931
89,268 114,199
Balance at 1 January 2020 Comprehensive income Profit for the period
12,515
12,416 34,512
24,931 34,512
89,268 114,199
-
37,420 71,932
Balance at 31 August 2020
(Unaudited)
Balance at 1 January 2019 Comprehensive income Profit for the period
12,515
46,928
59,443
126,688 186,131
247,653
34,766 20,405
282,419
110,815 393,234
-
20,405
28,183 48,588
Transactions with owners in their capacity as owners Decrease in capital Transaction with non-controlling interests Dividends declared
-
-
-
(485)
12
(485)
- -
(1,373) (57,405)
(1,373)
(627) (2,000)
(57,405) (56,232)
(113,637)
Balance at 31 August 2019
247,653
(3,607) 244,046
81,654
325,700
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(e)Consolidated statements of cash flows
Cash flows from operating activities
Note
Year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000
Eight months ended 31 August 2019 2020
RMB'000 RMB'000 (Unaudited)
Cash generated from/(used in) operations | 29(a) | 123,686 | 127,500 | 125,840 | 40,095 | (20,501) |
Income tax paid | (51,670) | (56,877) | (42,109) | (25,226) | (20,028) | |
Net cash generated from/(used in) operating | ||||||
activities | 72,016 | 70,623 | 83,731 | 14,869 | (40,529) | |
Cash flows from investing activities | ||||||
Payments for acquisition of subsidiary, net of cash | ||||||
acquired | 30 | (3,102) | - | - | - | - |
Payments for property, plant and equipment | (37,967) | (5,627) | (20,114) | (2,665) | (315) | |
Payments for financial assets at fair value through | ||||||
profit or loss | (35,000) | (48,000) | (140,000) | (64,000) | (75,580) | |
Payments for financial assets at fair value through | ||||||
other comprehensive income | (5,000) | (25) | - | - | - | |
Payments for a loan due from a related party | 31(b) | (1,879,800) | - | - | - | - |
Proceeds from repayment of a loan due from a | ||||||
related party | 31(b) | - | 229,000 | 288,000 | 288,000 | 1,182,000 |
Proceeds from sale of property, plant and equipment | 29(c) | 562 | 358 | 1,200 | 145 | 12 |
Proceeds from sale of investment properties | 29(d) | 567 | - | 70,002 | 21,752 | 43,261 |
Proceeds from sale of financial assets at fair value | ||||||
through profit or loss | 14,000 | 49,000 | 140,500 | 51,000 | 102,648 | |
Interest from a loan due from a related party | - | 123,687 | 106,385 | 106,385 | 88,562 | |
Interest received from financial assets at fair value | ||||||
through profit or loss | 658 | 1,410 | 1,169 | 796 | 611 | |
Net cash (used in)/generated from investing | ||||||
activities | (1,945,082) | 349,803 | 447,142 | 401,413 | 1,341,199 | |
Cash flows from financing activities | ||||||
Capital contribution from non-controlling interest | ||||||
shareholders | 980 | - | - | - | - | |
Transaction with non-controlling interest | ||||||
shareholders | - | - | (2,000) | (2,000) | - | |
Principal elements of lease payments | (228) | (245) | (263) | (173) | (69) | |
Payments for leases liabilities - interest | (50) | (33) | (15) | (12) | (1) | |
Proceeds from borrowings | 26 | 2,000,000 | - | - | - | 224,000 |
Repayments of borrowings | 26 | (19,160) | (261,560) | (290,560) | (289,280) | (1,454,280) |
Repayments to non-controlling interests shareholders | (40,550) | - | (58,992) | (58,992) | - | |
Dividends paid to CMIG Futurelife | (1,352) | - | (3,727) | (3,707) | (14,880) | |
Dividends paid to non-controlling interests | ||||||
shareholders in subsidiaries | (1,758) | (8,836) | (10,695) | (8,414) | (49,274) | |
Interest paid for borrowings | (723) | (137,657) | (113,060) | (113,060) | (96,436) | |
Net cash generated from/(used in) financing | ||||||
activities | 1,937,159 | (408,331) | (479,312) | (475,638) | (1,390,940) | |
Net increase/(decrease) in cash and cash | ||||||
equivalents | 64,093 | 12,095 | 51,561 | (59,356) | (90,270) | |
Cash and cash equivalents at beginning of the | ||||||
year/period | 81,351 | 145,444 | 157,539 | 157,539 | 209,100 | |
Cash and cash equivalents at end of year/period | 145,444 | 157,539 | 209,100 | 98,183 | 118,830 |
II | NOTES TO THE HISTORICAL FINANCIAL INFORMATION |
1 | GENERAL INFORMATION, REORGANIZATION AND BASIS OF PRESENTATION |
1.1 | General information |
Minrui Property Management (Shanghai) Co., Ltd. ("New CMIG PM") was established in the People's |
Republic of China (the "PRC") on 28 November 2019. The address of New CMIG PM's registered office is No. 8218 Jinda Road, Jinhui Town, Fengxian District, Shanghai, PRC.
New CMIG PM was established and owned by CMIG Futurelife Holdings Group Company Limited ("CMIG Futurelife"), an investment holding company established in PRC, as to 40%, and Guangdong Fengxin Yinglong Equity Investment Partnership (Limited Partnership) (the "Vendor"), a limited partnership ultimately and beneficially owned by four individuals, as to 60% as at 28 November 2019. The directors of New CMIG PM regard CMIG Futurelife as New CMIG PM's controlling company, and China Minsheng Investment Corp., Ltd. ("CMIG"), a company incorporated in PRC, as the ultimate holding company up to 17 March 2020. On 17 March 2020, the controlling shareholder changed to the Vendor pursuant to a mutual agreement between CMIG Futurelife and the Vendor. In April 2020, CMIG Futurelife transferred all its 40% equity interests in New CMIG PM to Mingtai (Shanghai) Enterprise Management Co., Ltd. (the "Remaining Shareholder"), a wholly owned subsidiary of CMIG Futurelife. As at the date of this report, New CMIG PM is owned by the Remaining Shareholder as to 40% and the Vendor as to 60%. New CMIG PM and its subsidiaries (together the "New CMIG PM Group") are principally engaged in the provision of property management services and related value-added services in the PRC (the "New CMIG PM Business").
On 25 September 2019, the Vendor and a wholly owned subsidiary of A-Living Smart City Services Co., Ltd. (the "Purchaser" or the "Company"), a company listed on the Stock Exchange of Hong Kong Limited, entered into a conditional agreement whereby the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to dispose, (i) the 60% equity interest in CMIG Futurelife Property Management ("CMIG PM"), after a restructuring comprising the transfer in and transfer out of certain entities, at a fixed consideration of RMB1.56 billion (the "CMIG PM Acquisition"), and (ii) the 60% equity interest in a new entity to be set up to hold the 51% equity interest in Shanghai Kerui Property Management Development Co., Ltd. ("Kerui PM"), a previous subsidiary of CMIG PM that was transferred to New CMIG PM on 11 December 2019, at a consideration up to a maximum amount of RMB500,000,000 (the "New CMIG PM Acquisition"). Pursuant to the supplemental agreement dated 11 November 2020, the final consideration for the New CMIG PM Acquisition was determined to be RMB344,250,000 while pursuant to a second supplemental agreement, it was further agreed that the final consideration shall be adjusted by deducting an amount of RMB141,082,800.
These financial statements are presented in Renminbi, unless otherwise stated.
1.2 Reorganization
New CMIG PM is an investment holding company. Prior to the incorporation of New CMIG PM and the completion of the reorganizations as described below, the New CMIG PM Business was carried out by the companies controlled by CMIG Futurelife (collectively, the "Operating Companies") in the PRC. These Operating Companies were historically acquired by CMIG Futurelife from other parties prior to and during the Track Record Period.
New CMIG PM was set up in the PRC on 28 November 2019 with a registered capital of RMB235,138,000, which has not yet paid up.
On 11 December 2019, New CMIG PM acquired 51% equity interests in Kerui PM from a subsidiary of CMIG Futurelife, at cash consideration of RMB235,138,000. The consideration has not been paid up to the date of this report. In August 2020, its repayment term has been adjusted to be repayable by 31 December 2021. Accordingly, the consideration payable was reclassified from current liabilities to non-current liabilities as at 31 August 2020.
New CMIG PM became the holding company of the companies now comprising the New CMIG PM Group upon completion of the Reorganisation on 11 December 2019..
The principal subsidiaries in which New CMIG PM held direct or indirect interests upon completion of the Reorganization and as at the date of this report are set out in Note 12.
1.3 Basis of presentation
Immediately prior to the Reorganization as mentioned in Note 1.2 above, the New CMIG PM Business was carried out by the Operating Companies which were controlled by CMIG Futurelife and ultimately controlled by CMIG, from the dates they were acquired by CMIG Futurelife from third parties. Pursuant to the Reorganization, the New CMIG PM Business was transferred to and held by New CMIG PM, which is controlled by CMIG Futurelife and ultimately controlled by CMIG on 11 December 2019.
New CMIG PM has not been involved in any other business prior to the Reorganization and its operations do not meet the definition of a business. The Reorganization is merely a reorganization of New CMIG PM Business and does not result in any changes in business substance, nor in any management or ultimate controlling shareholders of the New CMIG PM Business as at the completion date of the Reorganisation as at 11 December 2019. Accordingly, the historical financial information of the companies now comprising the New CMIG PM Group is presented using the carrying value of the New CMIG PM Business for all years/periods presented as if the current group structure had been in existence throughout the years/periods presented, or from the date the respective entity had been acquired by CMIG Futurelife from third parties, whichever is a shorter period.
For companies historically acquired by CMIG Futurelife from third parties, or disposed off to a third party or a related party during the Track Record Period, they were included in or excluded from the consolidated financial statements of the New CMIG PM Group from the respective dates of acquisitions and disposals, where appropriate, in the Historical Financial Information.
Inter-company transactions, balances and the unrealised gains/losses on transactions between the group companies are eliminated on consolidation.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied throughout the Track Record Period, unless otherwise stated.
2.1 Basis of preparation
The Historical Financial Information of the New CMIG PM Group has been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the HKICPA that have been effective for the financial year beginning on or before 1 January 2020. The Historical Financial Information has been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss (or through other comprehensive income), which are carried at fair value.
The preparation of the Historical Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the New CMIG PM Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4.
Application of HKFRS 9, HKFRS 15 and HKFRS 16
HKFRS 9 "Financial Instruments" addresses the classification, measurement and recognition of
financial assets and financial liabilities, and introduces new rules of hedge accounting and a new impairment
model for financial assets. The standard is effective for annual periods beginning on or after 1 January 2018
and earlier application is permitted.
HKFRS 15 "Revenue from contracts with customers" replaces the previous revenue standards HKAS 18
'Revenue' and HKAS 11 'Construction Contracts' and related interpretations. The standard is effective for
annual periods beginning on or after 1 January 2018 and earlier application is permitted.
HKFRS 16 "Leases" addresses the definition of a lease, recognition and measurement of leases. The
standard replaces HKAS 17 "Leases" and related interpretations. Under HKAS 17, operating lease
commitments are disclosed separately in a note to the consolidated financial statement and are recognised
outside of the consolidated statement of financial position. Under HKFRS 16, all leases (except for those with
lease term of less than 12 months or of low value) must be recognised in the form of an asset (being the
right-of-use assets) and a financial liability (being the lease liabilities), and accordingly, each lease will be
mapped in the New CMIG PM Group's consolidated statements of financial position. The standard is effective
for annual periods beginning on or after 1 January 2019 and earlier application is permitted.
The New CMIG PM Group has elected to apply HKFRS 9, HKFRS 15 and HKFRS 16 consistently throughout the Track Record Period.
The following standards and interpretations had been issued but were not mandatory for the financial year beginning before 1 January 2021 and have not been early adopted.
New standards, amendments
and interpretations | Effective date | |
HKFRS 17 | Insurance contracts | Annual periods beginning |
on or after 1 January | ||
2023 | ||
Amendments to HKAS 1 | Classification of liabilities as current | Annual periods beginning |
or non-current | on or after 1 January | |
2023 | ||
Amendments to HKAS 3 | Update reference to the conceptual | Annual periods beginning |
framework | on or after 1 January | |
2022 | ||
Amendments to HKAS 16 | Proceeds before intended use | Annual periods beginning |
on or after 1 January | ||
2022 | ||
Amendments to HKAS 37 | Onerous contracts - costs of fulfilling | Annual periods beginning |
a contract | on or after 1 January | |
2022 | ||
Amendments to HKFRS 16 | COVID-19-Related Rent Concessions | Annual periods beginning |
on or after 1 June | ||
2020 | ||
Amendments to HKFRS 9, HKAS | Interest Rate Benchmark Reform - | Annual periods beginning |
39, HKFRS 7, HKFRS 4 and | Phase 2 | on or after 1 January |
HKFRS 16 | 2021 | |
Amendments to HKFRS 10 and | Sale or contribution of assets between | To be determined |
HKAS 28 | an investor and its associates or | |
joint ventures |
The New CMIG PM Group has already commenced an assessment of the impact of these new or revised standards, interpretations, and amendments, certain of which are relevant to the New CMIG PM Group's operations. According to the preliminary assessment made by the Directors, no significant impact on the financial performance and positions of the New CMIG PM Group is expected when they become effective.
At 31 August 2020, the New CMIG Group's current liabilities exceed its current assets by RMB151,848,000. The management considered the Group has adequate resources to meet its liabilities from operating cash flows and proceeds from sale of investment properties when necessary and commitments in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the consolidated financial statements.
2.2 Subsidiaries
2.2.1 Consolidation
Subsidiaries are all entities (including structured entities) over which the New CMIG PM Group has control. The New CMIG PM Group controls an entity when the New CMIG PM Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the New CMIG PM Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the New CMIG PM Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of comprehensive income, statements of changes in equity and statements of financial position respectively.
2.2.2 Business combinations
The acquisition method of accounting is used to account for all other business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
• fair values of the assets transferred,
• liabilities incurred to the former owners of the acquired business,
• equity interests issued by the New CMIG PM Group,
• fair value of any asset or liability resulting from a contingent consideration arrangement, and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The New CMIG PM Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.
Acquisition-related costs are expensed as incurred. The excess of the
• consideration transferred;
• amount of any non-controlling interest in the acquired entity; and
• acquisition-date fair value of any previous equity interest in the acquired entity;
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
2.2.3 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the New CMIG PM on the basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the combined financial statements of the investee's net assets including goodwill.
2.3 Changes in ownership interests
The New CMIG PM Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the New CMIG PM Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the New CMIG PM Group.
When the New CMIG PM Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the New CMIG PM Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors that makes strategic decisions.
2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the New CMIG PM Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The combined financial statements are presented in RMB, which is the New CMIG PM's functional and the New CMIG PM Group's presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized within "Other gains - net" in the combined statements of comprehensive income.
2.6 Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the New CMIG PM Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives as follows:
Estimated useful lives | |
Buildings | 20-30 years |
Transportation equipment | 4-10 years |
Office and other equipment | 2-5 years |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised within "Other gains - net" in the consolidated statements of comprehensive income.
2.7 Investment properties
Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the New CMIG PM Group, are classified as investment property.
The New CMIG PM Group's investment properties comprise buildings located in the PRC, which are measured initially at their costs, including the related transaction costs.
After initial recognition, investment property is measured at cost less accumulated depreciation and any provision for impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the properties. The building portion of investment properties is depreciated over their estimated useful lives of 20 to 30 years.
Subsequent expenditure is capitalized to the asset's carrying amount or recognized as a separate asset only when it is probable that future economic benefits associated with the item will flow to the New CMIG PM Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance costs are expensed in the consolidated statements of comprehensive income during the financial period in which they are incurred.
An investment property shall be derecognized on disposal or when investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognized in the consolidated statements of comprehensive income in the period of the retirement or disposal.
2.8 Intangible assets
(a) Goodwill
Goodwill arising on the acquisition of subsidiaries represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identified net assets acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units ("CGUs"), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill is not amortised, but its impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Customer relationships
Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of 10 years for the customer relationship.
(c) Computer software
Acquired software licences are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (2 to 5 years).
2.9 Impairment of non-financial assets
Goodwill or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
2.10 Financial assets
2.10.1 Classification
The New CMIG PM Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income ("OCI") or through profit or loss), and
• those to be measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the New CMIG PM Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income ("FVOCI").
The New CMIG PM Group reclassifies debt investments when and only when its business model for managing those assets changes.
2.10.2 Recognition, derecognition and measurement
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the New CMIG PM Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the New CMIG PM Group has transferred substantially all the risks and rewards of ownership.
At initial recognition, the New CMIG PM Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ("FVPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the New CMIG PM Group's business
model for managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the New CMIG PM Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in the consolidated statements of comprehensive income when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated income statement.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the consolidated statements of comprehensive income and recognised in "other gains - net". Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and impairment expenses are presented as separate line item in consolidated income statement.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL and is not part of a hedging relationship is recognised in profit or loss and presented net within other gains in the period in which it arises.
Equity instruments
The New CMIG PM Group subsequently measures all equity investments at fair value. Where the New CMIG PM Group's management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the New CMIG PM Group's right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in "other gains-net" as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at financial assets at FVOCI are not reported separately from other changes in fair value.
2.11 Impairment of financial assets
The New CMIG PM Group assesses on a forward looking basis the expected credit losses associated with its debt instrument carried at amortised cost and financial assets at FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 3.1.2 details how the New CMIG PM Group determines whether there has been a significant increase in credit risk.
For trade receivables, the New CMIG PM Group applies the simplified approach permitted by HKFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
2.12 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the assets and settle the liabilities simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the New CMIG PM Group or the counterparty.
2.13 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in-first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.14 Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 12 months and therefore are classified as current. If not, they are presented as non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The New CMIG PM Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
2.15 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with banks.
2.16 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.17 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.18 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
2.19 Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Other borrowing costs are expensed in the period in which they are incurred.
2.20 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the countries where the New CMIG PM Group's subsidiaries operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the New CMIG PM Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Offsetting
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
2.21 Employee benefits
(i) Pension obligations
The New CMIG PM Group only operates defined contribution pension plans. In accordance with the rules and regulations in the PRC, the PRC based employees of the New CMIG PM Group participate in various defined contribution retirement benefit plans organized by the relevant municipal and provincial governments in the PRC under which the New CMIG PM Group and the PRC based employees are required to make monthly contributions to these plans calculated as a percentage of the employees' salaries. The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired PRC based employees' payable under the plans described above. Other than the monthly contributions, the New CMIG PM Group has no further obligation for the payment of retirement and other post-retirement benefits of its employees.
The assets of these plans are held separately from those of the New CMIG PM Group in independently administrated funds managed by the governments. The New CMIG PM Group's contributions to the defined contribution retirement scheme are expensed as incurred.
(ii) Housing funds, medical insurances and other social insurances
Employees of the New CMIG PM Group in the PRC are entitled to participate in various government-supervised housing funds, medical insurances and other social insurance plan. The New CMIG PM Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees, subject to certain ceiling. The New CMIG PM Group's liability in respect of these funds is limited to the contributions payable in each year. Contributions to the housing funds, medical insurances and other social insurances are expensed as incurred.
(iii) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(iv) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.
2.22 Provisions
Provisions for legal claims are recognized when: The New CMIG PM Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.
2.23 Revenue recognition
The New CMIG PM Group is primarily engaged in the provision of property management services, property developer-related services, community-related services and professional services. Revenue from providing services is recognised in the accounting period in which the services are rendered as the customer simultaneously receives and consumes the benefits provided by the New CMIG PM Group's performance when the New CMIG PM Group performs:
For property management services, the New CMIG PM Group bills a fixed amount for service provided on a monthly basis and recognises as revenue in the amount to which the New CMIG PM Group has a right to invoice and corresponds directly with the value of performance completed.
For property management projects where the services income is on a lump sum basis, the New CMIG PM Group acts as principal and is primary responsible for providing the property management services to the property owners/units, the New CMIG PM Group recognises the service fee received or receivable from property owners as its revenue and all related property management costs as its cost of services. For property management projects where the services income is on commission basis, the New CMIG PM Group recognises the commission, which is calculated at certain percentage of the total property management fee received or receivable from the property owners/units or at fixed amounts, as its revenue for arranging and monitoring the services provided by other suppliers to the property owners/units.
For property developer related services, revenue is recognised when the related services are rendered. Payment of the transaction is due immediately when the services are rendered to the customer.
Community related services include mainly: i) commission from public resources management services, which is recognized on a net basis over the time when such services are rendered; ii) revenue from other community convenience services are charged for each of the services provided and recognized when the relevant services are rendered. Community related services are normally billable immediately upon the delivery of the services.
Professional services mainly include engineering and maintenance services of elevator and intelligent security equipment. Revenue from professional services are recognized when the contracts have been approved and the services are rendered. Professional services are normally billable immediately upon the delivery of the services.
If contracts involve the sale of multiple services, the transaction price will be allocated to each performance obligation based on their relative stand-alone selling prices. If the standard-alone selling prices are not directly observable, they are estimated based on expected cost plus a margin or adjusted market assessment approach, depending on the availability of observable information.
When either party to a contract has performed, the New CMIG PM Group presents the contract in the balance sheet as a contract asset or a contract liability, depending on the relationship between the New CMIG PM Group's performance and the customer's payment.
A contract asset is the New CMIG PM Group's right to consideration in exchange for services that the New CMIG PM Group has transferred to a customer.
If a customer pays consideration or the New CMIG PM Group has a right to an amount of consideration that is unconditional, before the New CMIG PM Group transfers services to the customer, the New CMIG PM Group presents the contract as a contract liability when the payment is received or a receivable is recorded (whichever is earlier). A contract liability is the New CMIG PM Group's obligation to transfer services to a customer for which the New CMIG PM Group has received consideration (or an amount of consideration is due) from the customer.
A receivable is recorded when the New CMIG PM Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due.
2.24 Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
2.25 Dividend distribution
Dividend distribution to the New CMIG PM Group's shareholders is recognised as a liability in the New CMIG
PM Group's and the New CMIG PM Group's financial statements in the period in which the dividends are approved by the New CMIG PM Group's shareholders or directors, where appropriate.
2.26 Leases as leasee
The New CMIG PM Group leases various properties. Rental contracts are typically made for fixed periods of 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the New CMIG PM Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to consolidated statements of comprehensive loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate
- amounts expected to be payable by the lessee under residual value guarantees
- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
The lease payments are discounted using the interest rate implied in the lease, if that rate can be determined, or the respective incremental borrowing rate.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability
- any lease payments made at or before the commencement date less any lease incentives received
- any initial direct costs, and
- restoration costs.
Payments associated with short-term leases are recognised on a straight-line basis as an expense in consolidated statements of comprehensive loss. Short-term leases are leases with a lease term of 12 months or less.
2.27 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the New CMIG PM Group will comply with all attached conditions.
Government grants related to assets refer to government grants which are obtained by the New CMIG PM Group for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.
Government grants related to assets are either deducted against the carrying amount of the assets, or recorded as deferred income and recognised in profit or loss on a systemic basis over the useful lives of the assets. Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognised in profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government grants related to income that compensate the incurred costs, expenses or losses are recognised in profit or loss, or deducted against related costs, expenses or losses directly in current period. The New CMIG PM Group applies the presentation method consistently to the similar government grants in the financial statements.
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The New CMIG PM Group's activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. As all of the New CMIG PM Group's activities are in the PRC, the New CMIG PM Group's exposure to foreign currency risk is minimal and therefore no analysis of foreign currency risk is presented. The New CMIG PM Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the New CMIG PM Group's financial performance.
3.1.1 Interest rate risk
The New CMIG PM Group's interest rate risk arises from borrowings and receivables due from related parties. Borrowings at variable interest rates expose the New CMIG PM Group to cash flow interest rate risk. Borrowings and receivables due from related parties at fixed interest rates expose the New CMIG PM Group to fair value interest rate risk. The New CMIG PM Group closely monitors trend of interest rate and its impact on the New CMIG PM Group's interest rate risk exposure. The New CMIG PM Group currently has not used any interest rate swap arrangements but will consider hedging interest rate risk should the need arise.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, if interest rates on borrowings at variable interest rates had been 50 basis points higher or lower with all other variables held constant, the New CMIG PM Group's profit before income tax for the years/periods then ended would decrease or increase as set out, mainly as a result of higher or lower interest expenses on floating rate borrowings.
Eight months ended
Year ended 31 December
2017
2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Profit before income tax -
(lower)/higher
(55)/55
(42)/42
(30)/30
(23)/23
3.1.2 Credit risk
The New CMIG PM Group is exposed to credit risk in relation to its trade receivables, deposits and other receivables, and cash and cash equivalents. The carrying amounts of trade receivables, deposits and other receivables, and cash and cash equivalents represent the New CMIG PM Group's maximum exposure to credit risk in relation to financial assets.
(i) Cash in banks
The New CMIG PM Group expects that there is no significant credit risk associated with cash deposits at banks since they are substantially deposited in state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.
(ii) Trade receivables
The New CMIG PM Group applies the simplified approach to providing for expected credit losses prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected credit loss also incorporates forward looking information.
(iii) Other receivables due from related parties
The New CMIG PM Group expects that the credit risk associated with other receivables due from related parties is low, since the majority of the related parties have a strong capacity to meet its contractual cash flow obligations in the near term, except for the loans and interests receivables due from CMIG Futurelife. The impairment provision recognised in respect of other receivables due from related parties other than CMIG Futurelife during the period was limited to 12 months expected losses, which was insignificant.
For the loans and interests receivables due from CMIG Futurelife, CMIG Futurelife did not default its repayment during the Track Record Period. The credit risk associated with loans and interests receivables due from CMIG Futurelife was insignificant. Details are set out in Note 22.
(iv) Deposits and other receivables other than those due from related parties
The New CMIG PM Group pays deposits to a large number of counter parties recognised as other receivables other than those from related parties. There was no concentration of credit risk. The New CMIG PM Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the New CMIG PM Group reviews the recoverability of these receivables at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. The New CMIG PM Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the New CMIG PM Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition.
Forward-looking information incorporated in the expected credit loss model
The New CMIG PM Group has performed historical analysis and identified the key
economic variables impacting credit risk and expected credit loss. It considers available
reasonable and supportive forwarding-looking information. Especially the following indicators
are incorporated:
• internal credit rating
• external credit rating
• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower's ability to meet its obligations
• actual or expected significant changes in the operating results of individual property owner or the borrower
• significant increases in credit risk on other financial instruments of the individual property owner or the same borrower
• significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in the New CMIG PM Group and changes in the operating results of the borrower.
The New CMIG PM Group accounts for its credit risk by appropriately providing for
expected credit losses on a timely basis. In calculating the expected credit loss rates, the New
CMIG PM Group considers historical loss rates for each category of receivables and adjusts for
forward looking macroeconomic data. Since the actual loss rates for trade receivables and other
receivables and adjustments for forward looking macroeconomic data did not have significant
change during the Track Record Period, the directors of New CMIG PM consider that the change
in the expected loss rate for the provision matrix is insignificant throughout the Track Record
Period.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, the loss allowance provisions for trade receivables and deposits and other receivables is set out below.
Net carrying amount
-
As at 31 August 2020
RMB'000
LossGrosscarrying allowanceprovision
-
- 164,866
(1,927) 54,840
(3,676) 20,567
(4,301) 8,105
(5,127) 5,180
(15,031) 253,558
amount
- 164,866 56,767 24,243 12,406 10,307
268,589
Net carrying amount
- 109,085 50,102 19,286 14,583 4,683
197,739
2019
RMB'000
LossGrosscarrying allowanceprovision
- -
(1,022) (2,143) (3,646) (4,684)
(11,495)amount
- 109,085 51,124 21,429 18,229 9,367
209,234
As at 31 December 2018
Net carrying amount
227 166,450 67,025 28,441 11,703 2,616
276,462
RMB'000
LossGrosscarrying allowanceprovision
- -
(1,368) (3,160) (2,926) (2,616)
(10,070)amount
227 166,450 68,393 31,601 14,629 5,232
286,532
Net carrying amount
335 146,805 65,623 16,388 2,173 1,350
232,674
2017
RMB'000
LossGrosscarrying allowanceprovision
- -
(1,339) (1,821)amount
335 146,805 66,962 18,209
2,716 (543)
(1,350)
(5,053)
2,700
237,727
Expected loss rate
2% 10% 20% 50%
Trade receivables Related parties Non-residential Residential
- Within 1 year
- 1 to 2 years
- 2 to 3 years
- Over 3 years
Net carrying amount
As at 31 August 2020
RMB'000
LossGrosscarrying allowanceprovision
- 180,800
- 27,220
-
-
(752) 36,856
(403) 3,630
(1,259) 5,034
(3,523) 3,523
(5,937) 49,043
amount
180,800 27,220
-
37,608 4,033 6,293 7,046
54,980
Net carrying amount
2019
RMB'000
LossGrosscarrying allowanceprovision
- 1,399,431
- 26,575
- 1,350
23,172 4,332 3,648 2,456
33,608
(473) (481) (912)
(2,456)
(4,322)amount
As at 31 December 2018
Net carrying amount
RMB'000
LossGrosscarrying allowanceprovision
- 1,693,351 1,399,431
- 28,180 26,575
- 4,201 1,350
(185) 9,097 23,645
(623) 5,607 4,813
(1,669) 6,674 4,560
(7,961) 7,963 4,912
(10,438) 29,341 37,930
amountNet carrying amount
2017
RMB'000
LossGrosscarrying allowanceprovision
- 1,932,848 1,693,351
- 27,138 28,180
- 1,240 4,201
18,865 9,282 14,037 6,230 2,124 8,343
(385) (1,560)
(531)
(7,561) 7,562 15,924
(10,037) 42,588 39,779
amount
1,932,848 27,138
1,240
Expected loss rate
2% 19,250 10% 15,597 20% 2,655 50% 15,123
52,625
Prepayments, deposits and other receivables (excluding prepayments and Input tax to be deducted)
Loans and interest receivable from related parties
Deposits
Other receivables - related parties
Other receivables - third parties
- Within 1 year
- 1 to 2 years
- 2 to 3 years
- Over 3 years
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
As at 31 December 2017, 2018 and 2019 and 31 August 2019 and 2020, the movements in loss allowance provisions for trade and other receivables (excluding prepayments and input tax to be deducted) are as follows:
Loss allowance for
deposits and other
receivables
(excluding
prepayments and
Loss allowance for | input tax to be | ||
trade receivables | deducted) | Total | |
RMB'000 | RMB'000 | RMB'000 | |
At 1 January 2017 | (2,254) | (8,753) | (11,007) |
Provision for loss allowance | |||
recognised in profit or loss | (2,799) | (1,284) | (4,083) |
At 31 December 2017 | (5,053) | (10,037) | (15,090) |
Provision for loss allowance | |||
recognised in profit or loss | (5,017) | (401) | (5,418) |
At 31 December 2018 | (10,070) | (10,438) | (20,508) |
(Provision)/Reversal of loss | |||
allowance recognised in | |||
profit or loss | (1,425) | 6,116 | 4,691 |
At 31 December 2019 | (11,495) | (4,322) | (15,817) |
Provision for loss allowance | |||
recognised in profit or loss | (3,536) | (1,615) | (5,151) |
At 31 August 2020 | (15,031) | (5,937) | (20,968) |
(Unaudited) | |||
At 1 January 2019 | (10,070) | (10,438) | (20,508) |
Provision for loss allowance | |||
recognised in profit or loss | (5,355) | 3,410 | (1,945) |
At 31 August 2019 | (15,425) | (7,028) | (22,453) |
- II-29 - |
3.1.3 Liquidity risk
Management aims to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of available financing to meet its daily working capital requirements.
The table below set out the New CMIG PM Group's financial liabilities by relevant maturity grouping at each balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months from the balance sheet date equal to their carrying amounts in the statements of financial position, as the impact of discount is not significant.
Between
Less than 1 year RMB'000
As at 31 December 2017
Trade and other payables
(excluding non-financial liabilities)
Borrowings Interest payable on borrowings Dividend payables Lease liabilities
427,053 261,560 136,540 1,819 294
827,266 408,720 1,556,355
As at 31 December 2018
Trade and other payables
(excluding non-financial liabilities)
470,583
Borrowings Interest payable on borrowings Dividend payables Lease liabilities
290,560 1,455,560
117,898 6,556 295
885,892 1,552,839 3,516
As at 31 December 2019
Trade and other payables
(excluding non-financial liabilities)
Borrowings Interest payable on borrowings Dividend payables Lease liabilities
630,913 1,455,560
97,167 108,072 69
2,291,781
As at 31 August 2020
Trade and other payables
(excluding non-financial liabilities)
Borrowings Interest payable on borrowings Dividend payables
469,520 226,560
4,714 43,918
744,712 237,284 -
1 and Between 2 | Over | |
2 years and 5 years | 5 years | Total |
RMB'000 RMB'000 | RMB'000 | RMB'000 |
- | 427,053 | |
- | 2,011,040 | |
- | 351,804 | |
- | 1,819 | |
- | 625 | |
- | 2,792,341 | |
- | 470,583 | |
- | 1,749,480 | |
- | 215,264 | |
- | 6,556 | |
- | 364 | |
- | 2,442,247 | |
- | 630,913 | |
- | 1,458,920 | |
- | 97,302 | |
- | 108,072 | |
- | 69 | |
- | 2,295,276 | |
- | 704,658 | |
- | 228,640 | |
- | 4,780 | |
- | 43,918 | |
- | 981,996 |
-
-
290,560 1,458,920
117,898 - 262
97,366 - 69
-
- 3,360
97,210 - 69
156 - -
-
-
2,560 800
127 8
- -
- -
2,687
808
235,138 2,080
66
-
- - - -
3.2 Capital management
The New CMIG PM Group's objectives when managing capital are to safeguard the New CMIG PM Group's ability to continue as a going concern in order to provide returns for owners and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the New CMIG PM Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.
The New CMIG PM Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity as shown in the consolidated statement of financial position. Net debt is calculated as total borrowings less cash and cash equivalents and restricted cash.
Total borrowings (Note 26) | |
Less: cash and cash equivalents | |
(Note 23) | (157,539) |
Net debt | 1,591,941 |
Total equity | 393,234 |
Gearing ratio | 405% |
2017
RMB'000
2,011,040
(145,444)
1,865,596 347,027
538%
As at | ||
As at 31 December | 31 August | |
2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 |
1,749,480 | 1,458,920 | 228,640 |
(209,100) | (118,830) | |
1,249,820 | 109,810 | |
114,199 | 186,131 | |
1,094% | 59% |
The decrease in borrowing ratio for the years ended 31 December 2017 and 2018 and the period ended 31 August 2020 was due to repayment of borrowings and profits of the New CMIG PM Group over the years/period. The increase in borrowing ratio in year ended 31 December 2019 was due to decrease in total equity after the declaration of dividend during that year.
3.3 Fair value estimation
Fair value hierarchy of financial assets
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the consolidated financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the New CMIG PM Group has classified its financial instruments into the three levels prescribed under the accounting standards.
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Assets - Level 3:
- Financial assets at fair value through other comprehensive income (Note 18)
5,000
5,025
5,025 5,025
- Financial assets at fair value through profit or loss
(Note 21)
35,000
34,000
33,500 6,432
40,000
39,025
38,525 11,457
The New CMIG PM Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and financial assets at fair value through other comprehensive income) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the New CMIG PM Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities and wealth management products.
The investment in unlisted equity securities represent the investment in certain privately owned companies. The fair value of the investments approximates to the cost and relevant fair value gain/loss are minimal because these companies were in the early stage of operation and it has not been a long time since the New CMIG PM Group's investments in them.
The investment in wealth management products mainly represent the investments in wealth management products issued by banks in the PRC with non-guaranteed principal and floating return of investment. The New CMIG PM Group used discounted cash flows approach to value the fair value of the financial product as at period end. Due to the short period and low expected return rate ranging from 1.15% to 7.20% per annum, the New CMIG PM Group considered the fair value of financial product approximate to the cost.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The New CMIG PM Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
(a) Impairment of intangible assets
The New CMIG PM Group tests annually whether goodwill has suffered any impairment. The recoverable amount of a CGU is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates. These growth rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates. Details of impairment charge, key assumptions and impact of possible changes in key assumptions are disclosed in Note 16.
Customers' relationships intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been determined based on value-in-use calculations. These calculations require the use of judgements and estimates.
Judgement is required to determine key assumptions adopted in the valuation models for impairment review purpose. Changing the assumptions selected by management in assessing impairment could materially affect the result of the impairment test and as a result affect the New CMIG PM Group's financial condition and results of operations. If there is a significant adverse change in the key assumptions applied, it may be necessary to take additional impairment charge to the consolidated statement of comprehensive income.
(b) Business combinations
Business combinations are accounted for under acquisition method. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed, which mainly include customer relationship and customer contracts, is based on various assumptions and valuation methodologies requiring considerable management judgement. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The New CMIG PM Group determines discount rates to be used based on the risk inherent inthe related activity's current business model and industry comparisons. Terminal values are based on the expected life of assets and forecasted life cycle and forecasted cash flows over that period. Although the New CMIG PM Group believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.
(c) Allowance on doubtful receivables
The New CMIG PM Group makes allowances on receivables, including loans to/receivables from related parties, based on assumptions about risk of default and expected loss rates. The New CMIG PM Group used judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the New CMIG PM Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
Where the expectation is different from the original estimate, such difference will impact the carrying amount of trade and other receivables and doubtful debt expenses in the periods in which such estimate has been changed. For details of the key assumption and inputs used, see Note 3.1.2 above.
(d) Current and deferred income tax
The New CMIG PM Group is subject to corporate income taxes in the PRC. Judgement is required in determining the amount of the provision for taxation and the timing of payment of the related taxations. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers to be probable that future taxable profit will be available against which the temporary differences or tax losses can be utilized. The outcome of their actual utilisation may be different.
5 SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by CODM. The CODM, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as directors.
During the Track Record Period, the New CMIG PM Group is principally engaged in the provision of property management services and value-added services, including property developer-related services, community-related services and professional services in the PRC. Directors review the operating results of the business as one operating segment to make decisions about resources to be allocated. Therefore, the CODM of the New CMIG PM Group regards that there is only one segment which is used to make strategic decisions.
The principal operating entity of the New CMIG PM Group is domiciled in the PRC. Accordingly, all of the New CMIG PM Group's revenue was derived in the PRC during the Track Record Period.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, all of the non-current assets of the New CMIG PM Group were located in the PRC.
6 REVENUE
Revenue mainly comprises of proceeds from the provision of property management services, and related value added services including property developer related services, community related services and professional services such as engineering and maintenance services. An analysis of the New CMIG PM Group's revenue by category for the Track Record Period is as follows:
Eight months endedRevenue from customer and recognised over time
Property management services
Value added services
- Property developer related services
- Community related services
- Professional services
- Others
Rental income
Year ended 31 December | ||
2017 2018 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | ||
536,484 | 596,690 | |
46,288 | 67,346 | |
59,732 | 64,912 | |
6,829 | 3,105 | |
46,243 | 7,551 | |
- | - | |
4,201 | 4,002 | |
699,777 | 743,606 |
31 August
2019
RMB'000
639,328
777,293 795,914
67,142 89,153 2,696 2,871 6,274
71,343 111,094
83,480 119,637
7,126 8,706
318 2,633
6,905 4,943
807,464
946,465
1,042,927
The New CMIG PM Group had a large number of customers and none of whom individually contributed 10% or more of the New CMIG PM Group's revenue during the Track Record Period.
(a) Contract liabilities
The New CMIG PM Group had recognised the following revenue-related contract liabilities:
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Contract liabilities
90,184
98,447
93,227
47,205
(b) Significant change in contract liabilities
Contract liabilities of the New CMIG PM Group mainly arise from the advance payments made by customers while the underlying services are yet to be provided. Such liabilities increased as a result of the growth of the New
CMIG PM Group's business.
(c) Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities:
Eight months ended
RMB'000 RMB'000
Revenue recognised that was included in the contract liability balance at the beginning of the year Property management services
Others
2019 | 2019 | 2020 | ||
RMB'000 | RMB'000 | RMB'000 | ||
(Unaudited) | ||||
62,268 | 81,871 | 91,942 | 58,002 | 57,871 |
8,071 | 8,313 | 6,505 | 2,296 | 4,280 |
70,339 | 90,184 | 98,447 | 60,298 | 62,151 |
Year ended 31 December 2017 2018
31 August
(d) Unsatisfied performance obligations
For property management services and property developer-related services, the New CMIG PM Group recognises revenue in the amount that equals to the right to invoice which corresponds directly with the value to the customer of the New CMIG PM Group's performance to date, on a monthly or quarterly basis. The New CMIG PM Group has elected the practical expedient for not to disclose the remaining performance obligation for these types of contracts. The majority of the property management services contracts and property developer-related services do not have a fixed term.
For community-related services and professional services, they are rendered in short period of time and there is no material unsatisfied performance obligation at the end of respective periods.
(e) Assets recognised from incremental costs to obtain a contract
During the Track Record Period, there were no significant incremental costs to obtain or fulfil a contract.
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
7
EXPENSES BY NATURE
Employee benefit expenses
(Note 8)
Outsourcing costs Cost of consumables Maintenance and repair costs
Utilities
Depreciation of property, plant and equipment
(Note 13)
Depreciation of right-of-use assets (Note 14)
Depreciation of investment properties (Note 15)
Amortisation of intangible asset (Note 16)
Short term lease expenses Taxes and other levies Travelling and entertainment expenses Auditors' remuneration Consulting fees
Office expenses Others
Total of cost of sales and administrative expenses
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
232,829 | 166,255 | 157,869 | |
465,597 | 332,553 | 342,263 | |
20,576 | 11,126 | 10,657 | |
124,423 | 64,024 | 75,599 | |
36,590 | 21,002 | 24,431 | |
3,833 | 2,485 | 2,364 | |
233 | 155 | 58 | |
5,079 | 3,108 | 2,330 | |
12,828 | 8,551 | 8,553 | |
752 | 691 | 563 | |
4,586 | 2,473 | 3,208 | |
11,460 | 6,140 | 5,798 | |
20 | 292 | 170 | |
13,922 | 6,253 | 10,126 | |
13,404 | 5,921 | 6,489 | |
12,576 | 4,032 | 16,941 | |
958,708 | 635,061 | 667,419 |
31 August
216,049 239,374
345,525 405,418
26,573 16,365
63,577 87,771
23,585 26,178
3,495 3,202
233 232
3,928 5,316
12,518 12,829
646 409
2,938 4,577
4,309 10,316
180 140
10,650 19,071
11,536 11,840
16,530 12,997
Eight months ended
742,272
856,035
Cost of sales includes mainly employee benefit expenses, outsourcing costs, cost of consumables, maintenance and repair costs, utilities and consulting fees, travelling and entertainment expenses, etc.
8
EMPLOYEE BENEFIT EXPENSE
Wages, salaries and bonuses Pension costs
Housing funds, medical insurances and other social insurances (a) Other employee benefits (b)
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
175,350 | 131,062 | 139,408 | |
18,547 | 11,991 | 5,471 | |
14,275 | 9,537 | 4,872 | |
24,657 | 13,665 | 8,118 | |
232,829 | 166,255 | 157,869 |
31 August
175,213 194,129
15,764 17,466
10,763 11,925
14,309 15,854
216,049 239,374
Eight months ended
(a) Employees in the New CMIG PM Group's PRC entities are required to participate in a defined contribution retirement scheme administered and operated by the local municipal government. The New CMIG PM Group's PRC entities contribute funds which are calculated based on certain percentages of the average employee salary as agreed by local municipal government to the scheme to fund the retirement benefits of the employees.
(b) Other employee benefits mainly include meal, travelling and festival allowances.
(c) Five highest paid individuals
The five individuals whose emoluments were the highest in the New CMIG PM Group does not include any director for the years ended 31 December 2017, 2018, 2019 and the eight months ended 31 August 2019 and 2020. The emoluments payable to the five individuals for the Track Record Period are as follows:
Eight months ended
employees benefits |
2017 2018 | 2019 | 2020 | |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
3,646 | 2,481 | 2,996 |
31 August 2019
Year ended 31 December
Wages, salaries, bonuses, housing funds and other
3,118 3,339
The emoluments fell within the following bands:
Number of individuals
Eight months endedYear ended 31 December
31 August
Emolument bands (in HK dollar) |
HK$500,001 - HK$1,000,000 | 5 | 5 |
HK$1,000,001 - HK$1,500,000 | - | - |
5 | 5 |
2017 2018 | 2019 | 2019 | 2020 |
(Unaudited) | |||
4 | 5 | 5 | |
1 | - | - | |
5 | 5 | 5 |
9 OTHER INCOME AND OTHER GAINS - NET
Eight months endedYear ended 31 December 2017 2018
31 August
2019
2019
2020
RMB'000 RMB'000
RMB'000
RMB'000 (Unaudited)
RMB'000
Other income Government grants Others
574 726
1,552 86
5,796 -
2,511 -
7,953 -
1,300
1,638
5,796
2,511
7,953
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Eight months ended
Other gains - net Gain on disposal of investment properties (Loss)/gain on disposal of property, plant and equipment Income from financial assets at fair value through profit or loss
Compensation - net Others
Year ended 31 December | |||
2017 2018 | 2019 | 2020 | |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
14,316 | 5,320 | 19,251 | |
14 | 43 | (31) | |
1,169 | 796 | 611 | |
(4,093) | - | - | |
- | 90 | (173) | |
11,406 | 6,249 | 19,658 |
31 August 2019
77
-
(201)
60
658 -
(48)
486
1,410 - (7)
1,463
The government grants mainly represented financial support funds from local government without attached conditions.
During the eight months ended 31 August 2020, the Group's subsidiary, Kerui PM, disposed an investment property to its non-controlling interest shareholder at a cash consideration of RMB39,981,000, derived a gain of RMB18,149,000.
10
FINANCE COSTS - NET
Finance costs:
- Interest expense on bank loans
- Interest expense on asset-backed securities
- Interest expense on lease liabilitiesFinance income:
- Interest income on loans due from a related party (Note 31(b))
- Interest income from bank depositsFinance costs - net
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
(463) | (562) | (698) | |
(106,393) | (76,298) | (54,314) | |
(15) | (12) | (1) | |
(106,871) | (76,872) | (55,013) | |
100,917 | 70,348 | 51,931 | |
300 | 195 | 501 | |
101,217 | 70,543 | 52,432 | |
(5,654) | (6,329) | (2,581) |
31 August
(723)
(796)
(55,237)
(128,768)
(50)
(33)
(56,010) (129,597)
Eight months ended
53,048
122,677
361
53,409
301
122,978
(2,601)
(6,619)
11 INCOME TAX EXPENSE
Eight months ended
Current income tax - PRC CIT Deferred income tax
(Note 27)
- PRC CIT
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
27,974 | 18,625 | 27,563 | |
(2,042) | (2,011) | (3,429) | |
25,932 | 16,614 | 24,134 |
31 August
18,920
26,280
(4,159)
(4,566)
14,761 21,714
(a) PRC Corporate Income Tax ("CIT")
Income tax provision of the New CMIG PM Group in respect of operations in Mainland China has been calculated at the applicable tax rate on the estimated assessable profits for the years/periods, based on the existing legislation, interpretations and practices in respect thereof. The statutory tax rate was 25% for the Track Record
Period.
(b)
The reconciliation from income tax calculated based on the applicable tax rates and total profit presented in the consolidated statements of comprehensive income to the income tax expenses is listed below:
Eight months ended
Profit before income tax 60,294 81,494
Tax calculated at applicable corporate income tax rate of 25% 15,074 20,374
Tax effects of:
- Expense not deductible for tax purpose 591 644
- Tax losses for which no deferred income tax assets were recognized
(Note) - 696
- Utilisation of previously
unrecognised tax losses
- Others
Income tax expense
Year ended 31 December | |||
2017 2018 | 2019 | 2020 | |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
100,458 | 65,202 | 96,066 | |
25,115 | 16,301 | 24,017 | |
306 | 51 | - | |
- | - | - | |
511 | 262 | 185 | |
- | - | (68) | |
25,932 | 16,614 | 24,134 |
31 August 2019
- (904)
- -
14,761
21,714
Note: The tax losses for which no deferred income tax assets were recognized for 2018 will be expired in 2023.
As at
31 August 2020
As at
31 December 2019
RMB'000 RMB'000
235,138
235,138
12 SUBSIDIARIES - NEW CMIG PM
Investment in subsidiariesUpon completion of the Reorganization and as at the date of this report, the New CMIG PM Group has direct or indirect interests in the following principal subsidiaries:
Name of statutory auditors and periods covered
Attributable equity interest of the New
Attributable equity interest of CMIG PM Group as the New CMIG PM Group at the date of this Principal activities/report place of operation
51% Property management PricewaterhouseCoopersZhong Tian LLP for years 2017 and 2018 and Pan China LLP for year 2019
services in Shanghai
29.58% Property management Jiangxi Zhongrun LLP foryears 2017, 2018 and 2019
services in Nanchang
26.52% Property management Jilin Zhongxin HuachengLLP for years 2017, 2018 and 2019
services in Changchun
26.01% Property management Jiangsu Zhongtian HuaxiaLLP for years 2017, 2018 and 2019
services in NanjingProperty management NA services in Huhhot
51%
31 December 31 August 2017 2018 2019 2020
51%
29.58% 26.52%
26.01%
51%
51%
29.58% 26.52%
26.01%
51%
51%
29.58% 26.52%
26.01%
51%
51%
29.58% 26.52%
26.01%
51%
Issued and paid-up capital
RMB20,000,000
RMB500,000
RMB3,000,000
RMB3,000,000
RMB500,000
Place and date of incorporation/ establishment
Shanghai, the PRC 5 February 2002
Jiangxi, the PRC 19 September 2003 Changchun, the PRC 16 July 2004
Nanjing, the PRC 27 July 2006
Huhhot, the PRC 7 November 2008
Names of the subsidiaries
Direct subsidiary Kerui PM (ii)Indirect subsidiaries
Jiangxi Kerui Ecology property management Co., Ltd. Changchun Kerui Property
Management Co., Ltd.
Nanjing Green Kerui Property
Management Co., Ltd.
Huhhot Kerui Property
Management Service Co., Ltd.
Name of statutory auditors and periods covered
Attributable equity interest of the New CMIG PM Group as at the date of this Principal activities/ report place of operation
Property management Dahua LLP for 2017 andShanghai Jiuguang LLP for years 2018
NAservices in Shanghai
51%
51% Property management services in Zhengzhou
Property management NA services in Nanjing
26.01%
(i) NA in ShanghaiDecoration services
Attributable equity interest of the New CMIG PM Group
31 December 31 August 2017 2018 2019 2020
51%
51%
26.01%
(i)
51%
51%
26.01%
45.9%N/A
26.01%
23.41% (i)
Issued and paid-up capital
RMB7,300,000 45.9%
RMB80,000,000 N/A
26.01%
23.41%RMB500,000
RMB500,000
Place and date of incorporation/ establishment
Shanghai, the PRC 19 May 1995
Zhengzhou, the PRC 9 November 2018
Nanjing, the PRC 29 April 2016
Shanghai, the PRC 16 July 1998
Names of the subsidiaries
Shanghai Da'an Property
Management Co., Ltd. ("Da'an PM") (iii)
Zhengzhou Kerui Property
Management Co., Ltd.
Nanjing Kerui Restaurant
Service management
Co., Ltd.
Minkang Decoration Service
Co., Ltd.
(i) Deregistered company.
(ii) The single directly held subsidiary of New CMIG PM, Kerui PM, together with its subsidiaries at that time, was historically acquired by CMIG Futurelife, being the intermediate holding company of the New CMIG PM Group, from third parties on 30 September 2016, and was transferred to New CMIG PM on 11 December 2019.
(iii) On 30 November 2017, Kerui PM acquired 90% equity interest of Da'an PM from a third party. On 9 April 2019, Kerui PM further acquired the remaining 10% equity interest of Da'an PM at consideration of RMB2,000,000.
Details of the acquisitions of subsidiaries are set out in Note 30.
No summarised financial information of each subsidiary, together with their subsidiaries, which has non-controlling interests that are material to the CMIG PM Group is presented since Kerui PM is the only subsidiary with material non-controlling interest and the financial information of Kerui PM is identical to the New CMIG PM Group's financial information except for the payable to CMIG PM for the acquisition of Kerui PM amounting to RMB235 million (Note 1).
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
13
PROPERTY, PLANT AND EQUIPMENT
Office and | ||||
Transportation | other | |||
Buildings | equipment | equipment | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
As at 1 January 2017 | ||||
Cost | 48,169 | 5,617 | 8,589 | 62,375 |
Accumulated depreciation | (1,337) | (2,903) | (6,390) | (10,630) |
Net book amount | 46,832 | 2,714 | 2,199 | 51,745 |
Year ended 31 December 2017 | ||||
Opening net book amount | 46,832 | 2,714 | 2,199 | 51,745 |
Additions from acquisition of | ||||
subsidiaries (Note 30) | - | 17 | 253 | 270 |
Other additions | - | 1,125 | 851 | 1,976 |
Disposals | (529) | (194) | (40) | (763) |
Depreciation charge | (1,809) | (543) | (1,143) | (3,495) |
Closing net book amount | 44,494 | 3,119 | 2,120 | 49,733 |
As at 31 December 2017 | ||||
Cost | 47,296 | 6,580 | 9,786 | 63,662 |
Accumulated depreciation | (2,802) | (3,461) | (7,666) | (13,929) |
Net book amount | 44,494 | 3,119 | 2,120 | 49,733 |
Year ended 31 December 2018 | ||||
Opening net book amount | 44,494 | 3,119 | 2,120 | 49,733 |
Other additions | 1,113 | 2,761 | 2,308 | 6,182 |
Disposals | - | (284) | (14) | (298) |
Depreciation charge | (1,575) | (690) | (937) | (3,202) |
Closing net book amount | 44,032 | 4,906 | 3,477 | 52,415 |
As at 31 December 2018 | ||||
Cost | 48,409 | 8,641 | 11,772 | 68,822 |
Accumulated depreciation | (4,377) | (3,735) | (8,295) | (16,407) |
Net book amount | 44,032 | 4,906 | 3,477 | 52,415 |
Year ended 31 December 2019 | ||||
Opening net book amount | 44,032 | 4,906 | 3,477 | 52,415 |
Other additions | 1,670 | 591 | 1,490 | 3,751 |
Disposals | (1,022) | (132) | (32) | (1,186) |
Depreciation charge | (1,740) | (1,043) | (1,050) | (3,833) |
Closing net book amount | 42,940 | 4,322 | 3,885 | 51,147 |
- II-42 - |
Office and
Transportation | other | |||
Buildings | equipment | equipment | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
As at 31 December 2019 | ||||
Cost | 48,980 | 8,252 | 12,618 | 69,850 |
Accumulated depreciation | (6,040) | (3,930) | (8,733) | (18,703) |
Net book amount | 42,940 | 4,322 | 3,885 | 51,147 |
Eight months ended | ||||
31 August 2020 | ||||
Opening net book amount | 42,940 | 4,322 | 3,885 | 51,147 |
Other additions | - | - | 315 | 315 |
Disposals | - | (43) | - | (43) |
Depreciation charge | (1,069) | (640) | (655) | (2,364) |
Closing net book amount | 41,871 | 3,639 | 3,545 | 49,055 |
As at 31 August 2020 | ||||
Cost | 48,980 | 8,031 | 12,933 | 69,944 |
Accumulated depreciation | (7,109) | (4,392) | (9,388) | (20,889) |
Net book amount | 41,871 | 3,639 | 3,545 | 49,055 |
As at 1 January 2019 | ||||
Cost | 48,409 | 8,641 | 11,772 | 68,822 |
Accumulated depreciation | (4,377) | (3,735) | (8,295) | (16,407) |
Net book amount | 44,032 | 4,906 | 3,477 | 52,415 |
(Unaudited) | ||||
Eight months ended | ||||
31 August 2019 | ||||
Opening net book amount | 44,032 | 4,906 | 3,477 | 52,415 |
Other additions | 690 | 562 | 1,413 | 2,665 |
Disposals | - | (88) | (14) | (102) |
Depreciation charge | (1,080) | (691) | (714) | (2,485) |
Closing net book amount | 43,642 | 4,689 | 4,162 | 52,493 |
As at 31 August 2019 | ||||
Cost | 49,099 | 8,400 | 12,906 | 70,405 |
Accumulated depreciation | (5,457) | (3,711) | (8,744) | (17,912) |
Net book amount | 43,642 | 4,689 | 4,162 | 52,493 |
As at 31 December 2017 and 2018 and 2019 and 31 August 2020, certain property, plant and equipment of the New CMIG PM Group with net book value of RMB31,246,000, RMB30,187,000, RMB29,127,000 and
RMB28,597,000, have been pledged as security for the secured bank loans (Note 26), respectively.
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Depreciation expenses were charged to the following categories in the consolidated statements of comprehensive income:
14
(a)
Right-of-use assets - BuildingsLease liabilities - Current - Non-current
2019 | 2020 |
RMB'000 | RMB'000 |
(Unaudited) | |
913 | 825 |
1,572 | 1,539 |
2,485 | 2,364 |
Amounts recognized in the consolidated statements of financial position | |
As at | |
31 August | |
2019 | 2020 |
RMB'000 | RMB'000 |
58 | - |
69 | - |
- | - |
69 | - |
RMB'000
Cost of sales Administrative expenses
Year ended 31 December 2017 2018
RMB'000 RMB'000
746 2,749
2,545 2,526
3,495
3,202 3,833
LEASES
2019
RMB'000
657 1,307
2017
RMB'000
As at 31 December 2018
523 291
244 262
331 69
575 331
Eight months ended
31 August
(b)Amounts recognized in the consolidated statement of comprehensive income
Depreciation charge of right-of-use assets - Buildings
Interest expense Expense relating to short-term leases
Year ended 31 DecemberEight months ended
31 August
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
233 | 155 | 58 | |
15 | 12 | 1 | |
752 | 691 | 563 |
233 232
50 33
646 409
15 | INVESTMENT PROPERTIES | |||
Eight months | ||||
ended | ||||
31 August | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
As at 1 January | ||||
Cost | 118,142 | 125,944 | 86,621 | 67,141 |
Accumulated depreciation | (4,769) | (10,085) | (4,976) | (11,836) |
Net book amount | 113,373 | 115,859 | 81,645 | 55,305 |
During the year/period | ||||
Opening net book amount | 81,832 | 113,373 | 115,859 | 81,645 |
Additions | 35,959 | 7,802 | 26,551 | - |
Disposal | (490) | - | (55,686) | (24,010) |
Depreciation charge | (3,928) | (5,316) | (5,079) | (2,330) |
Closing net book amount | 113,373 | 115,859 | 81,645 | 55,305 |
Year ended 31 December
The New CMIG PM Group leases certain residential and commercial properties to third parties. The New CMIG PM Group's investment properties are stated at historical cost at the end of each reporting period.
Depreciation expenses were charged to the following categories in the consolidated statements of comprehensive income:
Eight months ended
Cost of sales
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
5,079 | 3,108 | 2,330 |
31 August
3,928
5,316
During the Track Record Period, the amounts recognised in profit or loss for investment properties other than depreciation expenses are as follows:
Eight months ended
Rental income (Note 6) Direct operating expenses from properties that generated rental income
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
4,943 | 4,201 | 4,002 | |
(1,267) | (506) | (368) |
31 August
6,274
6,905
(1,346)
(1,530)
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
16
INTANGIBLE ASSETS
Customer | Computer | |||
Goodwill | relationships | software | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
As at 1 January 2017 | ||||
Cost | 183,385 | 120,567 | 4,070 | 308,022 |
Accumulated amortization | - | (3,014) | (518) | (3,532) |
Net book amount | 183,385 | 117,553 | 3,552 | 304,490 |
Year ended 31 December 2017 | ||||
Opening net book amount | 183,385 | 117,553 | 3,552 | 304,490 |
Additions from acquisition of | ||||
subsidiaries (Note 30) | 10,805 | 3,213 | - | 14,018 |
Amortisation | - | (12,083) | (435) | (12,518) |
Closing net book amount | 194,190 | 108,683 | 3,117 | 305,990 |
As at 31 December 2017 | ||||
Cost | 194,190 | 123,780 | 4,070 | 322,040 |
Accumulated amortisation | - | (15,097) | (953) | (16,050) |
Net book amount | 194,190 | 108,683 | 3,117 | 305,990 |
Year ended 31 December 2018 | ||||
Opening net book amount | 194,190 | 108,683 | 3,117 | 305,990 |
Additions | - | - | 467 | 467 |
Amortisation | - | (12,378) | (451) | (12,829) |
Closing net book amount | 194,190 | 96,305 | 3,133 | 293,628 |
As at 31 December 2018 | ||||
Cost | 194,190 | 123,780 | 4,507 | 322,477 |
Accumulated amortisation | - | (27,475) | (1,374) | (28,849) |
Net book amount | 194,190 | 96,305 | 3,133 | 293,628 |
Year ended 31 December 2019 | ||||
Opening net book amount | 194,190 | 96,305 | 3,133 | 293,628 |
Amortisation | - | (12,379) | (449) | (12,828) |
Closing net book amount | 194,190 | 83,926 | 2,684 | 280,800 |
As at 31 December 2019 | ||||
Cost | 194,190 | 123,780 | 4,507 | 322,477 |
Accumulated amortisation | - | (39,854) | (1,823) | (41,677) |
Net book amount | 194,190 | 83,926 | 2,684 | 280,800 |
- II-46 - |
APPENDIX II |
Eight months ended |
31 August 2020 |
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Customer | Computer | |||
Goodwill | relationships | software | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Opening net book amount | 194,190 | 83,926 | 2,684 | 280,800 |
Amortisation | - | (8,252) | (301) | (8,553) |
Closing net book amount | 194,190 | 75,674 | 2,383 | 272,247 |
As at 31 August 2020 | ||||
Cost | 194,190 | 123,780 | 4,507 | 322,477 |
Accumulated amortisation | - | (48,106) | (2,124) | (50,230) |
Net book amount | 194,190 | 75,674 | 2,383 | 272,247 |
As at 1 January 2019 | ||||
Cost | 194,190 | 123,780 | 4,507 | 322,477 |
Accumulated amortisation | - | (27,476) | (1,373) | (28,849) |
Net book amount | 194,190 | 96,304 | 3,134 | 293,628 |
Eight months ended 31 August | ||||
2019 (Unaudited) | ||||
Opening net book amount | 194,190 | 96,304 | 3,134 | 293,628 |
Amortisation | - | (8,252) | (299) | (8,551) |
Closing net book amount | 194,190 | 88,052 | 2,835 | 285,077 |
As at 31 August 2019 | ||||
Cost | 194,190 | 123,780 | 4,507 | 322,477 |
Accumulated amortization | - | (35,728) | (1,672) | (37,400) |
Net book amount | 194,190 | 88,052 | 2,835 | 285,077 |
Amortization expenses were charged to the following categories in the consolidated statements of comprehensive income.
Cost of sales Administrative expenses
Year ended 31 December | |||
2017 2018 | 2019 | 2019 | 2020 |
RMB'000 RMB'000 | RMB'000 | RMB'000 | RMB'000 |
(Unaudited) | |||
12,377 | 8,252 | 8,252 | |
451 | 299 | 301 | |
12,828 | 8,551 | 8,553 |
31 August
12,084 12,378
434 451
12,518 12,829
Eight months ended
Goodwill
The breakdown of goodwill by companies acquired is set out below:
As at | ||||
31 August | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Acquisition of Kerui PM in 2016 | 183,385 | 183,385 | 183,385 | 183,385 |
Acquisition of Da'an PM in 2017 | ||||
(Note 30) | 10,805 | 10,805 | 10,805 | 10,805 |
Total | 194,190 | 194,190 | 194,190 | 194,190 |
As at 31 December
(i) Acquisitions
On 30 September 2016, the CMIG PM Group acquired 51% equity interest of Kerui PM from a third party at a cash consideration of RMB235,138,000 and obtained control of Kerui PM. The identifiable assets and liabilities of Kerui PM at the time of acquisition amounted to RMB106,056,000, excluding non-controlling interests of RMB54,303,000, the CMIG Group derived a goodwill of RMB183,385,000.
On 30 November 2017, Kerui PM acquired 90% equity interest of Da'an PM from a third party at a cash consideration of RMB18,000,000 and obtained control of Da'an PM. The identifiable assets and liabilities of Da'an PM at the time of acquisition amounted to RMB8,820,000, excluding non-controlling interests of RMB1,625,000, Kerui PM derived a goodwill of RMB10,805,000.
As mentioned in Note 1.2, Kerui PM was acquired by CMIG Futurelife, being the then intermediate controlling company, from third parties before the Track Record Period prior to the transfer of Kerui PM to New CMIG PM pursuant to the Reorganization. Assets and liabilities of Kerui PM, including goodwill derived from the acquisition, were included in the consolidated financial statements of the New CMIG PM Group from the date of the acquisition from third parties by CMIG Futurelife.
Goodwill is attributable to the business prospects of the acquired business and will not be deductible for tax purpose.
(ii) Impairment review
Impairment review on the goodwill of the New CMIG PM Group has been conducted by the management as at 31 December 2017 and 2018, 2019 and 30 August 2020, the balance sheet dates during the Track Record Period. For the purpose of impairment review, the recoverable amount of CGUs is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets prepared by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated terminal growth rates stated below.
The range of key parameters used for value-in-use calculations are as follows:
Growth rate of | Terminal | Discount | ||
Gross margin | the first five years | growth rate | rate | |
Kerui PM | ||||
As at 31 December 2017 | 18.00% to 20.00% | 10.00% | 3% | 15.00% |
As at 31 December 2018 | 17.00% | 15.00% | 3% | 15.00% |
As at 31 December 2019 | 16.00% to 17.50% | 6.00% to 10.00% | 3% | 15.00% |
As at 31 August 2020 | 16.00% to 17.50% | 6.00% to 10.00% | 3% | 15.00% |
Da'an PM | ||||
As at 31 December 2017 | 20.00% | 10.00% to 15.00% | 3% | 15.00% |
As at 31 December 2018 | 20.00% | 10.00% to 15.00% | 3% | 15.00% |
As at 31 December 2019 | 20.00% | 10.00% to 15.00% | 3% | 15.00% |
As at 31 August 2020 | 20.00% | 10.00% to 15.00% | 3% | 15.00% |
- II-48 - |
The growth rates used do not exceed the industry growth forecast for the market in which the New CMIG PM Group operates. The discount rate used is pre-tax and reflects market assessments of the time value and the specific risks relating to the industry. The budgeted gross margin was determined by the management based on past performance and its expectation for market development.
Based on the result of the goodwill impairment testing, the estimated recoverable amount of the CGUs far exceeded their carrying amount as at 31 December 2017, 2018 and 2019 and 31 August 2020. The management of the New CMIG PM Group has not identified that a reasonable possible change in any of the key assumptions that could cause the carrying amount to exceed the recoverable amount.
Based on the result of the goodwill impairment testing, the headroom of the CGUs, presented as the percentage over the respective goodwill amounts, were as following as at 31 December 2017, 2018 and 2019 and 31 August 2020, respectively.
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Headroom % Kerui PM Da'an PM
49% 117%
121% 129%
99% 74%
58% 39%The New CMIG PM Group performs the sensitivity analysis based on the assumptions that revenue amount or terminal value or the discount rate have been changed. Had the estimated key assumptions during the forecast period been changed as below, the headroom would be decreased to as below:
As at 31 August 2020
Kerui PM Da'an PM
Revenue amount decreases by 10% | 50% | 21% |
Terminal value decreases by 10% | 70% | 34% |
Discount rate increases by 5% | 69% | 34% |
With reference to the recoverable amount assessed as at 31 December 2017, 2018 and 2019 and 31 August 2020, the directors of the New CMIG PM Group determined that there was no provision for impairment of goodwill for the Track Record Period.
17 FINANCIAL INSTRUMENTS BY CATEGORY
The Group holds the following financial instruments:
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Financial assets at amortised cost
- Loan and interests due from a related party (Note 22)
- Trade receivables (Note 19)
- Deposit and other receivables (Note 20)
- Cash and cash equivalents (Note 23)
1,932,848 232,674 70,966 145,444
1,693,351 276,462 61,722 157,539
1,399,431 180,800
197,739 253,558
61,533 76,263
209,100 118,830
Financial assets at fair value through other comprehensive income (Note 18)
Financial assets at fair value through profit or loss (Note 21)
5,000 35,000
5,025 34,000
5,025 5,025
33,500 6,432
2,421,932
2,228,099
1,906,328 640,908
APPENDIX II | |||
As at 31 December | 31 August | ||
2017 | 2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 | RMB'000 |
Financial liabilities | |||
482,290 | 517,727 | 672,864 | 470,047 |
2,011,040 | 1,749,480 | 1,458,920 | 228,640 |
575 | 331 | 69 | - |
2,493,905 | 2,267,538 | 2,131,853 | 698,687 |
As at
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Liabilities at amortised cost
- Trade and other payables (exclude staff salaries and welfare payables and accrued taxes) (Note 25)
- Borrowings (Note 26)
- Lease liabilities (Note 14)
18 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
As at | ||||
As at 31 December | 31 August | |||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At the beginning of the year/period | - | 5,000 | 5,025 | 5,025 |
Additions | 5,000 | 25 | - | - |
At the end of the year/period | 5,000 | 5,025 | 5,025 | 5,025 |
Financial assets at fair value through other comprehensive income as at 31 December 2017, 2018 and 2019 and 31 August 2020 represented equity investments in certain unlisted companies in the PRC.
19 TRADE RECEIVABLES
RMB'000
Trade receivables - Third parties - Related parties (Note 31(c))
237,392 335
Subtotal of gross trade receivables 237,727 Less: provision for impairment of
trade receivables Notes receivable
Trade receivables - net
232,674
(5,053)
As at | ||
As at 31 December | 31 August | |
2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 |
286,135 | 209,234 | 268,589 |
227 | - | - |
286,362 | 209,234 | 268,589 |
(11,495) | (15,031) | |
- | - | |
197,739 | 253,558 |
2017
(10,070)
-
170
276,462
Trade receivables mainly arise from property management services managed under lump sum basis and value-added services. Property management services revenue under lump sum basis is received in accordance with the terms of the relevant property service agreements. Service income is due for payment by the property owners upon rendering of services.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, the ageing analysis of the trade receivables based on invoice date was as follows:
As at | ||||
As at 31 December | 31 August | |||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Within 1 year | 147,894 | 138,759 | 120,864 | 153,117 |
1 to 2 years | 60,759 | 76,434 | 48,505 | 60,999 |
2 to 3 years | 22,263 | 43,542 | 29,847 | 33,912 |
Over 3 years | 6,811 | 27,797 | 10,018 | 20,561 |
237,727 | 286,532 | 209,234 | 268,589 |
As at 31 December 2017, 2018 and 2019 and 31 August 2020, trade receivables were denominated in RMB. Property management services income and value-added services income are received in accordance with the terms of the relevant services agreements, and due for payment upon the issuance of invoice.
The New CMIG PM Group applies the simplified approach to provide for expected credit losses prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. As to measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. Movements on the provision for impairment of trade receivables are shown in Note 3.1.2. For the years ended 31 December 2017, 2018 and 2019 and the eight months ended 31 August 2020, a provision of RMB5,053,000, RMB10,070,000, RMB11,495,000 and RMB15,031,000 was made against the gross amounts of trade receivables as at the balance sheet dates, respectively.
The carrying values of trade receivables approximated their fair values as at the balance sheet dates and were denominated in RMB.
20 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Non-current:
Prepayment for purchase of properties
74,608
93,547
154,296 210,188
74,608
93,547
154,296 210,188
Current:
Prepayment for operations - Utilities - Others
7,162 1,157
8,578 4,566
7,164 10,198
10,626 7,761
8,319
13,144
17,790 17,959
Deposits (a)
27,138
28,180
26,575 27,220
Input tax to be deducted
-
3,595
-
-
APPENDIX II |
Other receivables |
As at
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
As at 31 December | |
2018 | |
RMB'000 | |
- Related parties (Note 31(c)), (b) | 4,201 |
- Payments on behalf of property | |
owners (c) | 31,846 |
- Others | 7,933 |
Subtotal | 43,980 |
Less: allowance for impairment of | |
other receivables | |
Total of current |
2017
RMB'000
1,240 45,552 7,073
53,865
(10,037)
79,285
31 August | ||
2019 | 2020 | |
RMB'000 | RMB'000 | |
1,350 | - | |
34,489 | 48,255 | |
3,441 | 6,725 | |
39,280 | 54,980 | |
(10,438) | (4,322) | (5,937) |
78,461 | 79,323 | 94,222 |
(a) The deposits represented the performance guarantees and bidding guarantees paid pursuant to the relevant service, contracts and bidding requirements.
(b) Other receivables due from related parties represented mainly the amounts due from CMIG Futurelife though a cash pooling arrangement setup by CMIG Futurelife. In connection with the Proposed VSA Transaction, the New CMIG PM Group's subsidiaries involved in the cash pooling arrangement stopped making deposits into the relevant bank accounts and all amounts had been settled in year 2020.
(c) The payments on behalf of property owners represented the payments in respect of utilities and maintenance costs of the properties and will be collected from property owners when it is charged together with the property fee.
Movements on the provision for impairment of deposits and other receivables (excluding prepayments) are shown in Note 3.1.2.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, prepayments, deposits and other receivables were denominated in RMB. The carrying values of other receivables approximated their fair values as at the balance sheet dates.
21 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Investment in wealth management products
35,000
34,000
33,500
6,432
Movements in investment in wealth management products were as follows:
Eight months | ||||
ended | ||||
31 August | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At the beginning of the | ||||
year/period | 14,000 | 35,000 | 34,000 | 33,500 |
Additions | 35,000 | 48,000 | 140,000 | 75,580 |
Fair value gain | 658 | 1,410 | 1,169 | 611 |
Disposals | (14,658) | (50,410) | (141,669) | (103,259) |
At the end of the year/period | 35,000 | 34,000 | 33,500 | 6,432 |
Year ended 31 December
The financial assets at fair value through profit or loss were wealth management products which were denominated in RMB and with expected rates of return ranging from 3.00% to 4.40% per annum during the Track Record Period. They had initial terms ranging from 91 days to 102 days. The returns on all of these wealth management products are not guaranteed, hence their contractual cash flows do not qualify for solely payments of principal and interest. Therefore they are measured at fair value through profit or loss.
22 LOANS AND INTEREST RECEIVABLES DUE FROM A RELATED COMPANY
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Loans and interests receivables due from CMIG Futurelife - Current - Non-current
312,048 1,620,800
330,551 1,362,800
1,399,431 -
180,800 -
Total
1,932,848
1,693,351
1,399,431
180,800
On 9 August 2017, the New CMIG PM's subsidiary, Kerui PM, entered into asset-backed securitisation ("ABS") arrangements with a third party assets management company, whereby Kerui PM issued asset-backed securities("ABS") to investors and obtained proceeds amounting to RMB2 billion ("ABS borrowings") (Note 26). Further details of the ABS borrowings are set out in Note 26.
The proceeds from the ABS borrowings were onward lent to CMIG Futurelife, the intermediate controlling shareholder of the New CMIG PM Group. According to the respective loan agreement with CMIG Futurelife, the loan to CMIG Futurelife is unsecured, interest bearing at 6.1% to 6.7% per annum and fully repayable by 8 August 2023. CMIG Futurelife had been settling Kerui PM's loan receivable by instalments according to Kerui PM's ABS borrowings' repayment schedule since the beginning of the ABS borrowings.
The entire balance of Kerui PM's loan and interest receivables due from CMIG Futurelife as at 31 December 2019 of RMB1,399 million became current assets since CMIG Futurelife was required to repay the whole amount to Kerui PM so as to enable Kerui PM to settle its ABS borrowings which would have been fully payable in August 2020 should the ABS investors opt to exercise an early redemption option (Note 26).
In January 2020, CMIG Futurelife repaid RMB205 million (being loan principal of RMB154 million and interests of RMB51 million) to Kerui PM for Kerui PM to settle its ABS borrowings for the seventh instalment in January 2020 and the interests accrued thereon. Further in July 2020, CMIG Futurelife repaid RMB651 million to Kerui PM for Kerui PM to settle ABS borrowings to investors for the eighth instalment as originally scheduled in August 2020 and the interest accrued thereon and the remaining balances of ABS borrowings in relation to investorswho opted for early redemption in August 2020. In addition, CMIG Futurelife repaid RMB60 million to Kerui PM for Kerui PM to repurchase the ABS held by a fellow subsidiary of CMIG Futurelife on the open market, by batches until all the 499 million in total ABS held by the fellow subsidiary were all bought by Kerui PM.
As at 31 August 2020, the loan and interest receivables from CMIG Futurelife have been settled to a remaining amount of RMB180,800,000. Subsequently, RMB30,800,000 was offset against Kerui PM's dividend payable to CMIG Futurelife. Also, pursuant to an entrusted repayment and loans offsetting letter entered into by Kerui PM and CMIG Futurelife, CMIG Futurelife repaid on behalf of Kerui PM's loan due to a third party amounting to RMB150 million in cash (Note 26(c)), and both parties agreed to offset the RMB150 million against Kerui PM's loan and interest receivables due from CMIG Futurelife, by then all remaining loan and interest receivables due from CMIG Futurelife were fully settled in October 2020.
23 CASH AND CASH EQUIVALENTS
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Cash at bank Cash on hand
143,602 1,842
156,096 1,443
208,177 923
117,916 914
Cash and cash equivalents
145,444
157,539
209,100
118,830
The carrying amount of cash and cash equivalents balances are denominated in RMB.
24 OTHER RESERVES
Capital reserves RMB'000
Statutory reserves RMB'000
Total RMB'000
Balance at 1 January 2017
Appropriation of statutory reserves
235,138 -
5,284 240,422
7,231 7,231
Balance at 31 December 2017 and until 1 January 2019
235,138
12,515 247,653
Deemed distribution to the owner in relation to acquisition of Kerui PM (a)
(235,138)
-
(235,138)
Balance at 31 December 2019 and until 31 August 2020
-
12,515
12,515
(a) Deemed distribution to owners
The deemed distribution to owners during the eight months ended 31 August 2020 represented the consideration payable by the New CMIG PM Group to CMIG Futurelife for the transfer of the equity in Kerui PM from CMIG Futurelife to New CMIG PM pursuant to the Reorganisation (Note 1.2). The consideration payable was treated as deemed distribution to the owners.
(b) Statutory reserves
Statutory reserves comprise statutory surplus reserve and discretionary surplus reserves.
Pursuant to the Company Law of the PRC and the articles of association of PRC subsidiaries, the subsidiaries in the PRC are required to appropriate 10% of each year's net profit (after offsetting previous years' losses) to statutory surplus reserve until the fund aggregates to 50% of their registered capital. After the appropriation to statutory surplus reserve, the subsidiaries in the PRC can appropriate profit, subject to respective equity holders' approval, to discretionary surplus reserve.
The appropriation to statutory and discretionary surplus reserves must be made before distribution of dividends to equity holders. These reserves shall only be used to make up for previous years' losses, to expand production operations, or to increase the capital of the respective company. The entities in the PRC may transfer their respective statutory surplus reserves into paid-in capital, provided that the balance of the statutory surplus reserve after such transfer is not less than 25% of the registered capital.
The balance of statutory reserves of the New CMIG PM Group represented the cumulative balance of the appropriation to and usage of the reserves subsequent to the dates of acquisitions by the New CMIG PM Group of the respective companies.
25 TRADE AND OTHER PAYABLES
(a) New CMIG PM Group
As at
2017
As at 31 December 2018
2019
31 August 2020
RMB'000
RMB'000
RMB'000
RMB'000
Non-current Other payables: - Consideration payable for acquisition of Kerui PM (Note 1.2)
-
-
-
235,138
Current
Trade payables:
- Due to related parties (Note 31(c))
- Due to third parties
- 104,755
1,388 132,471
1,113
297
85,330 137,671
104,755
133,859
86,443 137,968
Other payables:
- Consideration payable for acquisition of Kerui PM (Note 1.2)
- Amounts collected on behalf of property owners (a)
- Deposit received (b)
- 114,813 52,802
- 126,814 59,580
235,138
-
140,007 127,107
63,563 68,054
- Payables to the non-controlling shareholders of subsidiaries (Note 31(c))
- Other accrued expenses and payables
58,992 95,691
58,992 91,338
-
-
105,762 136,391
- Staff salaries and welfare payables
- Interest payable
- Accrued taxes other than income tax
680 55,237 3,779
96 47,144 6,027
457 1,169
41,951 527
17,475 2,528
381,994
389,991
604,353 335,776
486,749
523,850
690,796 473,744
(a) The amounts collected on behalf of property owners represented mainly the (i) fees for utilities charges collected from property owners and to be paid to utilities suppliers, (ii) fees collected from outsiders from operating public areas, such as advertising and parking income, and to be returned to property owners, (iii) property sales transaction stamp duty and service fees collected from property owners and to be paid to the relevant authorities, and others.
(b) The deposit received represented the deposit received from service providers for performance guarantee and cash received from property owners as decoration guarantees or utilities guarantees.
At 31 December 2017, 2018 and 2019 and 31 August 2020, trade and other payables were denominated in RMB, and their carrying amounts approximated their fair values as at the balance sheet date. The ageing of trade payables was within one year.
(b) New CMIG PM
Payable for acquisition of Kerui PM 235,138
26 BORROWINGS
2017
RMB'000
Non-current
Secured long-term bank loan (a) Asset-backed securities borrowings (b)
11,040 2,000,000
Less: Current portion of long-termbank loans (2,560) (2,560)
Current portion of asset - backed securities borrowings (259,000) (288,000)
1,749,480 1,458,920
Current
Loans due to a third party (c)
-
Current portion of bank loans 2,560 2,560
Current portion of asset-backed securities borrowings 259,000 288,000
261,560 290,560
Total borrowing
2,011,040
As at | ||
31 August | ||
2020 | ||
RMB'000 | ||
235,138 | ||
As at | ||
As at 31 December | 31 August | |
2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 |
8,480 | 5,920 | 4,640 |
1,741,000 | 1,453,000 | - |
(2,560) | (2,560) | |
(1,453,000) | - | |
3,360 | 2,080 | |
- | 224,000 | |
2,560 | 2,560 | |
1,453,000 | - | |
1,455,560 | 226,560 | |
1,458,920 | 228,640 |
As at 31 December
2019
RMB'000
-
1,749,480
(a) Secured long term bank loanThe secured long term bank loan amounting to RMB11,040,000, RMB8,480,000, RMB5,920,000 and RMB4,640,000 as at 31 December 2017, 2018 and 2019 and 31 August 2020 was borrowed by Kerui PM in August 2015 for a 7-year term to finance the purchase of the office premises properties of Kerui PM. The loan is interest bearing at the benchmark interest rate of People's Bank of China ("PBOC") plus 25% margin per annum, and principal and interest are repayable quarterly at a fixed repayment amount.
As at 31 December 2017, 2018 and 2019 and 31 August 2020, the properties of the New CMIG PM Group with net book value of RMB31,246,000, RMB30,187,000, RMB29,127,000 and RMB28,597,000 (Note 13) have been pledged as security for the secured bank loan, respectively.
(b) Asset-backed securities borrowings
On 9 August 2017, Kerui PM entered into an asset-backed securitisation arrangement with a third party assets management company whereby Kerui PM issued asset-backed securities ("ABS") to investors and obtained proceeds amounting to RMB2,020 million, amongst which RMB20 million was subordinated securities purchased by Kerui PM itself. The ABS were secured by Kerui PM's pledge of its future 6 years' right of receiving management fees from the property management contracts in respect of certain properties under Kerui PM's management, and supported by a corporate guarantee provided by CMIG Futurelife. The ABS carry nominal interest rate ranging from 6.1% to 6.7% per annum, and are repayable in twelve half-annual instalments from 9 February 2018 to 9 August 2023.
Among the RMB2,020 million ABS issued by Kerui PM, RMB778,000,000 was acquired by a fellow subsidiary controlled by CMIG Futurelife. The ABS owed by the fellow subsidiary amounted to RMB624,000,000, RMB499,000,000, RMB499,000,000 as at 31 December 2017, 2018 and 2019.
According to the ABS agreement, the ABS investors are eligible to exercise an early-redemption option to demand Kerui PM to redeem the remaining ABS held by the investors during the registration period of early redemption, which is from 18 to 20 days in advance to the eighth repayment date on 9 August 2020. Kerui PM is obligated to redeem all the remaining ABS if any investors exercised the early redemption option. Accordingly, the whole amount of the balance of ABS borrowings amounting to RMB1,453 million was reclassified from non-current liabilities to current liabilities as at 31 December 2019.
In January 2020, Kerui PM repaid RMB154,000,000 ABS borrowings for the seventh instalment and the interests accrued thereon. Further in August 2020, Kerui PM repaid RMB729,000,000 ABS borrowings to investors for the eighth instalment as originally scheduled and the interest accrued thereon and the remaining balances of ABS borrowings in relation to investors who opted for early redemption. In addition, Kerui PM repurchased on the open market ABS amounting to RMB71,000,000 from a third party ABS investor. In respect of the remaining ABS amounting to RMB499,000,000 held by the fellow subsidiary controlled by CMIG Futurelife, Kerui PM repurchased the ABS on the open market by batches until all the 499 million ABS were all bought by Kerui PM. Kerui PM then applied for offsetting the ABS investment assets with the ABS borrowings amounting to RMB570,000,000 held by it and the deregistration of the ABS there afterwards. The deregistration of Kerui PM's ABS is completed in January 2021 subsequently.
The ABS investment assets and the ABS borrowings liabilities held by Kerui PM were offset in these financial statements given the debtor and the creditor is the same party.
The source of funds supporting Kerui PM's repayment of the ABS borrowings in January and August 2020 comprised the repayment of loan and interest receivables due from CMIG Futurelife amounting to RMB 795 million (Note 22), the loans from a third party amounting to RMB 224 million (Note 26(c) below) and the internal funds of Kerui PM itself.
(c) Loans from a third party
On 23 July 2020, a third party borrowed two loans totalling RMB224 million from the Purchaser of the New CMIG PM Acquisition. These loans were unsecured, bearing interest at 6% per annum and repayable in October and December 2020. On 23 July 2020, Kerui PM borrowed from the third party two loans amounting to RMB150 million and RMB74 million, totalling RMB224 million. The loans due to the third party were unsecured, bearing interest at 6% and 8% per annum and repayable in December 2020. The proceeds of the loans were restricted for the repayment of Kerui PM's ABS borrowings according to the loan agreements.
The RMB150 million loan due to the third party was offset against Kerui PM's loan and interest receivables due from CMIG Futurelife (Note 22), and the RMB74 million loan was fully repaid in cash by Kerui PM to the third party in December 2020. The third party settled the loans due to the Purchaser in full in December 2020.
(d) Other disclosures
As at 31 December 2017, 2018 and 2019 and 31 August 2020, the New CMIG PM Group's borrowings were repayable as follows:
As at | ||||
As at 31 December | 31 August | |||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Bank borrowing | ||||
Within 1 year | 2,560 | 2,560 | 2,560 | 2,560 |
Between 1 and 2 years | 2,560 | 2,560 | 2,560 | 2,080 |
Between 2 and 5 years | 5,920 | 3,360 | 800 | - |
Over 5 years | - | - | - | - |
11,040 | 8,480 | 5,920 | 4,640 | |
ABS borrowings | ||||
Within 1 year | 259,000 | 288,000 | 1,453,000 | - |
Between 1 and 2 years | 288,000 | 1,453,000 | - | - |
Between 2 and 5 years | 1,453,000 | - | - | - |
Over 5 years | - | - | - | - |
2,000,000 | 1,741,000 | 1,453,000 | - | |
Loans due to a third party | ||||
Within 1 year | - | - | - | 224,000 |
Total | 2,011,040 | 1,749,480 | 1,458,920 | 228,640 |
All of the New CMIG PM Group's borrowings are denominated in RMB. The fair values of the borrowings approximated their carrying amounts as at the balance sheet dates, as the impact of discounting is not significant.
27 DEFERRED INCOME TAX
The analysis of deferred income tax assets and liabilities in the consolidated statements of financial position was as follows:
2017
RMB'000
Deferred income tax assets: - Deferred income tax asset to be settled within 12 months 3,774
Deferred income tax liabilities:
- Deferred income tax liabilities to be recovered after more than 12 months (27,222) (24,010)
- Deferred income tax liabilities to be recovered within 12 months (3,212) (3,212)
(30,434) (27,222)
(26,660) (22,094)
As at | ||
As at 31 December | 31 August | |
2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 |
5,128 | 3,958 | 5,246 |
(20,798) | (18,657) | |
(3,212) | (3,212) | |
(24,010) | (21,869) | |
(20,052) | (16,623) |
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
The movement in deferred income tax assets and liabilities during the Track Record Period, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred income tax liabilities - differences between the fair value of the identifiable net
28
Dividends declared: CMIG Futurelife Non-controlling shareholders of subsidiaries
As at 1 January 2017
Acquisition of subsidiaries Credited to the consolidated statements of comprehensive income
At 31 December 2017
Credited to the consolidated statements of comprehensive income
At 31 December 2018
Credited/(charged) to the consolidated statements of comprehensive income
At 31 December 2019
Credited to the consolidated statements of comprehensive income
At 31 August 2020
(Unaudited)
As at 1 January 2019
Credited/(charged) to the consolidated statements of comprehensive income
At 31 August 2019
DIVIDEND DECLARED AND PAYABLE
assets and book value | Deferred income | |
arising from business | tax assets - | |
combinations not under | provision for | |
common control | impairments | Total |
RMB'000 | RMB'000 | RMB'000 |
(32,769) | 2,753 | (30,016) |
(803) | - | (803) |
3,138 | 1,021 | 4,159 |
(30,434) | 3,774 | (26,660) |
3,212 | 1,354 | 4,566 |
(27,222) | 5,128 | (22,094) |
3,212 | (1,170) | 2,042 |
(24,010) | 3,958 | (20,052) |
2,141 | 1,288 | 3,429 |
(21,869) | 5,246 | (16,623) |
(27,222) | 5,128 | (22,094) |
2,141 | (130) | 2,011 |
(25,081) | 4,998 | (20,083) |
Eight months | ||
ended | ||
31 August | ||
2020 | ||
RMB'000 | ||
- | ||
- | ||
- |
Year ended 31 December
2017
RMB'000
1,352 2,132
3,484
2018
2019
RMB'000
RMB'000
5,100 57,425
8,473 58,513
13,573 115,938
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
Eight months ended
31 August | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
- | 5,100 | 58,798 | 43,918 | |
Non-controlling shareholders of | ||||
subsidiaries | 1,819 | 1,456 | 49,274 | - |
1,819 | 6,556 | 108,072 | 43,918 |
Year ended 31 December
Dividends payable: CMIG FuturelifeDividends declared during the Track Record Period represented dividends declared by the subsidiaries of the New CMIG PM Group to their then shareholders prior to their becoming subsidiaries of the New CMIG PM Group.
No dividend has been declared or paid by New CMIG PM since its incorporation on 28 November 2019.
29
CASH FLOW INFORMATION
(a)
Net cash generated from operating activities
Year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000
Eight months ended
31 August 2019 2020
RMB'000 RMB'000 (Unaudited)
Profit before income tax Adjustments for:
- Depreciation of property, plant and equipment
- Depreciation of investment properties
- Amortisation of intangible assets
- Allowance for impairment of trade receivables and other receivables
- Income from financial assets at fair value through profit or loss
- Net finance expenses
Changes in working capital:
- Trade and other receivables
- Inventories
- Trade and other payables
- Contract liabilities
60,294
81,494
3,495 3,928 12,518
3,202 5,316 12,829
4,083
5,418
(658) (1,410)
100,458
65,202 96,066
3,833 5,079
2,485 2,364
3,108 2,330
12,828
8,552 8,553
(4,691)
1,945 5,151
(1,169) 5,654
(796) (611)
2,601
6,619
6,329 2,581
(42,728)
(16,916)
7,185 (131,908)
(16) 60,324 19,845
(150,422)
356 22,329 8,263
1 1,882 (5,220)
1 136,721
(1) 59,510
(51,544) (46,022)Net cash generated from/(used in) operating activities
123,686
127,500
125,840
40,095 (20,501)
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(b) Non-cash investing activities:
Eight months endedYear ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000
31 August 2019 2020
RMB'000 RMB'000 (Unaudited)
Transfer of receivable to prepayment for purchase of properties
-
64,314
59,893
32,274
(c) The reconciliation of proceeds from sale of property, plant and equipment is as follows:
Net book value of property,
plant and equipment
(Note 13)
(Loss)/gain on disposal of assets
(Note 9)
15,610
Eight months ended
Year ended 31 December
31 August
2017 2018 2019
2019 2020
RMB'000 RMB'000 RMB'000
RMB'000 RMB'000
(Unaudited)
763
298 60
1,186
102 43
(201)
14
43 (31)Proceeds from disposal
562
358
1,200
(d) The reconciliation of proceeds from sale of investment properties is as follows:Year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000
145 12
Eight months ended
31 August 2019 2020
RMB'000 RMB'000 (Unaudited)
Net book value of investment property (Note 15)
Gain on disposal of assets
(Note 9)
490 77
- -
55,686 14,316
16,432 24,010
5,320 19,251
Proceeds from disposal
567
-
70,002
21,752 43,261
APPENDIX II
ACCOUNTANT'S REPORT ON THE NEW CMIG PM GROUP
(e)The reconciliation of liabilities arising from financing activities is as follows:Payables to
Leases | |||
liabilities | |||
RMB'000 | |||
At 1 January 2017 | 802 | - | 30,200 |
Cash flows | (278) | (723) | 1,980,840 |
Non-cash changes | 51 | 55,960 | - |
At 31 December 2017 | 575 | 55,237 | 2,011,040 |
Cash flows | (278) | (137,657) | (261,560) |
Non-cash changes | 34 | 129,564 | - |
At 31 December 2018 | 331 | 47,144 | 1,749,480 |
Cash flows | (278) | (113,060) | (290,560) |
Non-cash changes | 16 | 107,867 | - |
At 31 December 2019 | 69 | 41,951 | 1,458,920 |
Cash flows | (70) | (96,436) | (1,230,280) |
Non-cash changes | 1 | 55,012 | - |
At 31 August 2020 | - | 527 | 228,640 |
(Unaudited) | |||
At 1 January 2019 | 331 | 47,144 | 1,749,480 |
Cash flows | (185) | (113,060) | (289,280) |
Non-cash changes | 12 | 76,860 | - |
At 31 August 2019 | 158 | 10,944 | 1,460,200 |
Interest non-controlling
payable Borrowings | interests | Total |
RMB'000 RMB'000 | RMB'000 | RMB'000 |
99,542 | 130,544 | |
(40,550) | 1,939,289 | |
- | 56,011 | |
58,992 | 2,125,844 | |
- | (399,495) | |
- | 129,598 | |
58,992 | 1,855,947 | |
(58,992) | (462,890) | |
- | 107,883 | |
- | 1,500,940 | |
- | (1,326,786) | |
- | 55,013 | |
- | 229,167 | |
58,992 | 1,855,947 | |
- | (402,525) | |
- | 76,872 | |
58,992 | 1,530,294 |
30 BUSINESS COMBINATION
The companies of the New CMIG PM Group in the property management business were historically acquired
by CMIG Futurelife, from third parties, and were transferred to the Company. | |
Details of the acquisitions during the Track Record Period are set out below: | |
Da'an PM | |
RMB'000 | |
Purchase consideration in cash | 18,000 |
Recognized amounts of identifiable assets acquired, and liabilities assumed | |
Cash and cash equivalents | 14,898 |
Trade receivables | 369 |
Prepayments, deposits and other receivables | 155 |
Inventories | 158 |
Property, plant and equipment | 270 |
Intangible assets - customer relationship | 3,213 |
Trade and other payables | (9,440) |
Deferred income tax liabilities - net | (803) |
Net identifiable assets acquired | 8,820 |
Non-controlling interests | (1,625) |
Goodwill | 10,805 |
Net assets acquired | 18,000 |
Outflow of cash to acquire subsidiary, net of cash acquired | |
Cash consideration paid by CMIG Futurelife | 18,000 |
Less: Cash and cash equivalents acquired | (14,898) |
Net outflow of cash - investing activities | 3,102 |
On 30 November 2017, Kerui PM acquired 90% equity interest of Da'an PM from a third party at a cash consideration of RMB18,000,000 and at that time obtained control of Da'an PM.
The acquired business contributed revenue of RMB2,265,000 and net profit of RMB525,000 to the New CMIG PM Group for the period from the acquisition date to 31 December 2017.
If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and net profit for the year ended 31 December 2017 would have been increased by RMB24,911,000 and RMB5,771,000 respectively. These amounts have been calculated using the subsidiary's results.
31 RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control, common significant influence or joint control.
Save as disclosed elsewhere in the consolidated financial information, the following are the related parties and their transactions and balances with the New CMIG PM Group during the Track Record Period:
(a) Names and relationship with related parties
Name Relationship
China Minsheng Investment Group Co., Ltd.
Ultimate holding company up to 17 March 2020
ʕ͏͛ҳ༟ණྠϞࠢபʮ̡
CMIG Futurelife Holdings Group Company Limited ʕ͏͊ԸછٰණྠϞࠢʮ̡
Controlling shareholder up to 17 March 2020
(b) Transactions with related parties
Eight months ended
Year ended 31 December | 31 August |
2017 2018 2019 | 2019 2020 |
RMB'000 RMB'000 RMB'000 | RMB'000 RMB'000 |
(Unaudited) |
Companies controlled by the same ultimate holding company
- Provision of property management service to related parties
401
254
5
-
-
- Receipt of outsourcing services from related parties
- Interest expense
- Issue/(repayment) of ABS
9,923 16,537 778,000
18,403 22,961 (125,000)
21,370 35,112 -
- 23,376
- 13,359
-
(653,000)Non-controlling shareholders of
Kerui PM - Repayments of payables due to non-controlling shareholders
(40,550)
-
(58,992)
(58,992)
-
Companies controlled by non-controlling shareholders of Kerui PM - Sale of investment property
-
-
39,705
39,705
39,981
Controlling shareholder of the company
- Grant of loan
- Interest income
- Repayments of loan
1,879,800 53,409 -
- 122,978 229,000
- 95,897 288,000
- 70,348
- 51,931
288,000 1,182,000
Interests of 6.1% to 6.7% were charged based on the interest rates as agreed with related parties. The details of the terms on balances with related parties are set out in Note 22.
The balances with related parties are bearing interest rates ranging from 6.1% to 6.7%, and the repayment term is 6 years.
In the opinion of the Directors, the related party transactions were carried out in the normal course of business and at terms negotiated between the New CMIG PM Group and the respective related parties.
(c) Balances with related parties
RMB'000
Controlled by the same ultimate holding company
- Trade receivables (Note 19) 335
- Other receivables (Note 20) 1,240
- Prepayments 347 - Asset-backed securities borrowings
(Note 26)
- Interest payable on asset-backedsecurities borrowings (21,487) (13,802)
- Trade payables (Note 25)
Controlling shareholder of the Company - Loan and interest receivables
(Note 22)
1,932,848
Non-controlling shareholders of
Kerui PM - Other payables (Note 25)
(624,000) (499,000)
As at | ||
As at 31 December | 31 August | |
2018 | 2019 | 2020 |
RMB'000 | RMB'000 | RMB'000 |
227 | - | - |
4,201 | 1,350 | - |
64 | - | - |
(499,000) | - | |
(14,429) | - | |
(1,113) | (297) | |
1,399,431 | 180,800 | |
- | - |
2017
- (1,338)
1,693,351
58,992
58,992
The provision of services, sales and purchases were made with the related parties during the ordinary course of business of the New CMIG PM Group and on mutually agreed commercial terms.
32 DIRECTORS' BENEFITS AND INTERESTS
Up to 31 August 2020, the following directors were appointed:
Directors
Mr. Zhang Zhe Mrs. Yuan Jinting Mr. Chen Haosheng Mr. Liu Hanbin Mr. Luo Tao
These directors were appointed as the New CMIG PM's directors on 11 December 2019. During the Track Record Period, the directors have not yet been appointed and did not receive any remuneration.
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the New CMIG PM or any of its subsidiaries in respect of any period subsequent to 31 August 2020 and up to the date of this report.
No dividend or distribution has been declared or made by the New CMIG PM or any of the companies now comprising the New CMIG PM Group in respect of any period subsequent to 31 August 2020.
APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION
A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
Pursuant to the New CMIG PM Agreement, the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to dispose of the 60% equity interest in New CMIG PM.
The accompanying unaudited pro forma financial information of the Enlarged Group (the "Unaudited Pro Forma Financial Information") has been prepared to illustrate the effect of the New CMIG PM Completion on the financial information of the Group as if the New CMIG PM Completion had taken place on 30 June 2020 for the unaudited pro forma consolidated balance sheet and 1 January 2020 for the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows, respectively.
The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the financial position, net tangible assets, financial performance and cash flows of the Enlarged Group had the New CMIG PM Completion taken place as at 30 June 2020 or 1 January 2020, where applicable, or any future date.
The Unaudited Pro Forma Financial Information should be read in conjunction with other financial information included elsewhere in this circular.
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL INFORMATIONTHE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE ENLARGED GROUP AS AT 30 JUNE 2020
The New CMIGPro forma adjustments
GroupPM Group
Other adjustments
TheEnlarged
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Group RMB'000
Note 1
Note 2(a)
Note 3
Note 5
Note 6
Assets Non-current assets Property, plant and equipment Right-of-use assets Investment properties Other intangible assets Goodwill
Deferred income tax assets Investments accounted for using the equity method Financial assets at fair value through other comprehensive income Prepayments, deposits and other receivables
Total non-current assets
241,659 49,055
43,462 -
18,190 -
-
55,305
1,189
1,006,036
- - - - - - -
- 308,904
- 43,462
- 56,494
78,057
136,075
2,133,170
- 1,220,168
194,190
802,574
54,148 - -
27,741
- 2,381,508
5,246
-
27,881 29,612 4,312,135
5,025
-
210,188
-
597,066 209,602
- 32,987
- 802,574
- - -
- 32,906
- 239,800
- 5,118,803
Current assets Inventories Trade and other receivables, prepayments and deposits
Loans and interest receivables due from related parties Financial assets at fair value through profit or loss
Cash and cash equivalents Restricted cash
16,709
15
-
3,182,322
-
- 16,724
347,780
-
206,000
- (240,315)
180,800
-
204,190 4,882,015
6,432
-
118,830 (103,275)
3,289,787
-
- 386,800
- - -
- 210,622
- 4,897,570
26,879
-
-
- 26,879
Total current assets
8,518,115 653,857
(103,275)
- (240,315)
8,828,382
Total assets
12,830,250 1,250,923
106,327
- (240,315) 13,947,185
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro forma adjustments
The New CMIG
TheEnlarged
RMB'000
GroupPM Group
Other adjustments
RMB'000
RMB'000
RMB'000
RMB'000
Group RMB'000
Note 1
Note 2(a)
Note 3
Note 5
Note 6
Equity Share capital Reserves Retained earnings Capital and reserves attributable to the shareholders of the Company
1,333,334 3,302,424 1,715,983
- 12,515 46,928
- (12,515)
- -
- 1,333,334
- 3,302,424
(46,928)
(2,035)
- 1,713,948
6,351,741
59,443
(59,443)
(2,035)
- 6,349,706
Non-controlling interests
1,264,741
126,688 27,015
-
- 1,418,444
Total equity
7,616,482
186,131 (32,428)
(2,035)
- 7,768,150
Liabilities Non-current liabilities Borrowings
Other payables Lease liabilities
Financial liabilities for put option written on non-controlling interests Deferred income tax liabilities
84,366 50,398 21,534
2,080 235,138 -
- - -
-
- 86,446
- (235,138) 50,398
-
- 21,534
62,861 242,477
- 21,869
- 38,863
-
- 62,861
-
- 303,209
Total non-current liabilities
461,636
259,087
38,863
-
(235,138) 524,448
Current liabilities Trade and other payables Contract liabilities Current income tax liabilities Borrowings Lease liabilities
Financial liabilities for put option written on non-controlling interests
3,229,701 870,039 345,501 270,299 22,611
517,662 47,205 14,278 226,560 -
99,892 2,713
(5,177) 3,844,791
- - - -
-
- 917,244
(678)
- 359,101
- -
- 496,859
- 22,611
13,981
-
-
-
- 13,981
Total current liabilities
4,752,132 805,705
99,892
2,035
(5,177) 5,654,587
Total liabilities
5,213,768
1,064,792
138,755
2,035
(240,315) 6,179,035
Total equity and liabilities
12,830,250
1,250,923
106,327
-
(240,315) 13,947,185
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL INFORMATIONTHE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2020
The New CMIGPro forma adjustments
GroupPM Group
Other adjustments
TheEnlarged
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Group RMB'000
Note 1
Note 2(b)
Note 4
Note 5
Note 7
Revenue Cost of sales
4,001,627 (2,726,261)
554,417 (449,102)
- (4,398)
- -
- 4,556,044
- (3,179,761)
Gross profit
Selling and marketing costs Administrative expenses Net impairment losses on financial assets
Other income Other gains - net
1,275,366
105,315 -
(4,398)
(28,991) (221,059)
-
(42,249) (389)
- - (2,713)
- 1,376,283
- (28,991)
- (266,410)
(20,679) 94,715 40,200
(10,409)
- - -
- - -
- (31,088)
5,295 18,719
- 100,010
- 58,919
Operating profit Finance costs - net Share of post-tax profits of joint ventures and associates
1,139,552
76,671 (4,787)
(2,713)
- 1,208,723
(20,457)
(3,124)
-
-
- (23,581)
21,974
-
-
-
- 21,974
Profit before income tax Income tax expenses
1,141,069
73,547
(4,787)
(267,885)
(18,952) 1,197
(2,713)
- 1,207,116
678
- (284,962)
Profit and total comprehensive income for the period
Profit and total comprehensive income attributable to:
- Shareholders of the Company
- Non-controlling interests
873,184
54,595
(3,590)
(2,035)
- 922,154
757,954 115,230
26,713 27,882
(1,098) (2,492)
(2,035) (10,685) 770,849
-
10,685 151,305
873,184
54,595
(3,590) (2,035)
- 922,154
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL INFORMATIONTHE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE ENLARGED GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2020
Cash flows from operating activities
Cash generated from operations Income tax paid
Net cash generated from/
(used in) operating activitiesCash flows from investing activities
Acquisition of subsidiaries (net of cash and cash equivalent acquired)
Purchases of property, plant and equipment ("PPE")
Purchases of intangible assets Purchases of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through other comprehensive income
Investments in joint ventures and associates
Disposal of an associate Disposal of a subsidiary Proceeds from sale of investment properties
Advance to related parties Proceeds from disposal of PPE Changes in restricted bank deposits
Loans repayment from related parties
Interest received
The Group
RMB'000
Note 1
1,380,379 (281,156)
1,099,223
(671,036)
(11,823)
(630)
(1,847,065)
New CMIG PMOtherGroup adjustments
RMB'000
Note 2(b)
11,345 (13,336)
(1,991)
RMB'000
The Enlarged
Group RMB'000
Note 3
- 1,391,724
- (294,492)
- 1,097,232
-
105,825 (565,211)
(86) - (11,909)
-
-
(630)
(73,870)
- (1,920,935)
2,317,559
75,546
- 2,393,105
500
- - - -
- -
500
(2,498) 300,000 329
(2,498)
- 300,000
-
329
- (54,962)
40,327 - 13
-
-
40,327 (54,962)
296
-
309
4,993
- 154,000
-
4,993
115,000 29,632
- 269,000
50,223 - 79,855
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A-Living Services Co. Ltd. published this content on 26 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 February 2021 10:04:03 UTC.