ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE

12 Months Ended

Dec. 31, 2022

Assets And Liabilities Of Disposal Group Classified As Held For Sale

ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE

29. ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE

Since the ceramic tiles manufacturing business of the Company has experienced significant hurdles due to the significant slowdown of the real estate sector and the impacts of COVID-19 in China, the Company plans to divest its ceramic tiles manufacturing business, which is conducted through the Company’s two subsidiaries, Jinjiang Hengda Ceramics Co., Ltd. and Jiangxi Hengdali Ceramic Materials Co., Ltd.

Jiangxi Hengdali Ceramics is wholly owned by Jinjiang Hengda Ceramics, which is a wholly owned subsidiary of Stand Best Creation Limited, a Hong Kong company (the “Target”). The Target is Stand Best Creation Limited, a wholly owned subsidiary of Success Winner Limited which is 100% owned by the Company (“the Disposition Group”).

On December 30, 2022, the Seller, the Target and New Stonehenge Limited, a British Virgin Islands exempt company which is not affiliate of the Company or any of its directors or officers, (the “Buyer”), entered into certain share purchase agreement (the “Disposition SPA”). Pursuant to the Disposition SPA, the Buyer agreed to purchase the Target, and in exchange the Buyer will issue a 5% unsecured promissory note to the Seller with principal amount of $8.5 million with a maturity date on the fourth anniversary of its issuance (the “Note”). Upon the closing of the transaction (the “Disposition”) contemplated by the Disposition SPA, the Buyer will become the sole shareholder of the Target and as a result, assume all assets and liabilities of the Target and subsidiaries owned or controlled by the Target.

The Closing of the Disposition is subject to the satisfaction or waiver of certain closing conditions including the receipt of a fairness opinion from an independent firm, approval of a majority of the Company’s shareholders, and all consents required to be obtained from or made with any governmental authorities.

The Company held an extraordinary meeting of shareholders at on February 21, 2023, 8:30 A.M. ET. at Junbing Industrial Area, Anhai, Jinjiang, Fujian, China. There were 5,678,430 ordinary shares voted, representing approximately 56.58% of the total 10,035,188 outstanding ordinary shares and therefore constituting a quorum of more than fifty percent (50%) of the shares outstanding and entitled to vote at the meeting as of the record date of January 5, 2023. The final voting results submitted to a vote of shareholders at the meeting were that the following constitutes the number of votes voted with respect to the proposal of the approval of the proposed sale of the Company’s subsidiaries (the “Disposition Transaction”), Stand Best Creation Limited, Jinjiang Hengda Ceramics Co., Ltd., and Jiangxi Hengdali Ceramic Materials Co., Ltd. to New Stonehenge Limited, a business company incorporated in the British Virgin Islands with limited liability, in exchange for an unsecured promissory note with a principal amount of US$8.5 million, which will be mature in four years after its issuance. Accordingly, the Disposition Transaction has been approved.

Assets and liabilities of the Disposal Group were classified as “Assets classified as held for sale” and “Liabilities directly associated with assets classified as held for sale” respectively in accordance with IFRS 5 as at December 31, 2022.

	As of December 31, 2022
	RMB’000
ASSETS CLASSIFIED AS HELD FOR SALE
Right-of-use assets, net		30,937
Inventories, net		28,749
Trade receivables, net		11,683
Other receivables and prepayments		3,000
Cash and bank balances		306
Total assets of the Disposal Group held for sale		74,675

	As of December 31, 2022
	RMB’000
LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS CLASSIFIED AS HELD FOR SALE
Accrued liabilities and other payables		19,197
Amounts owed to related parties		35,057
Lease liabilities		33,325
Taxes payable		951
Total liabilities of the Disposal Group directly associated with assets classified as held for sale		88,530

Discontinued operations

Upon the classification of the assets and liabilities of the Disposal Group as ‘Assets classified as held for sale’ and ‘Liabilities directly associated with assets classified as held for sale’ respectively, the Disposal Group is reported in the current period as a discontinued operations. Financial information relating to the discontinued operations for the year is set out below.

The financial performance and cash flow information presented are for the years ended December 31, 2022, 2021 and 2022.

	Years ended December 31,
	2022			2021			2020
		RMB’000			RMB’000			RMB’000
Financial performance
Net sales		37,696			144,743			182,989
Cost of goods sold		41,245			83,436			209,705
Gross profit (loss)		(3,549	)		61,307			(26,716	)
Other income		14,244			9,388			14,531
Selling and distribution expenses		(5,913	)		(6,298	)		(9,356	)
Administrative expenses		(51,297	)		(131,867	)		(168,622	)
Finance costs		(1,479	)		(2,115	)		(2,673	)
Other expenses		-			(90	)		-
Loss before taxation		(47,994	)		(69,675	)		(192,836	)
Income tax expense		-			-			-
Loss for the year from discontinued operations		(47,994	)		(69,675	)		(192,836	)
Total comprehensive loss from discontinued operations		(47,994	)		(69,675	)		(192,836	)
Cash flow information
Net cash generated from operating activities from discontinued operations		4,982			3,314			4,400
Net cash used in investing activities from discontinued operations		-			-			-
Net cash used in financing activities from discontinued operations		(14,303	)		(14,303	)		(14,136	)
Net (decrease) increase in cash and cash equivalents from discontinued operations		(9,321	)		(10,989	)		(9,736	)