2019 UEM Edgenta Annual Report

204 205 UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION Notes to the Financial Statements For the year ended 31 December 2019 Notes to the Financial Statements For the year ended 31 December 2019 UEM Edgenta Berhad Annual Report 2019 17. INVESTMENT IN SUBSIDIARIES (CONT’D.) (a) Impairment of investment in subsidiaries During the current financial year, an impairment loss of RM78.0 million (2018: RM129.0 million) was recognised against the carrying amount of its investment in Opus Group Berhad (“OGB”) to its recoverable amount. Based on management’s assessment, the recoverable amount of its investment in OGB was RM683.6 million (2018: RM761.6 million) which was estimated based on the value-in-use of OGB. In addition, the carrying amounts of its investments in Edgenta Township Management Services Sdn. Bhd. and Edgenta Energy Services Sdn. Bhd. of RM2.7 million and RM0.7 million respectively were impaired in full in the current financial year. (b) Members’ voluntary winding-up of Faber Hotels Holdings Sdn. Bhd. (“FHH”) On 6 March 2019, FHH, a wholly-owned subsidiary of the Company, had been placed under Member’s Voluntary Winding- Up pursuant to Section 439(1)(b) of the Companies Act 2016. The winding up of FHH did not have a material effect on the earnings, gearing or net assets of the Group. (c) Members’ voluntary winding-up of Pengurusan LRT Sdn. Bhd. (“PLRT”) On 1 August 2019, PLRT, an indirect wholly-owned subsidiary of the Company, had been placed under Member’s Voluntary Winding-Up pursuant to Section 439(1)(b) of the Companies Act 2016. The winding up of PLRT did not have a material effect on the earnings, gearing or net assets of the Group. (d) Termination of joint venture On 1 September 2019, UEM Sunrise Edgenta TMS Sdn. Bhd. (“UEMSET”), an indirect 70% subsidiary of the Company had entered into a Termination Agreement with Township Management Services Sdn. Bhd. to terminate the Joint Venture Shareholders’ Agreement dated 13 January 2016. On 12 December 2019, Edgenta Township Management Services Sdn. Bhd., a wholly-owned subsidiary of the Company, had entered into a Termination Agreement with UEM Sunrise Berhad to terminate the Joint Venture Shareholders’ Agreement dated 30 November 2015. The termination of joint venture did not have a material effect on the earnings, gearing or net assets of the Group. (e) Disposal of a subsidiary On 27 September 2019, Edgenta Mediserve Sdn. Bhd., a wholly-owned subsidiary of the Company, had completed the disposal of its entire 60% equity interest in Fresh Linen Services (Sabah) Sdn. Bhd. for a total cash consideration of RM7,950,000. The disposal resulted in a gain of RM1,483,073 to the Group. 17. INVESTMENT IN SUBSIDIARIES (CONT’D.) (e) Disposal of a subsidiary (cont’d.) The value of the assets and liabilities disposed of on 27 September 2019 are as follows: RM’000 Property, plant and machinery 1,252 Right-of-use asset 842 Deferred taxation 73 Cash and bank balances 6,785 Deposits and prepayments 67 Trade receivables 3,394 Tax recoverable 592 Trade and other payables (2,227) Total value of net asset disposed of 10,778 Group’s share of net assets disposed of 6,467 Consideration received, satisfied in cash 7,950 Gain on disposal of a subsidiary 1,483 The effect of the disposal on cash flow is as follows: RM’000 Consideration received, satisfied in cash 7,950 Less: Cash and cash equivalent of subsidiary disposed (6,785) Net cash inflows from disposal of a subsidiary 1,165 (f) Acquisition of non-controlling interest in Edgenta GreenTech Sdn. Bhd. (“EGT”) (formerly known as KFM Holdings Sdn. Bhd.) On 16 December 2015, the Company had entered into a put option agreement with the non-controlling interest of EGT, to purchase its 20% equity interest in the entity. The Company currently has 80% direct equity interest in EGT. On 14 November 2019, the non-controlling interest of EGT has issued a notice to exercise the put option granted on its 20% shareholding in the entity at a total purchase price of RM28,209,686. The transaction is currently pending approval from Unit Kerjasama Awam Swasta (“UKAS”) under the Ministry of Finance. Upon UKAS’ approval and due completion of shares transfer, EGT will become a wholly-owned subsidiary of the entity. The transaction is expected to complete in 2020. (g) Dissolution of International Business Link Inc. (“IBL”) On 1 November 2018, IBL, a wholly-owned subsidiary of Opus Group Berhad, which in turn is a wholly-owned subsidiary of the Company, had been struck off from the British Virgin Islands’ Registry of Corporate Affairs. (h) Members’ voluntary winding-up of AIFS and Asia Facility Solutions Pte. Ltd. (“AFS”) On 22 November 2017, AIFS and AFS, indirect wholly-owned subsidiaries of the Company incorporated in Singapore, had been placed under members’ voluntary winding-up pursuant to Section 290(1) of the Singapore Companies Act (Cap. 50). The members’ voluntary winding up was completed on 27 December 2018. The voluntary wind-up had no material effect to the earnings, gearing or net asset of the Group and of the Company.