According to the Zhitong Finance App, Huicong Group (02280) issued an announcement. The Group expects the loss due to equity holders of the company to be between RMB 1.7 billion and RMB 2 billion for the year ended December 31, 2023, while the loss attributable to equity holders for the year ended December 31, 2022 is approximately RMB 224 million. The losses for the year ended 31 December 2023 were mainly due to the following main factors:

(1) Expected impairment losses relating to the proposed sale of all shares of Beijing Huicong Internet Information Technology Co., Ltd. The proposed sale is expected to be completed in or around the first half of 2024. As a result, the target group was classified as holding non-current assets for sale on December 31, 2023.

According to Hong Kong Financial Reporting Standard No. 5 “Non-current Assets Held for Sale and Discontinued Operations”, when 40% of the shares of the target group and Chongqing Shenzhou Digital Microfinance Co., Ltd. (Chongqing Microfinance, that is, the remaining shares held by the Group when completing the proposed sale (when Chongqing Microfinance is no longer a subsidiary of the Group) are classified as holding for sale, a full impairment review is required. If the fair value after deducting sales costs is lower than the book value of the target group and Chongqing Microfinance, an impairment loss is confirmed. Under these circumstances, the Group anticipates a total one-time impairment loss of approximately RMB 590 million.

(2) Impairment of goodwill and intangible assets relating to cash generating units in the Technology New Retail Business Group. As stated in the company's 2023 interim report, for the six months ended June 30, 2023, the company confirmed impairment of the business group's goodwill of approximately RMB 719 million. The company plans to further confirm the impairment of goodwill and intangible assets relating to this business group for the year ended December 31, 2023, which is currently estimated to reach RMB 260 million. Since the corresponding businesses (in particular, Zhongguancun Online, which provides online advertising and marketing services for 3C and lifestyle technology products in mainland China) were unable to achieve the expected financial results when the company implemented the 2023 Interim Report (it is expected that Zhongguancun Online will attract new customers to its advertising platform in the second half of 2023), it is recommended to confirm this impairment. The increase in advertising in the second half of 2023 was lower than expected, and ad spending fell sharply compared to the first half of 2023. Therefore, in view of the relevant decline, the company strictly re-evaluated Zhongguancun Online's financial forecasts, which led to revisions to future cash flow forecasts, thereby further re-evaluating Zhongguancun Online's business valuation. Based on the revised cash flow forecast, it is recommended that provision be made for further impairment of the goodwill and intangible assets of this business group;

(3) In the Group's daily and general business processes during the year, a number of significant overdue loans occurred in the microfinance business under the Group's platform and corporate services business groups. It is expected that the year ending 31 December 2023 (before the proposed sale is completed) will obtain loans receivable and interest impairment losses of approximately RMB 240 million.