roninblockchainaxie| Huayi Brothers 'actual controller illegally reduced the company's six-year loss of nearly 8 billion yuan

May 7thRoninblockchainaxieZhejiang Regulatory Bureau of China Securities Regulatory Commission (hereinafter referred to as "Zhejiang Securities Regulatory Bureau") issued the "decision on taking warning letter measures against Wang Zhongjun" on Huayi Brothers (300027).Roninblockchainaxie.SZ) Chairman Wang Zhongjun issued a warning letter on the illegal reduction of shares in the company, which was recorded in the integrity file of the securities and futures market.

From 2018 to 2023, Huayi Brothers made a net loss for six consecutive years, with a cumulative net loss of nearly 8 billion for shareholders of listed companies. Under the increasingly urgent debt pressure, the company promotes the light asset model, but the performance still shows a downward trend. At present, most of the shares held by the company's real controller brothers have been frozen, and the fixed increase plan launched in 2020 has not yet been launched, and the future development of film and television projects may be lack of financial support.

The actual controller has reduced his shares many times.

A warning letter issued by Zhejiang Securities Regulatory Bureau pointed out that Wang Zhongjun, as chairman of Huayi Brothers, illegally sold 328700 shares of the company's shares in the 30 days before the company's disclosure of the 2023 semi-annual report, with a transaction value of 999200 yuan. In view of this violation, Zhejiang Securities Regulatory Bureau decided to take supervision and management measures to issue a warning letter to Wang Zhongjun, which should be recorded in the integrity files of the securities and futures market.

As early as June 2, 2022, the Zhejiang Securities Regulatory Bureau issued a warning letter to Wang Zhongjun and Wang Zhonglei, the real controllers of Huayi Brothers, who failed to buy and sell the company's shares in accordance with the regulations and failed to fulfill their reporting and announcement obligations in time. According to public information, since its listing in 2009, the proportion of shares held by the company's real controllers has dropped from 34.41% to 13.9%, with a cumulative change ratio of 20.51%.

At the 2022 annual report presentation, Huayi Brothers said that the funds obtained from the reduction of shares held by the company's actual controllers are mainly used to repay stock pledge financing, reduce pledge risk and better ensure the stability of control.

According to the announcement issued by the company on July 20, 2023, the cumulative number of pledged shares due in the coming year by Wang Zhongjun and Wang Zhonglei is 386 million shares, accounting for 98.28% of their shares, accounting for 13.92% of the company's total share capital, and the corresponding financing balance is 480 million yuan. In addition, as of December 22, 2023, the cumulative frozen shares of Wang Zhongjun and Wang Zhonglei accounted for 100% of their shares, accounting for 13.9% of the company's shares; the accumulated frozen shares accounted for 83.46% of their shares, accounting for 11.6% of the company's shares.

In addition, the company also provides a large number of financing guarantees. As of April 30, 2024, the total amount of guarantees provided by the company and its holding subsidiaries exceeded 100% of the most recent audited net assets, all of which were guarantees for the company and companies within the scope of the company's consolidated statements. And in order to meet the needs of actual operation, it is estimated that the company and its subsidiaries will provide a total financing guarantee of no more than 1.571 billion yuan in 2024.

The company's solvency is weakening.

According to the financial data, the company's solvency is gradually weakening. From 2021 to 2023, the asset-liability ratio of the company was 64.02%, 72.37% and 79.06% respectively; the net cash flow at the end of the period was 528 million yuan, 250 million yuan and 165 million yuan respectively; current liabilities were 2.901 billion yuan, 2.124 billion yuan and 2.253 billion yuan respectively; current ratios were 0.72,0.67 and 0.56 respectively.

In order to reduce the debt burden, the company has tried many times to raise money through private share offerings, but they have not yet entered the issuance stage. In April 2020, the company announced that it plans to issue no more than 824 million shares to specific targets and raise shares with a total amount of no more than 2.29 billion yuan to replenish working capital and repay loans. This increase plan must have been suspended and adjusted several times, and it is still in the state of examination and inquiry. On January 30, 2024, the board of directors of the company again adjusted the fixed increase plan, and the total amount of funds raised was adjusted to 821 million yuan, of which the supplementary working capital was adjusted to 245 million yuan, and the rest was mainly used for investment in film and television works. In addition, on April 30, 2024, the company issued a notice on requesting the general meeting of shareholders to authorize the board of directors to issue shares to specific objects through summary procedures. It plans to issue shares to specific objects with a total financing amount of no more than 300 million yuan and no more than 20% of the net assets at the end of the most recent year.

It is worth mentioning that companies such as Shenzhen Tencent computer Systems Co., Ltd. (hereinafter referred to as "Tencent") and Hangzhou Ali Venture Capital Co., Ltd. (hereinafter referred to as "Ali Venture Capital") have established financing and business cooperation with Huayi Brothers in the past, reducing debt pressure to a certain extent, but now the shareholdings of both companies have declined. According to the 2021 annual report, Tencent is the second largest shareholder of the company with 7.94%, while Alibaba Venture Capital and Jack Ma are the third largest shareholder with 4.47% and 3.6% respectively. However, from 2022 to 2023, Tencent's shareholding decreased one after another and disappeared among the top ten shareholders. In the third quarter of 2023, Ali Venture Capital and Jack Ma reduced their holdings by 3%, and the remaining shares totaled 5.07%. However, in the first quarter of 2024, Alibaba Venture Capital increased its stake by 1%, and Ali's shareholding increased to 6.07%, while Tencent also appeared among the top 10 shareholders with 1.01%.

In addition, Huayi Brothers also obtained a five-year loan of 700 million yuan from Beijing Alibaba Film Culture Co., Ltd. through equity and real estate mortgage in 2019. In November 2023, the company transferred 350 million yuan to Sun's Beijing Huayi Brothers Jiali Culture Development Co., Ltd. to offset half of the loan due, and the remaining 350 million yuan loan was extended for six months after friendly negotiation between the two sides on January 24, 2024.

Performance loss

According to the financial report data, from 2018 to 2023, the company lost money for six consecutive years, with a cumulative loss of nearly 8 billion yuan, and the scale of revenue is gradually shrinking. In addition, the company has high management and financial costs. In 2023, the company's operating income was 666 million yuan, the net profit after deducting non-recurring profits and losses was-533 million yuan, the financial expense rate was 19.97%, and the management expense rate was 26.43%.

The company's main business is film and television entertainment business, brand authorization and live entertainment business, and Internet entertainment business, in which film and television entertainment business mainly depends on the box office revenue of cinemas and network platforms, accounting for more than 90% of the total revenue. Since 2018, the company's revenue from these three businesses has shown a downward trend.

As of the end of the first quarter of this year, the company's monetary capital is only 270 million yuan. According to the company's inquiry letter of February 27, 2024, the company plans to raise 575 million yuan through the fixed increase plan for the production of three films and a TV series. If the debt pressure is not relieved smoothly, the relevant film and television production is likely to be affected.

The reporter noted that the company's performance has not yet come out of the haze. According to the first quarterly report of 2024, the company's operating income was 95 million yuan, down 59.2% from the same period last year. The net profit after deducting non-recurring gains and losses belonging to shareholders of listed companies was-25 million yuan, down 46.93% from the same period last year. Light Media (300251.SZ), also a listed company, had an operating income of 1.07 billion yuan in the first quarter of this year, up 159.33% from a year earlier, while net profit after deducting non-recurring profits and losses was 416 million yuan, up 252.01% from a year earlier. In addition, according to Cat's Eye movie data and feedback from the investor interactive platform, "Roof Football," produced by Huayi Brothers and released on April 20, grossed 175400 yuan on its first day, ranking 26th at the box office of the day. The total box office was only 341000.

In the 2023 annual report, Huayi Brothers said that in the future, the company will continue to concentrate high-quality resources to implement the light-asset business model of "film and television production + IP operation", in order to accelerate the company's return to the fast track of healthy development. Xiang Kai, a young playwright and director, said in an interview with China Science and Technology Investment that the light asset model is a great help for content companies, allowing them to concentrate on content and produce more high-quality content. win market recognition. Xiang Kai said that the general environment of the film and television industry is better than before, the consumer market is recovering, and the scale of the box office is recovering rapidly. in addition, various supporting policies have also played a greater role in promoting the future development of the film and television industry. Huayi Brothers should try their best to solve the debt problem.

In view of shareholder reduction, debt pressure, performance development and other issues, the reporter wrote to Huayi Brothers, as of press time, has not yet received a reply.