China Fund News reporter Nan Shen
On April 12, the State Council issued the third capital market "National Nine Articles" after ten years, and the Shanghai and Shenzhen Stock Exchanges solicited opinions from the public on a number of specific business rules revisions, including the proposed inclusion of companies that have not paid dividends for many years or have a low dividend ratio into the "implementation of other risk warnings (ST)".
At this time, there is a listed company "Jilin Expressway" that has become a "conspicuous package". Also on April 12, Jilin Expressway released its 2023 annual report, and the proposed profit distribution plan is "no profit distribution, no cash dividends", which is the second consecutive year that the company has not paid dividends. This is in stark contrast to the company's performance level: the company has been profitable for three consecutive years, with a cumulative net profit of 940 million yuan in the past two years, the latest undistributed profit of more than 2.6 billion yuan, cash on the books of more than 1.5 billion yuan, and the debt ratio is as low as 20%. In this case, even two directors, including the company's vice chairman, one of whom is an independent director, abstained from voting at the board meeting where the allocation proposal was voted on. On April 14, the Shanghai Stock Exchange issued a letter of inquiry to the company, asking for an explanation of the reasons and reasonableness of not paying cash dividends for many years, whether there is a large amount of idle funds, and "whether all directors independently and prudently judge the profit distribution plan". Ability but no dividends?
On April 12, Jilin Expressway reviewed and approved the 2023 profit distribution plan, which intends not to distribute profits, not to carry out cash dividends, not to implement share gifts and capital reserve to increase share capital, among which Vice Chairman Liu Xianfu and independent director Lin Jianzhong abstained from voting on the plan.
Liu Xianfu's reason for abstaining from voting is that it is recommended that the company should consider the immediate cash return requirements of shareholders and formulate a cash dividend plan while meeting the long-term development capital needs. The reason why Lin Jianzhong abstained from voting was that the company had achieved good operating performance while maintaining steady development. It is recommended that in 2023, in accordance with regulatory requirements and in combination with the actual situation of the company, an appropriate cash dividend plan will be formulated.
According to the announcement, from 2019 to 2023, the company's annual net profit attributable to shareholders of listed companies will be 189 million yuan, 99 million yuan, 318 million yuan, 394 million yuan, and 546 million yuan respectively, making profits for five consecutive years and profit growth for three consecutive years. However, the company's cash dividend ratios are only 0, 0, 10.18%, 0, 0, 0, respectively, and only a low proportion of dividends of 32.4095 million yuan in 2021. The company has been profitable for many years, but has not implemented cash dividends for many years.
Jilin Expressway said that the retained undistributed profits will be used for the company's daily operation and development, investment, debt repayment, etc. However, as of the end of the reporting period, the company's asset-liability ratio was only 17.96%, declining for many years, the undistributed profit of the parent company at the end of the period was as high as 2.635 billion yuan, increasing for many years, and the balance of monetary funds at the end of the period reached 1.513 billion yuan.
This situation immediately aroused market attention, especially on the same day when the third "National Nine Articles" of the capital market was released, and the Shanghai and Shenzhen stock exchanges are planning to incorporate the cash dividend system into the mandatory constraint arrangement. Sure enough, on April 14, Jilin Expressway received an inquiry letter from the Shanghai Stock Exchange.
In the inquiry letter, the Shanghai Stock Exchange asked Jilin Expressway to explain three major issues.
First, in combination with the profitability and use of funds in recent years, it is necessary to explain the reasons and reasonableness of the company's high balance of monetary funds and profits for many years, and whether there is a large amount of idle funds; The specific direction of foreign investment fully explains the necessity and urgency of the relevant capital arrangements, whether the company facilitates the participation of small and medium-sized shareholders in the decision-making of cash dividends, and the practical and effective measures that the company intends to take to enhance the level of return to investors.
The second is to explain the detailed reasons why Vice Chairman Liu Xianfu, independent director Lin Jianzhong abstained from voting and other directors voted in favor, whether the relevant directors have communication differences with the company, whether all directors independently and prudently judge the profit distribution plan, and require all directors to express clear opinions on whether they are diligent and conscientious.
Third, the Shanghai Stock Exchange said that cash dividends are one of the most direct and effective ways for listed companies to return to investors. The SSE requires all directors, supervisors and senior executives of the Company to express their opinions on whether the matters related to the cash dividend plan are reasonable, and prudently assess whether the cash dividend plan is in line with the company's long-term strategy, whether it is conducive to investors to share the company's development results, respond to the concerns of the market and investors in a timely manner on cash dividends, effectively protect the interests of small and medium-sized investors, and enhance the stability, sustainability and predictability of cash dividends.
The SSE also requires the Company to disclose this letter immediately upon receipt and to respond in writing within 5 working days.
According to the data, Jilin Expressway is a listed company approved by the China Securities Regulatory Commission and established after the separation of the former Northeast Expressway. The company was established in Changchun City, Jilin Province on March 1, 2010, and the company's shares were listed on the Shanghai Stock Exchange on March 19, 2010. The largest shareholder of the company is Jilin Expressway Group Co., Ltd., and the second largest shareholder is China Merchants Highway Network Technology Holding Co., Ltd.
If you meet the criteria, you will not be dividend
On April 12, in order to implement the recently released "Several Opinions of the State Council on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" (i.e., the "National Nine Articles"), the Shanghai and Shenzhen Stock Exchanges solicited opinions from the public on the revision of a number of specific business rules, among which the institutional arrangements involving cash dividends have attracted much attention from the market.
In the Consultation Paper, the Shanghai and Shenzhen Stock Exchange amend the proposed key arrangements for the provisions on dividends in the Stock Listing Rules of the Main Board, ChiNext and Science and Technology Innovation Board. The core content is to take mandatory restraint measures for non-compliance with dividends, and include companies that have not paid dividends for many years or have a low dividend ratio into the situation of "implementing other risk warnings" (ST).
Specifically, in terms of the main board, ST will be implemented for companies that meet the basic conditions for dividends, the total cumulative cash dividends in the last three fiscal years are less than 30% of the average annual net profit, and the cumulative dividend amount is less than 50 million yuan.
In terms of the Growth Enterprise Market and the Science and Technology Innovation Board, taking into account the characteristics of different sectors and the differences between companies, the absolute value of the dividend amount will be adjusted to 30 million yuan. At the same time, companies with cumulative R&D investment accounting for more than 15% of cumulative operating income in the last three fiscal years, or companies with cumulative R&D investment of more than 300 million yuan in the last three fiscal years can be exempted from ST.
At the same time, the amount of repurchase cancellation is included in the calculation of cash dividend amount. This adjustment is planned to be officially implemented from January 1, 2025, when the "most recent three fiscal years" correspond to the fiscal year 2022 to 2024.
It should be noted that, considering that the dividends of listed companies are related to their size, profitability, cash flow and other factors, the proposed revised dividend ST rules are not implemented without discrimination, and have a clear premise for application: only for the parent company, the undistributed profit at the end of the consolidated statement year is positive and profitable in the current year. This premise anchors companies that are capable, but whose dividend levels are consistently low, pushing them to enhance investor returns.
Editor: Xiao Mo
Review: Xu Wen