Zhouyu Design Group Co., Ltd. (hereinafter referred to as "Zhouyu Design"), an architectural design company closely related to the real estate industry, finally failed in three years.
The reporter of the Spiegel Finance Studio of the "Public Securities Journal" found that Zhouyu Design, which is in a typical technology-intensive and intelligence-intensive service industry, will significantly reduce the number of employees by more than 1,000 in 2022, but in the case of a significant reduction in employees, Zhouyu Design's revenue has not decreased significantly, nor has it been able to reverse the trend of declining net profit. In the same year, a number of enterprises providing design outsourcing services entered the top five suppliers of Zhouyu Design, among them, one outsourcing supplier has 0 social security employees, and one outsourcing supplier has abnormal operation and tax arrears.
Regarding the matching degree between the decline in the number of employees and the change in revenue, the abnormal operation of the external contractor, tax arrears and other related issues, this newspaper sent a letter to Zhouyu Design on March 28, but did not receive a substantive reply. A week later, Zhouyu Design and the sponsor brokerage applied to withdraw the listing application documents and terminate the IPO.
Profits continue to decline
Impairment losses have a significant impact on net profit
The main business of Zhouyu Design is architectural design, and its main products and services include general architectural design, BIM design and industrialization, and comprehensive design consulting. A number of large real estate development enterprises, including Longfor, Sunac, Blu-ray, New Hope, Evergrande, etc., are important customers of Zhouyu Design.
From 2020 to 2022 and the first half of 2023, Zhouyu Design achieved revenue of about 683 million yuan, 850 million yuan, 802 million yuan and 340 million yuan respectively; The net profit was 94.9801 million yuan, 87.910 million yuan, 80.1567 million yuan and 33.1634 million yuan respectively.
Behind the decline in performance, the proportion of accounts receivable of Zhouyu Design continues to be at a high level. At the end of each period from 2020 to 2022 and the first half of 2023, the book value of accounts receivable was 180.6315 million yuan, 293.677 million yuan, 240.6756 million yuan and 234.9067 million yuan respectively, accounting for 21.90%, 34.50%, 28.65% and 27.47% of current assets respectively. At the end of 2020, if the ratio of the sum of the book value of accounts receivable and contract assets to the current operating income is considered, it will reach 61.50%, and at the end of 2022 and the end of June 2023, the aforementioned proportion will be 82.16% and 103.15%, respectively.
At the same time, the company is also facing difficulties in recovering payments. In recent years, under the influence of macro-control and industry policies, the real estate industry has undergone cyclical changes, the credit differentiation of real estate enterprises, the extension of the upstream settlement cycle, the use of supply chain financing, bills, housing offset and other settlement and payment methods have also become more common, and the redemption of commercial papers issued by some enterprises has been hindered.
From 2020 to 2022 and the first half of 2023, the credit impairment losses of Zhouyu Design will be -17.0318 million yuan, -36.8488 million yuan, -35.7728 million yuan, and -498,400 yuan respectively; The amount of asset impairment losses was -11.1672 million yuan, -28.6413 million yuan, -34.1331 million yuan and -18.718 million yuan respectively (see Figure 1). It can be seen that the impact of credit impairment losses and asset impairment losses on net profit continues to increase.
Figure 1: The specific composition of credit impairment losses and asset impairment losses
As of the end of June 2023, the total book value of accounts receivable of Zhouyu Design exceeded 700 million yuan, and the top five customers in terms of accounts receivable were Longfor, Sunac, Wanda, New Hope, and Dongyuan. The bad debt provision for Sunac's accounts receivable is as high as 10.5096 million yuan, and Evergrande's is 5.7498 million yuan.
From 2020 to 2022, the company's payment in the form of housing payment will be 20.6897 million yuan, 176 million yuan, and 207 million yuan respectively.
Zhouyu Design said in the prospectus that the company faces the risk of a 50% decline in performance or even a loss caused by changes in the real estate industry.
More than 1,000 employees were reduced in a year
It is difficult to match with the change in revenue
In the face of the continuous decline in net profit, Zhouyu Design will significantly reduce the number of employees by more than 1,000 in 2022, but it has not yet reversed the trend of declining net profit.
The overall design ability and scale of designers can be described as the key factors of the core competitiveness of Zhouyu Design. Due to the fierce competition in the architectural design industry, the strong mobility of designers, and the changes in the real estate industry since the second half of 2021, Zhouyu Design took the initiative to reduce the expansion speed and adjust the layout of the business sector in order to cope with risks.
In 2022, the number of design and design personnel of Zhouyu will be reduced, and the company said: "If the company fails to optimize the management, salary distribution and other policies in a timely manner, it will inevitably lead to an increase in the risk of loss of design personnel, which may have an adverse impact on the company's production, operation and sustainable development." ”
According to the prospectus, the number of employees in Zhouyu Design will be significantly reduced in 2022, from 2,436 at the end of 2021 to 1,402, and as of the end of June 2023, the number of employees will be 1,421, while the number of employees in the company will be stable at 2,083 in 2020 (see Figure 2).
Figure 2: The number of employees and changes in Uniyu Design and its subsidiaries
With the significant reduction in the number of employees, the labor cost of Zhouyu Design has dropped significantly. From 2020 to 2022 and the first half of 2023, the labor cost will be 308.1065 million yuan, 350.709 million yuan, 244.7078 million yuan and 107.0637 million yuan respectively, accounting for 70.92%, 65.94%, 60.25% and 54.20% of the main business cost respectively, mainly including the salary of designers, social insurance and housing provident fund, etc., which is the main component of the main business cost.
However, the revenue of Zhouyu Design has not decreased significantly with the significant reduction in the number of employees. From 2020 to 2022 and the first half of 2023, the company achieved revenue of about 683 million yuan, 850 million yuan, 802 million yuan and 340 million yuan respectively.
The subcontractor has abnormal operation and arrears of taxes
It is worth mentioning that in 2022, when the staff was greatly reduced, a number of companies providing design outsourcing services entered the top five suppliers of Zhouyu Design, but many outsourcing suppliers were unqualified, one outsourcing supplier had 0 social security, and one outsourcing supplier had abnormal operation and tax arrears.
According to the prospectus, in 2022, four of the top five suppliers of Zhouyu Design will provide design outsourcing services, namely Chenghua District Qiangheng Architectural Design Studio, Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd., Henan Yohe Cultural and Creative Development Co., Ltd., and Shenzhen Xide Architectural Design Co., Ltd. Among them, Zhouyu Design purchased professional design outsourcing from Henan Yohe Cultural and Creative Development Co., Ltd., and purchased auxiliary design outsourcing from the remaining three suppliers.
Combined with the July 2021 and the latest disclosed prospectus of Zhouyu Design, the company has long purchased design outsourcing services from Qiangheng Architectural Design Studio in Chenghua District. In 2018, 2020, 2022 and the first half of 2023, the purchase amount from Chenghua District Qiangheng Architectural Design Studio will be 3.4124 million yuan, 2.8819 million yuan, 4.2517 million yuan and 2.9508 million yuan respectively.
According to the industrial and commercial information queried by the enterprise, Chenghua District Qiangheng Architectural Design Studio was established on March 17, 2014, as an individual industrial and commercial household, the operator is Wanqiang, the industry belongs to the business service industry, and the business scope includes architectural graphic design services. The enterprise check further shows that the qualification certificate of the studio is 0, and the only customer shown is Zhouyu Design; Its 2018 and 2020 annual reports show that the number of employees is only 1 (see Figures 3 and 4).
Figure 3: 2018 annual report of Chenghua District Qiangheng Architectural Design Studio
Figure 4: 2020 annual report of Chenghua District Qiangheng Architectural Design Studio
Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd. ranked the third largest supplier in 2022 with a procurement amount of 3.8434 million yuan, and the procurement content is mainly "the main procurement of construction drawing engineering technical consulting, scheme design, pre-planning and positioning, pre-plan coordination, project competitive product research, design optimization, and drawing proofreading consulting services".
According to the company's data, Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd. was established in September 2017, the legal representative is Xing Zifan, the registered capital is 1 million yuan, and the business scope includes: engineering management services, engineering supervision, engineering survey and design, engineering technology consulting, engineering cost consulting, engineering bidding agency, government procurement agency, enterprise management consulting, computer software and hardware development and sales.
It is interesting to note that Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd. is operating abnormally and owes taxes (see Figure 5). In July 2023, the company was listed as having abnormal operations by the Sichuan Tianfu New Area Market Supervision and Administration Bureau for failing to publicize the annual report within the time limit stipulated in Article 8 of the Interim Regulations on the Disclosure of Enterprise Information. According to information released by the Sichuan Provincial Taxation Bureau of the State Administration of Taxation in January 2024, the company owes more than 60,000 yuan in taxes.
Figure 5: Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd. is operating abnormally
Henan Yohe Cultural and Creative Development Co., Ltd. also shows 0 qualification certificates in the enterprise check, and in 2022, Zhouyu Design will mainly purchase engineering consulting services from it, with a transaction amount of 3.388 million yuan.
Shenzhen Xide Architectural Design Co., Ltd. is one of the few suppliers with qualification certificates. In 2022, Zhouyu Design will mainly purchase design consulting, house design, and technical measures pre-consulting services from it, with a transaction amount of 3.2009 million yuan.
However, judging from the filing of engineering consulting units, Shenzhen Xide Architectural Design Co., Ltd. will only start to engage in engineering consulting business in 2023, and the filing time will be March 2023.
So, in 2022, a number of companies that provide design outsourcing services will enter the top five suppliers of Zhouyu Design, is there anything to do with the significant reduction in staff that year? In the case of the number of employees disclosed in its annual report is 1, how does Chenghua District Qiangheng Architectural Design Studio complete the design outsourcing procurement of about 3 million yuan from Zhouyu Design? Is the supplier mainly for Zhouyu Design Services? Sichuan Kangsat Construction Engineering Management Consulting Co., Ltd. has abnormal operation and even tax arrears, is Zhouyu Design prudent in the selection of suppliers? A number of the company's main external partners have 0 social insurance participants or 1 employee, whether the outsourcing party's employment is compliant, whether it uses part-time personnel or school students, and whether it can ensure the quality of outsourcing services provided to the company?
Is the policy of "optimizing management and salary distribution" just layoffs and compressing employee salaries? In recent years, has it been maintaining stable profits by reducing costs? As an architectural design company, what is the reason why the revenue of Zhouyu Design has not been greatly reduced in the case of a large reduction in employees? Can the reduction of nearly half of the number of employees support the same amount of business? After the large-scale downsizing, is there an illegal extension of employees' working hours? Are there any labor disputes during the downsizing?
Combined with the contract order, project progress, the number of designers, etc., is there a situation of cross-period accounting for the corresponding cost of the company's service procurement? Is there a situation where the period expenses are included in the contract cost? Is there a situation of personnel affiliation?
In response to the above questions, the "Public Securities Journal" Spiegel Finance Studio sent an interview letter to Zhouyu Design by email on March 28, but did not receive a reply as of press time. Reporter Cheng Shu