Chairman Wang Zhongjun received a warning letter for illegally reducing his holdings of the company's shares, and most of the shares held by the actual controller's brothers have been frozen
"China Science and Technology Investment", Long Min, Liu Meili
On May 7, the Zhejiang Supervision Bureau of the China Securities Regulatory Commission (hereinafter referred to as the "Zhejiang Securities Regulatory Bureau") issued the "Decision on Issuing a Warning Letter to Wang Zhongjun", which issued a decision on Huayi Brothers (300027. SZ) Chairman Wang Zhongjun issued a warning letter for the illegal reduction of the company's shares, and recorded it in the integrity file of the securities and futures market.
From 2018 to 2023, Huayi Brothers has suffered net losses for six consecutive years, with a cumulative net loss attributable to shareholders of listed companies of nearly 8 billion. Under the increasingly urgent debt pressure, the company promoted the asset-light model, but the performance still showed a downward trend. At present, most of the shares held by the company's actual controller brother have been frozen, and the fixed increase plan launched in 2020 has not yet been implemented, and there may be a lack of financial support for the development of film and television projects in the future.
The actual controller has reduced his shareholding several times
The warning letter issued by the Zhejiang Securities Regulatory Bureau pointed out that Wang Zhongjun, as the chairman of Huayi Brothers, sold 328,700 shares of the company's shares in violation of regulations within 30 days before the company's disclosure of the "2023 Semi-annual Report", with a turnover of 999,200 yuan. In response to this violation, the Zhejiang Securities Regulatory Bureau decided to take supervision and management measures against Wang Zhongjun by issuing a warning letter, and recorded it in the integrity file 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 actual controllers of Huayi Brothers, for failing to buy and sell the company's shares in accordance with the regulations and failing to perform their reporting and announcement obligations in a timely manner. According to public information, since its listing in 2009, the proportion of the company's equity held by the company's actual controller has decreased from 34.41% to 13.9%, with a cumulative change of 20.51%.
At the 2022 annual report briefing, Huayi Brothers said that the funds obtained by the company's actual controller from the reduction of shares are mainly used to repay stock pledge financing, reduce pledge risks, 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 of Wang Zhongjun and Wang Zhonglei that will expire in the next year 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 and 13.9% of the company's shares; The cumulative frozen shares account for 83.46% of its shares and 11.6% of the company's shares.
In addition, the company 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 latest audited net assets, and all such guarantees were guarantees provided to the Company and the Company within the scope of the Company's consolidated statements. In order to meet the needs of actual operation, it is expected that the company and its subsidiaries will provide financing guarantees with a total amount of no more than 1.571 billion yuan in 2024.
The company's solvency weakened
According to the financial report data, the company's solvency has gradually weakened. From 2021 to 2023, the company's asset-liability ratios will be 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; The current ratios were 0.72, 0.67 and 0.56, respectively.
In order to alleviate the debt burden, the company has repeatedly tried to raise funds through non-public directional issuance of shares, but none of them have 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 a total of no more than 2.29 billion yuan of shares to supplement liquidity and repay loans. However, this fixed increase plan has been suspended and adjusted several times, and is still in the state of review and inquiry. On January 30, 2024, the board of directors of the company held a meeting to adjust the fixed increase plan again, and the total amount of funds raised was adjusted to 821 million yuan, of which the amount of supplementary liquidity was adjusted to 245 million yuan, and the rest of the funds were mainly used for investment in film and television works. In addition, on April 30, 2024, the Company issued the "Announcement on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Issue Shares to Specific Targets by Simplified Procedures", planning to issue shares to specific targets with a total financing amount of no more than RMB 300 million and no more than 20% of the net assets at the end of the most recent year.
It is worth mentioning that Shenzhen Tencent Computer System Co., Ltd. (hereinafter referred to as "Tencent") and Hangzhou Ali Venture Capital Co., Ltd. (hereinafter referred to as "Alibaba Venture Capital") and other companies have established financing and business cooperation with Huayi Brothers in the past, which has reduced debt pressure to a certain extent, but now, the shareholding ratio of both companies has declined. According to the 2021 annual report, Tencent is the second largest shareholder of the company with a shareholding ratio of 7.94%, and Alibaba Venture Capital and Jack Ma are the third largest shareholders and the fifth largest shareholder with a shareholding ratio of 4.47% and 3.6% respectively. However, from 2022 to 2023, Tencent's shareholding ratio will gradually decrease and disappear from the top ten shareholders. In the third quarter of 2023, Alibaba Venture Capital and Jack Ma reduced their holdings by a total of 3%, and the remaining shares totaled 5.07%. However, in the first quarter of 2024, Alibaba Venture Capital increased its stake by 1%, and Alibaba's shareholding ratio became 6.07%, and Tencent also appeared in the top ten shareholders with a shareholding ratio of 1.01%.
In addition, Huayi Brothers also obtained a 5-year loan of 700 million yuan from Beijing Alibaba Pictures Culture Co., Ltd. through equity and real estate mortgage in 2019, and in November 2023, the company transferred 100% of the equity and all debts of Beijing Huayi Brothers Jiali Culture Development Co., Ltd., a grandson company, for 350 million yuan to offset half of the due loans, and the remaining 350 million yuan of loans were extended for 6 months through friendly negotiation between the two parties on January 24, 2024.
Earnings loss
According to the financial report data, from 2018 to 2023, the company has 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 expenses. In 2023, the company's operating income will be 666 million yuan, net profit after deducting non-recurring gains and losses will be -533 million yuan, the financial expense ratio will be 19.97%, and the management expense ratio will be 26.43%.
The company's main business is film and television entertainment business, brand licensing and live entertainment business, and Internet entertainment business, of which the film and television entertainment business mainly relies on the box office revenue of cinemas and online 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 funds were only 270 million yuan, and according to the company's inquiry letter reply announcement on February 27, 2024, the company plans to raise 575 million yuan through the fixed increase plan for the production of three movies and one TV series. If the debt pressure is not successfully lifted, the production of relevant film and television works 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 quarter report of 2024, the company's operating income was 95 million yuan, a year-on-year decrease of 59.2%. Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was -25 million yuan, a year-on-year decrease of 46.93%. and Guangguang Media (300251. SZ) operating income in the first quarter of this year was 1.07 billion yuan, up 159.33% year-on-year; The net profit after deducting non-recurring gains and losses was 416 million yuan, an increase of 252.01% year-on-year. In addition, according to the data of Maoyan Films and the feedback from the investor interactive platform, on April 20, "Roof Football", which was produced + promoted by Huayi Brothers, was released, with a comprehensive box office of 175,400 on the first day, ranking 26th at the box office of the day, and as of April 26, the total box office was only 341,000.
In the 2023 annual report, Huayi Brothers said that in the future, the company will continue to concentrate high-quality resources to implement the asset-light business model of "film and television production + IP operation" to promote the company's accelerated return to the fast lane of healthy development. Young playwright and director Xiang Kai said in an interview with the reporter of "China Science and Technology Investment" that the asset-light model is a great help for content-based companies, which can allow companies to concentrate on content consistently, make more high-quality content, and win market recognition. Xiang Kai said that the general environment of the film and television industry is now better than before, the consumer market is recovering, and the box office scale is recovering rapidly.
In response to issues such as shareholder reduction, debt pressure, and performance development, the reporter sent a letter to Huayi Brothers, but as of press time, no reply has been received.