Shenzhen Business Daily Reading Client Reporter Li Gengguang
Recently, Li Suhua, the former actual controller of Shenzhen Meizhi Decoration Design Engineering Co., Ltd. (stock abbreviation: Meizhi shares, stock code: 002856), was sued for disputes arising from disputes such as performance compensation and failure to fulfill the commitment to repurchase shares.
At the same time, due to the "roller coaster" fluctuation of revenue from 2021 to 2023, the net profit has been losing money for three consecutive years and has continued to expand, and the asset-liability ratio has increased year by year in the past three years, which has attracted the attention of regulators. To this end, the company received an inquiry letter for the 2023 annual report of the Shenzhen Stock Exchange on May 19, and the Shenzhen Stock Exchange also required the company to explain whether the original actual controller Li Suhua was unable to pay the performance VAM compensation.
The original controller of the company was sued one after another
The amount involved is nearly 500 million yuan
It is worth noting that Meizhi issued major litigation announcements in April and May this year, saying that Li Suhua, the company's original controller, was sued one after another. The reasons for the prosecution all point to Li Suhua's failure to fulfill his performance VAM and equity repurchase commitments.
Among them, in mid-April this year, Meizhi announced that the current controlling shareholder of the company, Guangdong Yijian Equity Investment Partnership (Limited Partnership) (hereinafter referred to as "Guangdong Yijian"), filed a lawsuit against the original actual controller Li Suhua, requesting the court to order Li Suhua to pay 348 million yuan in performance compensation and related interest losses to the company, and pay 74.9749 million yuan in liquidated damages to Guangdong Yijian.
According to the announcement, Guangdong Yijian signed the "Share Transfer Agreement" of the company on December 12, 2020 with Li Suhua, the then controlling shareholder, and Shanghai Tianzhi Technology Development Co., Ltd. (hereinafter referred to as "Shanghai Tianzhi"). According to the agreement, Li Suhua and Shanghai Tianzhi, which is under his control, transferred 29.99% of the shares of Meizhi to Guangdong Yijian by way of agreement, and gave up the voting rights of the remaining shares. After the completion of the transaction, Guangdong Yicheng became the new controlling shareholder, and the State-owned Assets Supervision and Administration Bureau of Nanhai District, Foshan City, became the actual controller of the listed company.
In the share transfer agreement, Li Suhua promised that the original business of Meizhi Co., Ltd. would remain profitable in 2020, and the cumulative non-net profit deducted from 2021 to 2023 would not be less than 40 million yuan; At the same time, the total amount of new bid-winning contracts for the original business from 2021 to 2023 will not be less than 1.8 billion yuan. If the aforesaid VAM is not completed, Li Suhua shall compensate the listed company in cash. In terms of accounts receivable, Li Suhua promised that 80% of the net accounts receivable of Meizhi shares as of December 31, 2020 should be recovered by December 31, 2025.
Because Li Suhua violated the provisions of the Share Transfer Agreement on the company's performance VAM and minimum shareholding commitment, Li Suhua was required to pay relevant compensation and liquidated damages, and Guangdong Yijian recently filed a lawsuit with the Nanhai District People's Court of Foshan City, Guangdong Province, with a total amount of more than 423 million yuan. The Nanhai District People's Court of Foshan City, Guangdong Province accepted the case on April 11, 2024, and as of the disclosure date of the announcement, the company has not received the case materials served by the court, and the case has not yet been heard.
In this regard, the Shenzhen Stock Exchange asked Meizhi to explain the reasons why Guangdong Yijian is currently only suing for compensation for the performance compensation in 2021 and 2022, that is, 348.3789 million yuan, and whether it will continue to require Li Suhua to compensate for the performance compensation in 2023, and if not, the measures to be taken by the company's directors, supervisors and senior executives. In addition, in light of Li Suhua's assets, the pledge and freezing of the shares of the listed company held by him, it is explained whether the company or the controlling shareholder has taken pre-preservation measures against Li Suhua's assets, and whether there is a situation in which Li Suhua is unable to pay the VAM compensation.
The reporter checked the 2023 annual report and noticed that during the reporting period, Li Suhua was the second largest shareholder of the company, currently holding 18,319,700 shares of the company, with a shareholding ratio of 13.54%, all of which were frozen.
Another major litigation case involved Li Suhua's failure to fulfill his commitment to repurchase shares.
On May 16, Meizhi Co., Ltd. announced that due to Li Suhua's failure to fulfill the commitment to repurchase 30% of the equity of the joint venture Guangdong Wanxiang Metropark Construction Engineering Development Co., Ltd. (hereinafter referred to as "Wanxiang Metropark"), the company has filed a lawsuit with the People's Court of Nanshan District, Shenzhen in March 2024, and recently received a summons from the court, involving an amount of about 61.285 million yuan.
Looking back, Meizhi invested 60 million yuan in two installments in 2019 to purchase 30% of the equity of Wanxiang Metropark, and agreed that if Wanxiang Metropark's operating performance did not meet expectations, Li Suhua would need to repurchase this part of the equity at cost price.
Wanxiang Metropark has been losing money continuously from 2020 to 2023, and its performance is far from meeting expectations, triggering the buyback clause. According to the 2023 annual report, the aforementioned commitments are overdue and unfulfilled. After the negotiation failed, Meizhi filed a lawsuit with the court, demanding that Li Suhua repurchase 30% of the equity of Wanxiang Metropark for 60 million yuan, and at the same time pay 1.285 million yuan of overdue interest losses.
The amount involved in the above two lawsuits is nearly 500 million yuan. So far, no court has been held.
Revenue "roller coaster" fluctuations
Net profit has been in the red for three consecutive years
According to the company's website, Meizhi Co., Ltd. was established in 1984 and is a building decoration design and construction enterprise integrating architectural decoration, building curtain wall, building electromechanical, electronic and intelligent, mechanical and electrical equipment installation, fire protection facilities, environmental protection engineering and other specializations, and was listed on March 20, 2017. The company mainly provides comprehensive engineering services for customers such as transportation institutions, cultural industries, financial real estate, government agencies, and high-end star hotel groups.
As a "Shenzhen time-honored brand" enterprise, Meizhi's performance in recent years has been unsatisfactory.
According to the latest annual report data, the company will achieve revenue of 878 million yuan in 2023, a year-on-year decrease of 47.34%; The net profit attributable to shareholders of listed companies was -173 million yuan, down 21.68% year-on-year.
Although the company's revenue has grown as a whole in recent years, it has shown a "roller coaster" of large fluctuations.
According to the financial report, the company's operating income from 2021 to 2023 will be 588 million yuan, 1.668 billion yuan, and 878 million yuan respectively. The operating income in 2022 increased by 183.58% compared with 2021, while the operating income in 2023 declined rapidly, with a decrease of 47.34% compared with 2022.
In addition, the annual report shows that in 2023, the gross profit margin of the company's decoration business will be -6.11%, and the gross profit margin of the construction business will be -1.80%, both of which will be significantly lower than the same period in 2022.
For the continuous and sharp fluctuations in revenue, the Shenzhen Stock Exchange requires the company to explain the reasons for the sharp decline in the company's operating income in 2023 compared with 2022 in combination with market changes, business types, business sources, etc. At the same time, combined with the composition of operating costs, changes in the market environment and changes in comparable companies in the same industry, etc., it explains the reasons and reasonableness of the company's gross profit margin to decline sharply in 2023 while being positive in 2022.
It is worth noting that Meizhi shares have lost money for 3 consecutive years, and the net profit attributable to shareholders of the parent company from 2021 to 2023 will be -161 million yuan, -143 million yuan, and -174 million yuan respectively; The net profit attributable to shareholders of the parent company after deducting non-profits was -169 million yuan, -155 million yuan and -207 million yuan respectively, and the loss continued to expand. In addition, the net cash flow from operating activities was -55.9233 million yuan, -27.9962 million yuan and -74.2763 million yuan respectively, and the net cash flow from operating activities continued to decline.
Interestingly, the reason for the large loss in annual report performance, in Li Suhua's view, is mainly attributed to Guangdong Yijian, the current controlling shareholder of the company.
On April 28 this year, the company's directors Li Suhua and Li Bijun issued an objection statement to the company's annual report, saying that they could not guarantee the truthfulness, accuracy and completeness of the report.
Li Suhua's explanation and reasons for the company's performance not meeting the standard are: state-owned assets did not empower the company with 6 billion yuan of engineering business in 2021-2023 as promised; Guangdong Yijian violated the acquisition agreement (Article 9 of the equity transfer agreement) by arbitrarily replacing the company's core management team, and still replaced the general manager of Meizhi Company despite its strong opposition, resulting in the instability of the company's management and having a significant adverse impact on the company's original business. Li Suhua further said that if the company's core management team is not replaced, the company can achieve the target performance in 2021, 2022 and 2023.
In this regard, the Shenzhen Stock Exchange requires the company to indicate whether the relevant entities have signed an agreement containing the aforesaid content, and if so, please add a specific agreement on whether the company has fulfilled its information disclosure obligations on this matter.
Previously, Li Suhua also voted against and abstained from voting on the company's related proposals many times. Among them, on May 31, 2023, the "Announcement on the Resolution of the 29th Meeting of the Fourth Board of Directors" disclosed by the company shows that Li Suhua, vice chairman of the company, and Yang Shuisen, director of the company, voted against the "Proposal on the Dismissal of the General Manager of the Company", and Li Suhua, vice chairman of the company, voted against the "Proposal on the Appointment of Senior Managers of the Company".
In the secondary market, the share price of Meizhi shares fell by 45% during the year, and as of May 17, the stock closed at 8.13 yuan per share, down 0.37%, and the latest total market value was only 1.1 billion yuan.