On June 28, a disciplinary action issued by the Shanghai Stock Exchange exposed Zhejiang Furun’s restructuring party’s high gambling performance promises, which ended up being publicly condemned by the Shanghai Stock Exchange.
Looking back at this reorganization, on December 2, 2016, Zhejiang Furun Digital Technology Co., Ltd. (referred to as “Zhejiang Furun”) disclosed that it issued shares and paid cash to purchase assets and raised supporting funds and related transactions. The report stated that the company planned to Through a combination of issuing shares and paying cash, 18 shareholders including Jiang Yougui and Fu Haipeng purchased 100% of the equity held by them in Hangzhou Taiyi Zhishang Technology Co., Ltd. (“Taiyi Zhishang” for short). At that time, the counterparty made a three-year performance commitment. From 2016 to 2018, the completion rates of Taiyi Shang’s performance commitments were 111.88%, 101.97%, and 108.16% respectively, and the cumulative performance commitment completion rate was 106.93%.
The turning point occurred on November 27, 2018. Zhejiang Furun disclosed an announcement stating that Jiang Yougui and Fu Haipeng voluntarily increased Taiyishang’s performance commitments for 2019 and 2020, and it is expected to achieve non-profit deductions in 2019 and 2020. The final net profits are no less than 159 million yuan and 207 million yuan respectively. If Taiyi Index’s realized net profit in 2019 and 2020 is lower than the promised net profit, Jiang Yougui and Fu Haipeng will make up the difference between the actual net profit and the promised net profit in the form of cash or stocks.
Backfired. In 2019 and 2020, Taiyi Index achieved a total net profit of 100 million yuan after non-deductions, and the cumulative performance commitment completion rate was 27.46%. On November 14, 2020, Zhejiang Furun agreed that Jiang Yougui and Fu Haipeng would pay the company 2019 performance compensation of 83.6164 million yuan in cash before December 31, 2021. However, the agreed compensation period for performance compensation has expired on December 31, 2021. On March 18 this year, the company only received 1 million yuan in performance compensation for 2019 from Jiang Yougui and Fu Haipeng. As of now, Jiang Yougui and Fu Haipeng, the parties responsible for performance commitments and compensation responsibilities, have not yet fulfilled their remaining performance compensation obligations.
In this regard, the Shanghai Stock Exchange believes that the counterparties Jiang Yougui and Fu Haipeng, as performance promisers and persons responsible for compensation, failed to perform their performance compensation obligations when the performance of the underlying assets did not meet the standards and there was a large difference from the promised performance, and the circumstances were serious. , violated relevant regulations. The Shanghai Stock Exchange decided to publicly condemn Jiang Yougui and Fu Haipeng, the parties to Zhejiang Furun’s major asset restructuring transaction. Regarding the above disciplinary actions, the Shanghai Stock Exchange will notify the China Securities Regulatory Commission and the Zhejiang Provincial People’s Government, and record them in the integrity files of listed companies.
Previously, on June 6, Zhejiang Furun planned to terminate the sale of 100% equity of Taiyi Shang because the company’s overall operating income in 2022 will not meet expectations after the sale.
11 years after taking over, we lost 800 million yuan and lost 500 million yuan.
The listed company was originally established by six units including Zhejiang Knitting Factory, Zhuji Yinda Economic and Trade Company, and Zhuji Electric Power Industrial Corporation. The actual controller is the Zhuji Municipal People’s Government. It was listed on the Shanghai Stock Exchange in 1997.
In 2011, Huifeng Venture Capital, jointly controlled by 17 natural persons including Boss Zhao, took over 81% of the state-owned equity of the controlling shareholder Furun Group, indirectly held 25.64% of Zhejiang Furun shares, and became the new actual controller.
After Boss Zhao and his team took over the business in 2011, Zhejiang Furun’s operating income has been sluggish and did not start to rise until 2017.
Beginning in 2021, Zhejiang Furun’s operating income seems to have encountered another bad year. This year, it achieved 1.312 billion yuan, halved year-on-year. In the first quarter of 2022, it achieved 262 million yuan, which continued to be halved.
Profit is similar to revenue.
After taking over the business in 2011, Zhejiang Furun’s net profit attributable to its parent company still struggled a little. But deducting the net profit that is not attributable to the parent company is very unsightly. It also suffered losses for three consecutive years from 2014 to 2016, and began to improve in 2017.
The difference is that the net profit attributable to the parent company began to change in 2020, and the net profit attributable to the parent company was deducted a year earlier. Both of them suffered continuous huge losses from 2020 to 2021.
Among them, the net profit attributable to the parent and the net profit after non-attributable to the parent will be -477 million yuan and -580 million yuan respectively in 2021, and in the first quarter of 2022, they will be -4.3767 million yuan and -41.6257 million yuan respectively.
From the perspective of deducting non-attributable net profits, Zhejiang Furun suffered a total loss of 767 million yuan from 2011 to 2021.
Under such circumstances, Zhejiang Furun’s cash flow is even worse.
Unlike revenue and net profit, net cash flow from operating activities has been worse than before after 2017, and has begun to be dominated by outflows.
Free cash flow has been negative since 2017, with a total of -543 million yuan from 2011 to 2021.
At this point, whether it is the termination of the sale of Taiyi Shang, or the surge in performance and change of face, it is inseparable from the following incident.
Performance changes + goodwill impairment
In 2016, a listed company acquired 100% of the equity of Taiyi Shang in a cross-border merger for a price of 1.2 billion yuan, of which 998 million yuan was paid by issuing shares and 202 million yuan was paid in cash.
The estimated value-added rate of this merger for Taiyi Shang was 310.51%, and a goodwill of 794 million yuan was finally confirmed, successfully laying a huge foundation for the future.
After joining a listed company, Taiyi Zhishang’s revenue has grown really well. This has brought fresh blood to Zhejiang Furun’s bleak revenue for many years and became the main reason for the rise in performance in 2017.
But it can be seen at a glance from the profit trend that as one of the tens of thousands of cross-border high-premium mergers and acquisitions, Taiyizhishang still cannot escape the all-too-familiar routine.
From 2016 to 2018, Taiyi Index achieved net profits of RMB 61.5329 million, RMB 86.6720 million, and RMB 131.9578 million respectively after non-deductions, fulfilling its performance commitments with a cumulative completion rate of 106.93%.
In 2019, when the commitment period ended, Taiyi Zhishang’s performance changed. The net profit in 2019 was almost halved year-on-year, and it continued to be halved in 2020. In 2021, it suffered a direct loss of -312 million yuan.
For this reason, Zhejiang Furun made provisions for goodwill impairment of 28 million yuan, 494 million yuan, and 272 million yuan respectively for Taiyi Zhishang’s goodwill from 2019 to 2021.
The performance of the merger and acquisition target has changed and the goodwill has been impaired, and the performance of the listed company has also fallen and suffered huge losses.
Can selling mobile phone cards be used to show off? !
Seeing that the dividends of the Internet advertising industry were gradually disappearing, Taiyi Zhishang also began to save itself, imitating listed companies and trying to transform.
In September 2020, Taiyizhishang increased its capital to acquire 85% of the equity of Kasai Technology, with an amount of 20 million yuan, forming goodwill of 15.61 million yuan.
Kasai Technology’s business scope is quite wide, including technical services, management consulting, department store sales, data services, blockchain, cultural creativity, medical supplies, etc.
At present, Kasai Technology has only two businesses: brand marketing and promotion services and operator account card promotion services. Among them, the former is decreasing and the latter is the main direction of attack.
At the beginning of 2022, affected by the epidemic, express delivery in some areas was stagnant, which affected the current activation rate and activation data of number cards, causing a major impact on Kasai Technology’s performance.
This is the business field that the listed company originally planned to sell off Taiyi Zhishang, leaving Kasai Technology behind, and planned to move to it in the future.
A sigh: a good hand, played to pieces
Zhejiang Furun, located in Shaoxing, has an annual output of 80 million meters of high-end fabric printing and dyeing processing capabilities. It is one of the companies participating in the formulation of local standards for the printing and dyeing industry in Shaoxing.
Not only is it well-known locally, Zhejiang Furun was also one of the top 10 enterprises in my country’s dyeing and printing industry, the first approved enterprise in the printing and dyeing industry by the Ministry of Industry and Information Technology, and was recognized as a clean production demonstration enterprise.
In 2016, Shaoxing launched a reorganization of the printing and dyeing industry, and 74 local printing and dyeing companies were shut down for rectification. Zhejiang Furun not only was not affected in any way, but also benefited greatly from it. Even though it was already operating at full capacity, new customers continued to come to the company seeking processing, and it was very prosperous for a while.
From the perspective of a listed company, after Zhao Linzhong and his team took over, they began to transfer traditional printing and dyeing assets one after another in 2018, and completed the divestiture in 2020.
During this period, Zhejiang Furun made a high-profile transformation into Internet marketing in 2016. It was once packaged in a gorgeous way, but it still couldn’t escape the fate of thunder. A closer look revealed that the truth was just “advertising” and “selling mobile phone cards.”
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