More than 1.1 billion yuan of debt is overdue, and the financial alarm of Zhongying Internet (4.320, 0.00, 0.00%) continues to sound.
In the first three quarters of this year, revenue was only 178 million yuan, but interest expenses were as high as 275 million yuan.
The goodwill exploded, the capital was under pressure… The evil consequences of frantic mergers and acquisitions in the past few years are appearing intensively.
Debt under pressure
Zhongying Internet chairman Li Hualiang has publicly stated on many occasions that the company’s biggest problem is its heavy debt pressure.
The concentration of goodwill and the deep debt quagmire are the results of the company’s frantic mergers and acquisitions in the past few years.
In 2014, the company suffered a huge loss for the first time, starting the transfer of control rights and the transformation of mergers and acquisitions. The company sold out all its original manufacturing business and invested 306 million euros (approximately 2.184 billion yuan) to acquire 100% of MMOGA. MMOGA’s customers are concentrated in Europe, mainly Germany, and it is one of the largest vertical e-commerce platforms for game virtual goods in the region.
The acquisition of MMOGA has boosted the company’s performance in the short term, but such a huge cash acquisition has caused the company’s debt-to-asset ratio to rise sharply and financial pressures surged.
However, MMOGA has failed to fulfill its performance commitments for three consecutive years, and the risk of a huge impairment of goodwill follows.
Against this background, Zhongying Internet and then started mergers and acquisitions. In 2017, it acquired 100% equity of Cailiang Technology for 475 million yuan and entered the mobile game planning and mobile big data traffic distribution industries.
By the end of 2018, the total goodwill of Zhongying Internet reached 2.130 billion yuan, accounting for 67.15% of the company’s total assets and 144.60% of net assets.
In 2019, the company eventually failed to meet expectations due to both the performance of Cailiang Technology and MMOGA, resulting in a huge impairment of goodwill. The company’s net profit attributable to the parent for the whole year was -13.5 billion yuan.
The company’s debt crisis is looming due to poor performance and capital pressure. Yesterday, the company responded to the exchange inquiry letter, exposing all the problems in a centralized manner.
As of the end of October this year, the company’s overdue debts had reached 1.146 billion yuan, and most of its main assets had been frozen. The third quarterly report shows that as of the end of September, the company’s asset-liability ratio has reached 97.91%.
Overdue debts directly led to further increase in the company’s financial pressure. From January to September this year, the company recorded operating income of 178 million yuan, down 61.30% year-on-year; during the same period, interest expenses reached 275 million yuan, an increase of 66.51% year-on-year. The company’s overall revenue was not enough to pay interest.
When the company’s funds are so tight, the amount that should be recovered has been delayed.
In 2019, Cailiang Technology suffered a loss of RMB 33,710,900 and failed to fulfill its performance commitment. According to the agreement, the person responsible for compensation Gu Hongliang and Gongqingcheng Wo Times Investment should compensate the company with cash of RMB 270 million. However, the person responsible for compensation indicated that there is no cash compensation capability in the short term. After due diligence, the company found that Gu Hongliang had no houses, no vehicles, no deposits and other assets available for execution.
The loss-making color quantity technology, Zhongying Internet (002464.SZ) can no longer afford it. In May of this year, the company signed an agreement with Yuanchun Media and its shareholders to acquire 22.39% equity of Yuanchun Media with 100% equity of Cailiang Technology, 95 million yuan in debt to Shanghai Zongyang Network and 30 million yuan in cash, and eliminate Cailiang Technology. The scope of the consolidated statement.
After the signing of the agreement, Yuanchun Media has completed the industrial and commercial change, and 22.39% of the equity has been transferred to the listed company. Cailiang Technology was unable to complete the transfer due to the pledge of equity. The 30 million yuan in cash promised by listed companies has never been in place.
As a well-known variety show and film and television drama production company in China, why did Yuanchun Media agree to the investment plan of Zhongying Internet? The outside world is unknown.
After the introduction of Color Volume Technology, Zhongying Internet can only rely on MMOGA’s sole support. As an intermediary platform, MMOGA is in an awkward position, especially in the context of severe challenges and constraints in the global game virtual goods industry, the company and its partners are in a position of conflicting commercial interests. In the second half of 2019, the company continued to negotiate with partners to balance the interests of all parties, and through lowering the level of commission rates, in exchange for continued cooperation.
Affected by this, in the first nine months of this year, MMOGA’s operating income decreased by RMB 75,257,600 year-on-year, and its operating gross profit decreased by RMB 80,753,800 year-on-year. As the company’s main source of revenue, the e-commerce sector, in the first half of this year, while revenue declined, gross profit margin fell by 9% year-on-year.
If the company’s stake in Yuanchun Media is to enter the variety show and film and television drama production industry? Yuanchun Media’s most well-known program is the star reality show “Extreme Challenge”. However, the company clearly stated that its investment in Yuanchun Media will not exceed 50% and will not be included in the scope of the consolidated statement.
Leading the battle to no avail
From Jinli Technology’s name change to Zhongying Internet, the company’s controlling shareholder changed three times in just four years. In the end, Ningbo Ruishen, who was actually controlled by Li Hualiang, became the new controlling shareholder.
Li Hualiang is only 33 years old this year, but he has been in the game industry for many years. Qixinbao shows that its subsidiary Xuanzong Network has received investment from well-known institutions such as Yunfeng Fund and Innovation Workshop.
In 2017, Li Hualiang passed Ningbo Ruishen as a strategic investor and spent 1.137 billion yuan to acquire 10% of the shares of a listed company. As the stock price of Zhongying Internet continues to fall, the market value of this part of the stock is now only more than 200 million yuan.
All the shares of listed companies held by Ningbo Ruishen have been pledged. Due to a stock pledge business dispute, in August this year, all shares of Zhongying Internet held by Ningbo Ruishen have been applied for judicial freezing by Yunnan International Trust.
Faced with the increasing debt pressure of listed companies, the company’s management stated that in the future, it will optimize the financial structure by introducing strategic investors or issuing additional stocks.
In June last year and January this year, the company successively approached the Guangzhou Development Zone Emerging Industry Investment Fund and Beijing Haidian Technology Financial Capital Holding Group, but there was no follow-up.