Securities code: 002131 securities abbreviation: Leo Group Co.Ltd(002131) Announcement No.: 2022-009
Announcement on the reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Leo Group Co.Ltd(002131) (hereinafter referred to as "the company") received the notice on Leo Group Co.Ltd(002131) issued by Shenzhen Stock Exchange on February 7, 2022 (company Department notice [2022] No. 112). After receiving the letter of concern, the company attached great importance to it and actively organized relevant personnel to discuss and verify relevant issues. Now the reply is announced as follows:
1. In 2020, your company will realize a net profit of 4.772 billion yuan, which is due to the recognition that the income from changes in the fair value of ideal vehicles is about 4.5 billion yuan, and the net profit after deduction is 283 million yuan. Please explain the reasons for the significant loss of your company's performance in 2021 and whether the business environment has changed significantly in combination with your company's business environment, main business conditions and main products.
The company's main business includes machinery manufacturing business and Internet business. Among them, machinery manufacturing business can be divided into civil and commercial pumps, industrial pumps, garden machinery, accessories and other product categories; Internet business can be divided into media agency business, digital marketing services and other business categories. In addition to the above two sectors, investment business is currently one of the important factors affecting the company's profits.
(1) Machinery manufacturing business
According to the requirements of the national "14th five year plan", we will continue to strengthen the policies of water conservancy infrastructure construction, expanding investment in public facilities and stimulating domestic demand in the next few years. The demand for water conservancy and water affairs, electric power, iron and steel metallurgy, petrochemical, mining and other major sectors of the national economy and urban infrastructure construction will continue to grow, and the market demand for the company's pump products will also maintain growth.
Thanks to the fruitful market development and brand promotion of the civil pump business, the transfer of foreign orders affected by the epidemic to China, and the continuous technical accumulation, process improvement, new product research and development, as well as the continuous investment in internal management improvement and market expansion of the industrial pump business for many years, the orders of the company's machinery manufacturing business in foreign markets increased significantly in 2021, The manufacturing sector achieved an annual operating revenue of about 3.5 billion yuan, a year-on-year increase of about 35%. In 2021, due to the sharp rise in the price of bulk commodities, the price of raw materials for the main products of the company's machinery manufacturing business continued to rise, resulting in a significant increase in the company's procurement costs; On the other hand, the RMB exchange rate against the US dollar continued to strengthen, which led to a decline in the sales gross profit margin of the company's export-oriented subsidiary "Leo Zhejiang pump" in 2021. In addition, this year, the company's machinery manufacturing business sector formulated a new development strategic plan, actively explored the Chinese market, adjusted the internal organizational structure, and added a new business team, resulting in a significant increase in various expenses. Affected by multiple factors such as the increase of production costs, exchange rate fluctuations and the increase of various expenses, the net profit of the company's machinery manufacturing sector in 2021 decreased compared with that in 2020.
Despite the impact of short-term factors such as exchange rate fluctuations, rising raw material prices and rising costs, the performance of the machinery manufacturing sector decreased in 2021. The management of the company has actively taken response mechanisms, including effective measures such as product price adjustment and vigorously developing the Chinese market. The performance of the manufacturing sector of the company is expected to maintain stable growth.
To sum up, the business environment of the company's machinery manufacturing sector has not changed significantly and still maintains a positive trend. (2) Internet business
In 2021, affected by various internal and external factors, the company's digital marketing sector's business performance declined. The main reasons are as follows: 1) the content, channel, communication mode and audience of digital marketing have changed, giving birth to new marketing methods, and the traditional digital marketing business has been impacted; 2) The competition of digital advertising agency business is fierce, the voice of mainstream media pricing is enhanced, and the gross profit margin of the company's platform traffic business is declining; 3) Affected by the double reduction policy and the continuous supervision of the game industry, the gross profit of the company's education industry and game industry is less than expected; 4) Affected by market competition, personnel adjustment and other factors, the gross profit of creative marketing business has declined; 5) The layout of the new incubation team was not as expected, and the cost increased during the period; 6) Leo digital platform collaborative integration has achieved some results, but it has not achieved the expected results; 7) A customer of the company's business condition is abnormal, resulting in the company's large amount of receivables not being recovered normally, and a large amount of bad debt reserves are withdrawn.
Despite the above adverse factors, the company's management has also actively taken various measures, such as expanding the market, optimizing the team and developing new business models. The operating revenue of the digital marketing sector still increased by about 26% in 2021.
To sum up, there are adverse factors in the company's digital marketing sector, such as economic downward pressure, slowing industry growth, increasingly fierce market competition, decline in gross profit margin and decline in business volume of some subdivided industries affected by supervision. However, generally speaking, the overall business environment of the company's digital marketing sector has not undergone fundamental and significant adverse changes.
(3) Investment business
Adhering to the concept of value investment, the company actively explores the investment direction of emerging industries, patiently cultivates invested enterprises and grows together with enterprises. The company has established and trained a professional internal investment management team, carried out extensive cooperation and exchange with external professional institutions, and established a mechanism of information sharing and cooperative investment.
In the past two years, the industrial fields invested by the company are relatively concentrated in the pharmaceutical health and intelligent automobile industry chain. The company's financial investment is widely involved in high-tech fields such as big data, Internet of things, aerospace and information security.
(4) Reasons for loss
The company's performance loss in 2021 is mainly due to the company's provision for large amount of goodwill impairment (see the reply to question 2 for details) and the provision for bad debts of accounts receivable. For example, after excluding the influence factors of the company's single provision for bad debt of a customer's receivables and the provision for goodwill impairment on the net profit, the net profit range attributable to the shareholders of the listed company in 2021 is expected to be about 550 million yuan - 650 million yuan (assuming that the company makes provision for bad debt of a customer's receivables according to the bad debt provision ratio of normal aging).
2. Please explain the formation process of the above-mentioned goodwill, whether the amount of provision for goodwill impairment in previous years matches its operating performance, the reason, amount and specific calculation process of large amount of provision for goodwill impairment in 2021, whether the provision for goodwill impairment in previous years is sufficient, and whether there is improper earnings management.
At the end of 2021, during the goodwill impairment test, the company comprehensively analyzed and predicted the future operation of the asset group in the digital marketing sector, and fully considered the macro environment, industrial policies, actual operation status, future operation planning and other factors of the asset group, The amount of provision for impairment of the company's goodwill group is 1.25 billion yuan to 2021.5 billion yuan.
(1) Formation process of goodwill
The goodwill of the asset group of the company's digital marketing segment is the company's acquisition of Shanghai Manku Advertising Co., Ltd. (hereinafter referred to as "Shanghai Manku"), Shanghai argon krypton Advertising Co., Ltd. (hereinafter referred to as "Shanghai argon krypton") and Shanghai wodong marketing planning Co., Ltd. (hereinafter referred to as "Shanghai wodong") during 2014-2016 Silver Amber Culture Communication (Beijing) Co., Ltd. (hereinafter referred to as "Amber communication"), Jiangsu Wansheng Weiye Network Technology Co., Ltd. (hereinafter referred to as "Wansheng Weiye"), Beijing minimally invasive era Advertising Co., Ltd. (hereinafter referred to as "minimally invasive era") and Shanghai Zhiqu Advertising Co., Ltd. (hereinafter referred to as "Shanghai Zhiqu").
In 2019, the company systematically integrated the relevant personnel, organizational structure and business of the above acquired target company to create an integrated Leo digital advertising undertaking and delivery platform. The company transferred the goodwill formed by acquiring the equity of the above target company to Leo digital platform.
Among them, the formation process of goodwill in the digital marketing sector is as follows:
Unit: Yuan
The investee or the event forming goodwill the original value of goodwill and the formation time
Shanghai Manku Advertising Co., Ltd. 324524576.81 2014
Shanghai argon krypton Advertising Co., Ltd. 104955445.37 2014
Shanghai wodong marketing planning Co., Ltd. 99629704.24 2014
Silver Amber Culture Communication (Beijing) Co., Ltd. 172391920.61 2014
Jiangsu Wansheng Weiye Network Technology Co., Ltd. 1724306741.68 2015
Beijing Weiwei Times Advertising Co., Ltd. 682730555.14 2015
Shanghai Zhiqu Advertising Co., Ltd. 699312629.08 2016
Total 3807851572.93
(2) Whether the amount of provision for impairment of goodwill in previous years matches its operating performance
From 2017 to 2020, the company made a total of 2.045 billion yuan of goodwill impairment provision for the asset group of digital marketing, as follows:
Unit: Yuan
Investee: 2017, 2018, 2019, 2020
Matters forming goodwill
Shanghai Manku - 24944230.60
Shanghai argon krypton --
Shanghai wodong --
Amber communication - 79993346.54 95762644.38 732387134100 shengweiye - 1306926569.12
Minimally invasive era --
Shanghai Zhiqu 100386085.44 364181590.66
Total 100386085.44 1776045736.92 95762644.38 73238713.41
1) Shanghai Manku
Shanghai Manku is an Internet integrated marketing agency based on big data. It focuses on providing integrated marketing services for digital media. It focuses on digital marketing businesses such as Internet advertising, network image design, media relations and network activity promotion. Its main service customers are leading enterprises in e-commerce, real estate, automobile, mother and baby, clothing and footwear and other industries, The operating performance from 2016 to 2018 is as follows:
Unit: 10000 yuan
Project 2016 2017 2018
Operating income 224543.75 342889.83 407597.85
Net profit 7644.82 6639.61 189.45
In 2018, Shanghai Manku's operating revenue increased and its net profit decreased significantly. After testing, the recoverable amount of Shanghai Manku's asset group was lower than its book value. The company made a provision for goodwill impairment of 24.9442 million yuan, which matched its operating performance.
2) Amber propagation
Amber communication is a digital integrated marketing company dedicated to providing digital business transformation solutions for brand customers. The specific business performance from 2016 to 2018 is as follows:
Unit: 10000 yuan
Project 2016 2017 2018
Operating income 14409.63 13149.28 14381.20
Net profit 2540.86 1275.96 -2111.47
In 2018, the operating income of amber communication remained stable compared with previous years, the net profit decreased significantly, and there was a loss. After testing, the recoverable amount of the asset group of amber communication was lower than its book value. The company made a provision for goodwill impairment of 79.9933 million yuan for amber communication, which matched its operating performance.
3) All saints
Wan Shengwei owner
