On February 18, Shenzhen Sdg Information Co.Ltd(000070) replied to the attention letter of Shenzhen Stock Exchange on matters related to the expected huge loss of performance in 2021. The company’s performance forecast for 2021 indicates that the expected net profit is – 590 million yuan to – 690 million yuan. This is Shenzhen Sdg Information Co.Ltd(000070) the year with the most serious performance loss since its listing in 2000. It is precisely because of the change of performance that has attracted the attention of regulators.
factor: the company’s performance is out of control, resulting in huge losses
Shenzhen Sdg Information Co.Ltd(000070) said in the announcement that the main reason for the loss was that Shenzhen tefa Dongzhi Technology Co., Ltd. (hereinafter referred to as “tefa Dongzhi”), a wholly-owned subsidiary, was operating less than expected due to factors such as the epidemic, chip shortage and sharp rise in raw material prices, and made large impairment losses on relevant accounts receivable and inventories.
The company further explained the above issues in its reply to the concern letter of Shenzhen Stock Exchange, “The main reason for the loss is that at the end of the gambling period (poor management of the original management team), TEDA Dongzhi expects an operating loss of about 150 million yuan in 2021, and the provision for inventory impairment is expected to increase by 300 million yuan to 400 million yuan (the specific amount is subject to the approval result) ； After the end of tefa Dongzhi’s gambling period in 2021, a new management team has been dispatched to take over and carry out operation and management, and a series of positive countermeasures have been taken. According to the current situation, the operation of tefa Dongzhi is gradually improving, and its performance will not continue to decline. “
In an announcement issued on April 27, 2021, Shenzhen Sdg Information Co.Ltd(000070) said, “in 2021, Shenzhen Sdg Information Co.Ltd(000070) comprehensively optimized the management of Dongzhi, dispatched a Shenzhen Sdg Information Co.Ltd(000070) management team, continuously upgraded the business and gradually turned losses.” Unfortunately, all-round optimization of management in exchange for a huge loss of performance.
Shenzhen Sdg Information Co.Ltd(000070) is an old state-owned enterprise controlled by Shenzhen SASAC. It is mainly engaged in the business of selling optical fiber and cable, optical transmission and other equipment. Its subsidiary tefa Dongzhi is mainly engaged in the manufacturing business of broadband communication terminals, and 90% of its revenue comes from the sales business of optical fiber network terminals and set-top boxes.
“As broadband services enter thousands of households, the demand for optical fiber network terminals and set-top boxes has basically reached saturation since 2018, and the business of broadband communication terminals is in a relatively low-end position in the communication industry chain. Therefore, it is not surprising for this type of enterprises to suffer losses, and the development trend is expected to be bleak in the future.” The person in charge of a private placement in Guangzhou told the reporter of Securities Daily.
performance commitment difference compensation is in vain
It is understood that Shenzhen Sdg Information Co.Ltd(000070) spent 190 million yuan to acquire 100% equity of tefa Dongzhi in 2015, paid 20 million yuan in cash to Chen Chuanrong, the former largest shareholder of tefa Dongzhi, and issued shares equivalent to 170 million yuan according to the agreed price at that time; At the same time, both parties sign a performance commitment. If tefa Dongzhi fails to meet the performance commitment requirements in the agreed year, the shares of Chen Chuanrong and others will not be cashed out because they fail to meet the conditions for lifting the restrictions on sales, and Chen Chuanrong needs to make up the difference in cash within 30 days of the issuance of the annual audit report.
The two parties signed a six-year performance commitment: the net profit of tefa Dongzhi after deducting non recurring profits and losses in 2015, 2016 and 2017 shall not be less than 37.5 million yuan, 46.88 million yuan and 58.6 million yuan respectively, or the total accumulated committed net profit in three years shall not be less than 142.98 million yuan; The supplementary performance commitment period is from 2018 to 2020, and the annual net profit is not less than 58.6 million yuan.
In essence, tefa Dongzhi successfully completed the performance commitment from 2015 to 2018, but failed to meet the performance commitment in 2019 and 2020, with a net profit of 20.512 million yuan and – 389 million yuan respectively. Since tefa Dongzhi did not achieve the promised performance in 2019 and 2020, Chen Chuanrong should make up the difference in cash within 30 days of the issuance of the annual audit report.
According to public information, Chen Chuanrong needs to compensate for the difference of about 38.08 million yuan in 2019 and 419 million yuan in 2020. However, up to now, Chen Chuanrong has not made any cash difference compensation and has received a notice of criticism and punishment from the Shenzhen Stock Exchange.
According to the announcement of the report on issuing shares, paying cash assets, raising supporting funds and related party transactions issued on Shenzhen Sdg Information Co.Ltd(000070) October 21, 2015, the content of the profit compensation agreement mentioned therein does not specify the liability for breach of contract if tefa Dongzhi fails to make up the difference in performance commitments on time. The system and agreement seem to be in vain.
The reporter sent an email and called the Shenzhen Sdg Information Co.Ltd(000070) secretary office on the above situation, which said, “thank you for your attention to the company.” As of press time, the company has not made any reply.
\u3000\u3000 “The general M & a contract will stipulate the performance commitment of the shareholders of the merged enterprise, and the CSRC has also issued strict examination methods. However, the performance of the merged enterprise does not meet the expectations, and there are still many cases of decline or loss. The original shareholders should fulfill the commitment, otherwise it will harm the majority of investors. Of course, it will seriously erode the shareholders’ rights and interests of the listed company, and the listed company also needs to be counted Provision for impairment of goodwill. ” Tian Yong, director of Guangdong Shengma law firm, told reporters.
He believes that the listed company should also stipulate the liability for breach of contract of the shareholders of the acquired enterprise for failing to fulfill their performance commitments in the M & a contract. If there is no design penalty clause in the original M & a contract, Shenzhen Sdg Information Co.Ltd(000070) shall claim the right in time and investigate the liability of the breaching party. If the provisions on liability for breach of contract were indeed inadvertently omitted at the beginning, and the right is not claimed in time under the current situation, it reflects the low operation and management ability of the management, and the risk control level of the enterprise, such as compliance and the level of legal counsel, is worth examining.
tefa Dongzhi went to court
Meanwhile, the reporter exclusively obtained a civil ruling on Retrial review and trial supervision of intermediary contract disputes between Shenzhen tefa Dongzhi Technology Co., Ltd. and Shenzhen yifangfu Investment Management Co., Ltd. issued by Guangdong Provincial Higher People’s court in 2019.
According to the civil ruling, yifangfu believed that it provided intermediary services in the process of Shenzhen Sdg Information Co.Ltd(000070) acquiring the equity of tefa Dongzhi, but tefa Dongzhi believed that in fact, yifangfu did not provide any intermediary services, did not recognize the equity transfer advisory service agreement signed between the two sides and was unwilling to pay relevant fees, so yifangfu took tefa Dongzhi to court.
In the judgments of the first and second instance, the Shenzhen intermediate people’s court found that yifangfu had fulfilled the intermediary obligation, and tefa Dongzhi had to pay the relevant intermediary fee. The Guangdong High Court also found that yifangfu had fulfilled the intermediary obligation, so it rejected the retrial application of tefa Dongzhi. According to the equity transfer advisory service agreement and the final ruling of Guangdong High Court, tefa Dongzhi needs to obtain 3% of the consideration and pay the remuneration to duyifangfu, and tefa Dongzhi needs to pay liquidated damages from November 8, 2015, and the liquidated damages shall be calculated at the proportion of 24% per year.
The reporter called the relevant person in charge of yifangfu to inquire about the progress of the implementation of the intermediary fee. He said, “it is not convenient to disclose relevant information for the time being.”
