Stock Code: 000620 stock abbreviation: Macrolink Culturaltainment Development Co.Ltd(000620) Announcement No.: 2022-018 Macrolink Culturaltainment Development Co.Ltd(000620)
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.
Macrolink Culturaltainment Development Co.Ltd(000620) (hereinafter referred to as “the company”) received the letter of concern on Macrolink Culturaltainment Development Co.Ltd(000620) issued by the management department of listed companies of Shenzhen Stock Exchange on January 30, 2022 (company department concern letter [2022] No. 102, hereinafter referred to as “the concern letter”), and the company carefully analyzed and verified the relevant problems, The final reply of the company to the letter of concern is hereby announced as follows (the relevant financial data involved have not been audited):
1. Your company’s report for the third quarter of 2021 shows that your company’s net profit in the first three quarters was -1.788 billion yuan, and the net profit after deduction was -1.19 billion yuan. Please explain the main reasons for the large losses in 2021 in combination with the composition of main business income, gross profit margin of main business and signs of impairment of relevant assets in the first three quarters and the fourth quarter of 2021, and the rationality of concentrating the losses in the fourth quarter.
reply:
① The composition and gross profit margin of the company’s operating revenue in the first three quarters and the fourth quarter are as follows:
Unit: 10000 yuan
Category first three quarters fourth quarter (estimated)
Proportion of operating revenue to gross profit margin proportion of operating revenue to gross profit margin
Commercial housing sales 239187.76 62.44% 25.68% 424631.51 89.92% 30.40%
Cultural tourism comprehensive industry 97442.51 25.44% – 22.46% 29182.80 6.18% – 42.43%
Other business 46436.20 12.12% 35.72% 18438.71 3.90% 15.73%
Total 383066.47 100.00% 14.65% 472253.02 100.00% 25.33%
② The company plans to make provision for impairment of inventories and intangible assets during the reporting period. The relevant impairment signs are as follows:
1) Stock
Tianjin Yuelan Bay project is located in Wuqing District, Tianjin, adjacent to the high-speed railway Wuqing station. The company has been selling in batches since November 2018, and the average sales price in 2021 is 16182 yuan / square meter. Due to multiple adverse factors such as national real estate regulation policies and repeated epidemics, the overall real estate market in Wuqing, Tianjin showed an obvious downward trend in 2021. In order to recover funds, competitive projects have adopted the strategy of reducing prices. The average price of real estate projects around the company’s project location in 2021 was 13965 yuan / m2, of which Shimao began to reduce prices from February, Through the time difference and price difference, with the lowest foreign house price of 11000 yuan / m2, it has successfully won the regional sales crown. In order to comply with the market situation and realize rapid de capitalization and cash return in 2022, the company needs to adopt more flexible sales strategies and promotion means. Based on the above situation, the company plans to withdraw inventory falling price reserves for the project.
Taicang riverside Yayuan project is located in the port area of Taicang City, facing Chongming Island across the river; Kunshan City in the West; It is adjacent to Baoshan District and Jiading District of Shanghai in the South; It connects Changshu to the north. Taicang Binjiang Yayuan project was opened in June 2020, and the average sales price in 2021 is 12431 yuan / m2. In 2021, Taicang district had a high selling frequency, continued concentrated promotion in the new urban area and intensified competition. Due to multiple adverse factors such as national real estate regulation policies and repeated epidemics, the market was relatively cold and the de commercialization was low in the second half of 2021. Major real estate projects were sold by means of discount, distribution and commission, In 2021, the overall average transaction price of Taicang port area is 11970 yuan / m2. In order to comply with the market situation and realize rapid de capitalization and cash return in 2022, the company needs to adopt more flexible sales strategies and promotion means. Based on the above situation, the company plans to withdraw inventory falling price reserves for the project.
Daqing Aslan town project is located in Daqing Qingdong new town. The company has been selling in batches since August 2014. As the company is currently a late project, the average sales price in 2021 is 4694 yuan / square meter. Under the influence of multiple factors such as excessive oil exploitation, depletion, cold climate in Northeast China, downward market environment and resident population outflow, the overall real estate market in Daqing was relatively depressed in 2021, and competitive projects were sold at reduced prices. The average sales price of Shangdong No. 9 and Huilong Jiuxi capital projects around the company’s project location was 10300 yuan / m2 in 2020, In 2021, it will be adjusted to 6000-7000 yuan / m2. In 2021, the newly opened xueweihe Park project will launch the rigid demand house type, and vigorously use the distribution and special price house strategy. The average contract price in 2021 will be about 5500 yuan / m2. The project is close to Evergrande project. The average contract price of Evergrande project in 2021 is about 3500 yuan / m2. Considering that the project has entered the final sales stage, in order to adapt to market changes and achieve the purpose of liquidating and eliminating in 2022 and accelerating payment collection, the company plans to adjust the price system according to the market situation, reprice the project, and plan to withdraw inventory falling price reserves for the project.
The company plans to withdraw the inventory falling price reserve for the above items according to the difference between the estimated net realizable value and its cost based on prudent financial strategy and taking into account the market conditions, sales prices and other factors in the region where the above items are located.
2) Intangible assets
New Silk Road cultural tourism, a subsidiary of the company, has acquired 72% of the equity of South Korea meigaole Co., Ltd. (hereinafter referred to as meigaole) since 2015. The company has a special entertainment business license. The company confirms that the operating right of meigaole license is worth 396 million yuan and the amount of goodwill is 62 million yuan. Before 2021, the company has accrued 63 million yuan of provision for impairment of goodwill of MGL (taking into account the change of exchange rate); The accumulated provision for impairment of intangible asset license management right is 17 million yuan (taking into account the change of exchange rate). The carrying amount of intangible assets after provision for impairment is 358 million yuan (exchange rate changes have been taken into account). In 2021, due to the continuous impact of covid-19 epidemic, the South Korean government suspended the visa free entry policy in Jeju, temporarily suspended the issuance of tourist visas to some countries, and imposed strict restrictions on entry-exit personnel. The daily operation of MgO suffered a serious blow.
In 2021, MGL recognized an income of 0 yuan and a net profit of -8.7103 million yuan attributable to the owner of the parent company. The value of the license management right held by Miguel has declined sharply. Based on the principle of prudence and combined with the current market situation, the company plans to withdraw the provision for impairment of intangible assets for the license management right of Miguel.
③ The main reasons for the company’s large losses in 2021 and the losses mainly concentrated in the fourth quarter are as follows:
1) Reasons for the company’s large losses in 2021
a. The gross profit margin of the company in this reporting period is relatively low. The overall gross profit margin is expected to be 20.55%, down 4.16% from 24.71% last year; Among them, the gross profit margin of commercial housing sales is expected to be 28.70%, down 9.7% from 38.40% last year;
b. The amount of impairment provision to be withdrawn in 2021 is 800-1 billion yuan. According to the requirements of the accounting standards for business enterprises, the company conducts impairment tests on inventory and other asset items every year. Due to the continuous downward trend of the real estate market and the repeated impact of the epidemic, based on the principle of prudence, the company plans to withdraw impairment reserves for some inventory items and intangible assets;
c. During the reporting period, due to the judicial disposal of some shares of Bank Of Changsha Co.Ltd(601577) held by the wholly-owned subsidiary Hunan Macrolink Culturaltainment Development Co.Ltd(000620) Construction Engineering Co., Ltd., the company is expected to recognize an investment loss of 620 million yuan;
d. The financial expenses in the reporting period are expected to be 1.489 billion yuan, an increase of 256 million yuan over the same period last year, of which the interest expenditure (including penalty interest) is expected to be 1.548 billion yuan, an increase of 174 million yuan over the same period last year, which is due to the gradual completion of the project over time and the cessation of interest capitalization in accordance with the requirements of the accounting standards for business enterprises.
2) The rationality of losses concentrated in the fourth quarter
The company suffered a loss of 1.788 billion yuan in the first three quarters of 2021, of which Bank Of Changsha Co.Ltd(601577) some shares were judicially disposed, resulting in an investment loss of 620 million yuan. The company expects a loss of 2.940 billion yuan to 3.720 billion yuan in the whole year and 1.152 billion yuan to 1.932 billion yuan in the fourth quarter. The main reasons are as follows:
a. The amount of asset impairment is large. The company conducts asset impairment test at the end of each year, calculates the impairment of various assets and withdraws asset impairment reserves. During the reporting period, the company expects to make provision for asset impairment of RMB 800-1 billion, which is mainly due to the impact of the overall downturn of the real estate market since 2021. In order to eliminate the real estate project as soon as possible and return cash in 2022, the company will have impairment;
b. Interest expense increased. The annual interest expenditure is expected to be 1.548 billion yuan, the interest expenditure in the first three quarters is 961 million yuan, and the interest expenditure in the fourth quarter is expected to be 587 million yuan, which is mainly due to the cessation of capitalization and conversion of interest into expensed interest after the completion and delivery of the project;
c. Increased costs during the period. The annual expenses (taxes and surcharges, sales expenses and management expenses) are expected to be 2.015 billion yuan, 973 million yuan in the first three quarters and 1.042 billion yuan in the fourth quarter. The real estate sales carry over income in the first three quarters was 2.392 billion yuan, and the expected carry over income in the fourth quarter was 4.246 billion yuan, with a carry over increase of 43.67%. With the centralized delivery of real estate projects in the fourth quarter, the corresponding taxes, surcharges and sales expenses Commission increased; At the same time, according to the company’s system, the increase of accrued bonus at the end of the year resulted in the increase of management and sales expenses.
In conclusion, it is reasonable for the company to concentrate its losses in the fourth quarter.
2. In combination with the operation of your company, the region where the real estate is located and the sales situation, the specific content of intangible assets, etc., explain the main inventory items and the specific situation of intangible assets for which large impairment is accrued, the basis for impairment accrual, the setting of key parameters and the specific calculation process, as well as the main reasons, compliance and rationality of large impairment accrual. The annual audit accountant shall check and give opinions.
reply:
(1) Business conditions of the company and its real estate sales area
See the reply to question 1 for details of the company’s operation, real estate location and sales.
(2) Details of major inventories and intangible assets
See the reply to question 1 for details of major inventory and intangible assets.
(3) Impairment accrual basis, key parameter settings and specific calculation process, as well as the main reasons, compliance and rationality of large impairment accrual
1) Basis for withdrawing inventory impairment
The company’s inventories are measured at the lower of cost and net realizable value. The net realizable value of inventory refers to the amount of the estimated selling price of inventory minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes in daily activities. If the management of the company revises the estimated selling price of the inventory, the estimated cost to be incurred by the time of completion, the estimated selling expenses and relevant taxes, the revised estimated selling price is lower than the currently adopted estimated selling price, or the revised estimated cost to be incurred by the time of completion, the estimated selling expenses and relevant taxes are higher than the currently adopted estimates, The company needs to withdraw depreciation reserves for inventory increase. On the contrary, the company needs to reverse the originally accrued falling price reserves for inventories.
The parameters used in determining the net realizable value mainly include the estimated selling price of inventory, the estimated cost to be incurred by the time of completion, the estimated selling expenses and relevant taxes. The signed inventory price shall be confirmed according to the actual signed inventory price; For the inventory not contracted, it is based on the average selling price of the same project in the current year, with reference to the price trend of the real estate market in the region and the transaction price of the surrounding buildings of the same business type. For the inventory that fails to reach the delivery status, the estimated cost is comprehensively calculated according to the actual completion progress, actual cost and estimated total cost of the project. The estimated sales expenses are calculated based on the historical data and the percentage of sales expenses in revenue in different regions, combined with the company’s marketing strategy planning. The relevant taxes and fees are calculated according to the estimated selling price according to the relevant tax policies and regulations of the area where the real estate is located.
2) Basis for impairment of intangible assets
According to the accounting standards for Business Enterprises No. 8 – asset impairment, goodwill and intangible assets with uncertain service life formed by business combination shall be tested for impairment every year, regardless of whether there are signs of impairment. The final maturity date of the license management right held by the company is uncertain, so it will not be amortized during the holding period, but the company will conduct impairment test for it in each accounting period.
3) Inventory key parameter setting and specific calculation process
In this period, it is planned to withdraw inventory falling price reserves for three projects: Tianjin Yuelan Bay, Taicang Binjiang Yayuan and Daqing Aslan town.
Taicang Binjiang Yayuan project is expected to have a total remaining contract amount of 1.291 billion yuan, an estimated sales tax and surcharges (including value-added tax) of 109 million yuan, a sales expense of 116 million yuan, an estimated net realizable value of 1.066 billion yuan and an inventory book value of 1.371 billion yuan. According to the difference between net realizable value and book value, an inventory falling price reserve of about 300 million yuan is accrued.
It is estimated that the total remaining contract amount of Tianjin Yuelan Bay project is 863 million yuan, the estimated sales tax and surcharges (including value-added tax) is 71 million yuan, the sales expense is 65 million yuan, the estimated net realizable value is 727 million yuan, and the book value of inventory is 958 million yuan. According to the difference between the net realizable value and the book value, the provision for inventory falling price is about 231 million yuan.
Daqing Aslan town project is expected to have a total remaining contract amount of 445 million yuan, and the expected sales taxes and surcharges (including value-added tax)
