With the implementation of the new securities law and the heavy blow of supervision, the performance “face change” cases of listed companies have an obvious downward trend.
According to the statistics of China stock market news choice, as of March 17, a total of 11 A-share listed companies, including Great Wall International Acg Co.Ltd(000835) , Egls Co.Ltd(002619) , Jiangsu Xinning Modern Logistics Co.Ltd(300013) and others, issued announcements on Revising the performance forecast of 2021. Among them, 9 companies lowered their performance expectations, resulting in reduced profits, profit to loss and expanded losses. In addition, the Hunan Hualian China Industry Co.Ltd(001216) , Advanced Technology & Materials Co.Ltd(000969) amendment announcements did not involve performance changes. Compared with 42 listed companies in the same period last year, the number of “face changing” companies this year decreased by 33 compared with last year.
performance “face changing” management is to blame
On January 26 this year, Egls Co.Ltd(002619) released the performance forecast for 2021, saying that the company expects the net profit attributable to the parent company in 2021 to be -756688 million yuan to -114 million yuan. On February 15, Egls Co.Ltd(002619) issued a performance forecast amendment announcement, saying that the company’s loss in 2021 will expand, and the net profit attributable to the parent company is expected to be – 460 million yuan to – 562 million yuan.
On March 16, Egls Co.Ltd(002619) again issued a performance forecast amendment announcement, saying that the loss of net profit attributable to the parent company in 2021 is expected to be – 730 million yuan to – 892 million yuan, hundreds of millions more than the previous forecast.
Egls Co.Ltd(002619) why revise the performance forecast repeatedly in less than two months? The company said that it was mainly because the annual audit accountant sent letters to the relevant parties of the company’s game revenue and the accounts receivable of previous years before January 31, 2022. Because the relevant reply was not received, the company estimated that the game revenue of 20 million yuan was uncertain, and decided to withdraw bad debts in full for the accounts receivable of 290 million yuan.
In addition, Egls Co.Ltd(002619) also said that in November 2020, the company’s subsidiary Hangzhou soying Technology Co., Ltd. (hereinafter referred to as “Hangzhou soying”) transferred 100% equity of its subsidiary Horgos taixiang Network Technology Co., Ltd. (hereinafter referred to as “Horgos Taiheng”) to 0 yuan. As of May 31, 2021, the dividend receivable balance of Hangzhou soying was 106 million yuan. In July 2021, Horgos Taiheng has been cancelled. The company believes that it is unlikely to recover, and plans to withdraw bad debts for the Dividend Receivable in full.
Why do the game revenue and accounts receivable face the risk of uncollectible until the annual audit accountant issues the confirmation letter? Sun company was cancelled as early as July 2021. The uncertainty of dividend recovery is obvious. Why didn’t the company give corresponding risk warning in the first performance forecast?
A professor from the school of accounting of the Central University of Finance and economics, who asked not to be named, said in an interview with the Securities Daily, “it is acceptable for the market to have changes in expected performance due to the impact of the economic environment on special industries, but it is necessary to increase some doubt about the disclosure of sudden changes of listed companies. Executives of listed companies should have a keen ability to predict market changes.”
It is not an isolated case that the performance prediction data is distorted due to the lack of prediction ability of the management.
On March 4, Jiangsu Xinning Modern Logistics Co.Ltd(300013) released the performance correction notice for 2021, saying that the loss range of net profit attributable to the parent company in 2021 is expected to change from – 80 million yuan to – 135 million yuan to – 140 million yuan to – 195 million yuan. The reason for the change is that the company received the civil judgment served by the higher people’s Court of Hubei Province. The subsidiary Shenzhen Xinning Modern Logistics Co., Ltd. (hereinafter referred to as “Shenzhen Xinning company”) was ordered to pay 149 million yuan of compensation to the Beijing Branch of the people’s Insurance Company of China. The listed company shall bear joint and several liability for this, and plans to make up about 85 million yuan of estimated liabilities in 2021.
The reporter learned from China judicial documents network that the above disputes have a long history, and the amount of the subject matter involved in the lawsuit exceeds 200 million yuan. As early as 2019, the higher people’s Court of Hubei Province made a civil ruling of first instance on the above disputes. Shenzhen Xinning company appealed to the Supreme People’s court because it refused to accept the ruling of first instance. The appeal was rejected in 2019 and the original ruling was upheld. The management of the company who is familiar with the context of the dispute obviously did not take the potential risks of the case into account when predicting the performance in 2021.
Wang Zhibin, a lawyer from Shanghai Minglun law firm, told reporters: “before the management made a prediction on the performance, the case already existed. The company should make a reasonable provision. At least when making a prediction on the performance, it did not fully mention the risk of this part of litigation.”
there are many problems in the impairment of goodwill
Among the nine performance “face changing” companies exposed this year, six companies are involved in the provision for impairment.
On March 17, Great Wall International Acg Co.Ltd(000835) issued a performance correction announcement, saying that the company expected a net loss of 440 million yuan to 460 million yuan in 2021, while the previously disclosed net profit range was a loss of 235 million yuan to 350 million yuan.
For the reasons for the sudden change of performance, Great Wall International Acg Co.Ltd(000835) said that it was mainly due to the proposed provision of credit impairment loss and increase of asset impairment loss after checking the assets of the company and its subsidiaries that may have signs of impairment at the end of 2021. According to the accounting standards for business enterprises, the company’s accounting policies and other relevant provisions, the total amount of credit impairment loss to be accrued this year is about 13.98 million yuan; The total amount of asset impairment loss to be accrued in this year is about 289 million yuan.
“The performance forecast can be different from the final audit data, but this difference should be within a reasonable range. If there are no emergencies leading to significant changes in performance, the performance change itself may involve information disclosure.” Wang Zhibin told reporters.
It is worth mentioning that the impairment of huge goodwill has been the “sword of Damocles” hanging over the heads of many listed companies in recent years. Up to now, the companies that have revised the performance forecast have not mentioned the issue of goodwill, but the listed companies that have disclosed financial data have frequently reported losses that exceed the market expectation.
In January this year, Suzhou Shijia Science & Technology Inc(002796) which has been listed for five years and has always maintained annual profit, handed over a report card with an expected loss of more than 600 million yuan. The “culprit” causing this situation is huge goodwill.
Due to the unsatisfactory performance of Suzhou bofat Electronic Technology Co., Ltd., a subsidiary acquired at a premium of 4.7 times, the company has made a provision for goodwill impairment of more than 500 million yuan.
Pan Helin, CO director of the Research Center for digital economy and financial innovation of the International United Business School of Zhejiang University, said, “there is a lot of moisture in the goodwill formed by mergers and acquisitions of many enterprises. During mergers and acquisitions, their performance commitments are unalterable. At the same time, there is no unified standard for the provision of goodwill impairment of listed companies, resulting in the suspicion that many listed companies use goodwill impairment to calculate and manipulate profits.”
crack the “stubborn disease” need to increase punishment
“The change of performance means that the company has a high probability of problems. Why do you change your face? It is either intentional and malicious, or too careless, or lack of sense of responsibility to public investors. Here, it is possible to hide dirt, hide false statements, false records, misleading statements, some insider trading, and even manipulate the market, illegally occupy, illegally misappropriate, transfer assets of the company, etc.” Liu Junhai, director of the Institute of commercial law of Renmin University of China, said in an interview with Securities Daily.
For the “persistent disease” of the performance change of A-share listed companies for many years, in recent years, on the one hand, regulators have “stared at” the reasons and rationality of the “change of face” of listed companies; On the other hand, we will strike hard and severely punish the listed companies that expose their “horsefeet”.
A typical example is Yu diamond. Yu diamond first predicted that the net profit in 2019 would be 67.438 million yuan to 96.34 million yuan. Subsequently, the revised forecast said that the net profit in 2019 would be a loss of 4.5 billion yuan to 5.5 billion yuan. The astonishing performance change caused great concern in the market. Then, after the regulatory agency filed a case for investigation, the insider of long-term systematic fraud of Henan diamond surfaced, and the relevant personnel were punished.
Many experts interviewed by the Securities Daily also said that in order to eradicate the “face change” of listed companies’ performance, it is still necessary to further “increase” the intensity of supervision and punishment.
“Financial fraud of listed companies will eventually increase the personal wealth of major shareholders or management. It is hoped that the market will severely punish those who break their promise in order to maintain the fairness of the market.” Said the accounting professor of the Central University of Finance and economics.
Guo Lijun, a partner of BOC law firm in Beijing, believes that the misleading behavior of performance change, especially the situation where the pre profit turns into a loss, is very unfavorable to investors and the securities market. If a listed company fails to conscientiously perform its obligation of information disclosure in accordance with relevant regulations when disclosing its performance, or commits fraud in information disclosure, illegal market manipulation and other acts, in addition to facing the consequences of administrative punishment by the securities administrative regulatory authority and compulsory delisting by the exchange, in accordance with the relevant provisions of the criminal law (11) “crime of illegal disclosure and non disclosure of important information”, “crime of manipulating the securities and futures market” and other relevant provisions implemented from March 1, 2021, There is also a risk of being prosecuted for criminal responsibility.
He also suggested that investors should be cautious when reading the performance forecast of listed companies and understand the reasonable differences of performance correction. If they find the illegal operation clues of “performance changing face”, they can report and complain to the regulatory authorities. For the corresponding violations confirmed or punished, qualified damaged investors can file civil claims to the listed subject, its controlling shareholders, intermediaries and other responsible subjects according to law.
