Securities code: Cloud Live Technology Group Co.Ltd(002306) securities abbreviation: Cloud Live Technology Group Co.Ltd(002306) Announcement No.: 2022025 Cloud Live Technology Group Co.Ltd(002306)
Reply announcement on the annual report inquiry letter 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.
Cloud Live Technology Group Co.Ltd(002306) (hereinafter referred to as ” Cloud Live Technology Group Co.Ltd(002306) ” or “the company”) received the inquiry letter on Cloud Live Technology Group Co.Ltd(002306) 2021 annual report from the management department of listed companies of Shenzhen Stock Exchange on April 1, 2022 (annual report inquiry letter [2022] No. 36 of the company department, hereinafter referred to as “annual report inquiry letter”), requesting the company to make a written explanation on relevant matters concerned in the process of annual report review. The reply is hereby announced as follows:
1、 The annual report shows that in 2021, your company’s operating revenue was 3171721 million yuan, a year-on-year increase of 16.59%; The net profit attributable to the shareholders of the listed company was 4.747 million yuan, a year-on-year increase of 141.82%; The net profit attributable to shareholders of listed companies after deducting non recurring profits and losses was -139800 yuan, an increase of 72.96% year-on-year; The net cash flow from operating activities was -391618 million yuan, a year-on-year decrease of 366.86%. Your company’s net profit after deducting non recurring profit and loss has been negative for nine consecutive years. Please your company:
(I) explain the reasons and rationality of the deterioration of cash flow and mismatch with net profit.
reply:
1. Comparison of relevant financial data in 2020 and 2021
Year on year change of the project from 2021 to 2020
Net profit attributable to shareholders of listed companies 474.70 -113503 141.82%
Net profit attributable to shareholders of listed companies after deduction of non profits -13.98 -51.69 72.95%
Net profit after deduction (excluding share based payment expenses) 450.94268806 – 83.22%
Operating net cash flow -391618146748 -366.86%
2. Reasons for the deterioration of the company’s cash flow
As the promotion and operation of the game business of the subsidiary Chongqing Weiyin culture media Co., Ltd. (hereinafter referred to as “Chongqing Weiyin”) has entered a mature stage, the promotion method has changed from large-scale purchase promotion by mainstream media to precision marketing methods for existing players, including SMS, cooperation with game anchor and game studio; Meanwhile, due to the impact of relevant regulatory policies and documents successively issued by regulators in the second half of 2021, new cooperative or customized development games are in the process of online preparation. During the reporting period, the net cash flow from the company’s operating activities was -391618 million yuan, a year-on-year decrease of 366.86%. The main reasons for the deterioration of cash flow are as follows:
(1) Chongqing Weiyin, a subsidiary, paid 34.007 million yuan of accounts payable in the previous period, a decrease of 34.007 million yuan at the end of the period compared with the beginning of the period. If this amount is paid in the previous period, the net operating cash flow in the current period is -5.1548 million yuan, an increase of 73.34% compared with -193322 million yuan in the previous period;
(2) In the current prepayment, the prepayment for customized game development is 12 million yuan (including tax, the same below); (3) The tax paid in this period is 3254300 yuan;
(4) 5 million yuan for the execution of natural litigation in this period;
The total net outflow of operating cash flow affected by the above factors is -542613 million yuan, which is the main reason for the deterioration of the company’s cash flow.
3. Reasons and rationality of mismatch between operating net cash flow and net profit
The main reason for the mismatch between operating net cash flow and net profit is that the game development cycle affects the net outflow of operating cash flow this year by -542613 million yuan. Excluding the channel advertising expense of amortization of main operating costs that does not affect the outflow of cash flow, the total impact on operating net cash flow in 2021 is -443813 million yuan. After deducting the above factors, the operating net cash flow is 5.2196 million yuan; After deducting the non listed shareholders’ net profit of RMB 9.393 million, the net profit attributable to the company is reasonable after deducting the non listed shareholders’ net profit of RMB 9.393 million.
(II) explain the reasons for the negative net profit after deducting non profits for many consecutive years, whether there is uncertainty in the ability of sustainable operation, and whether it is possible to touch the “stock listing” in combination with the situation of the industry and the operation of the main business
Other risk warning situations specified in article 9.8.1 (VII) of the rules (revised in 2022).
reply:
1. Deduction of non net profits and related items of the company over the years (unit: RMB / 10000)
Project 20132014 20152016 20172018 20192020 2021
Operating income 8021362121 3766410029 96698165 93082720431717
Net profit – 56438 – 683746557 – 5408 – 1833803 – 3574 – 1135475
Net profit after deduction – 44452 – 71854 – 21803 – 3257 – 1924 – 2241 – 19192688 note 1 451 note 2
Note 1: the net profit after deduction of non-profit in 2020 is -516900 yuan, excluding the influence of share based payment fee of 43178300 yuan
After the sound, the net profit after deducting non profits was 268806 million yuan.
Note 2: the net profit in 2021 after deduction of non-profit is -139700 yuan, excluding the influence of share based payment fee of 4649200 yuan
After, the net profit after deducting non-profit was 4.594 million yuan.
2. Reasons for negative net profit of the company after deduction of non profits for many consecutive years
The net profit of the company after deducting non-profit has been negative for many consecutive years since 2013. Now, from 2013 to 2018
The two phases from 2019 to now will be explained.
The specific reasons are as follows:
(1) Phase from 2013 to 2018
The company is the first private catering enterprise listed on A-share market, which mainly provides special dishes and specialties integrating Hunan and Hubei
The catering service integrating color service is positioned as medium and high-end official and business banquets, taking into account family catering, and
Strive to build a business ecological chain of “Chinese restaurant + catering group meal + catering fast food + central kitchen”.
At the end of 2012, the central government issued the “eight provisions” and “strict economy and anti waste” were deeply rooted in the hearts of the people and effective
The results are remarkable. The overall environment of China’s high-end catering industry has undergone major changes, and the overall operation of the high-end catering industry is difficult,
The company’s business income has fallen sharply, while the fixed costs such as rent and labor required by the restaurant business are high, as well as wine
The large amount of decoration of the building business in the previous years needs to be amortized year by year in the later stage, and the shutdown needs to be amortized at one time. In addition, the company
“Xiang’e bonds” issued on april5,2012 and Beijing trust loans and other bonds occurred on march262014
It needs to bear a certain capital cost. Although the company actively adjusts the price of dishes and the positioning of restaurants
To attract mass consumers to come to the store for dinner, close loss making stores, stop losses and accelerate business transformation, but at the high end
With the change of catering environment and the superposition of business risks and financial risks, the overall operation of the company is difficult, resulting in negative net profit attributable to the parent company and net profit after deduction for two consecutive years in 2013 and 2014.
In April 2015, the company failed to raise sufficient debt service funds, resulting in a substantial breach of “Hunan Hubei debt”, which became the first case of default of public debt in China. The gradual increase of debt risk and improper disposal may lead to mass events, which will have a significant negative impact on the company’s social image, market reputation, business operation, personnel stability, customer trust, supplier relations and many other aspects, and the company’s operation will further deteriorate. Although the debt restructuring and major asset restructuring (asset sale) implemented at the end of 2015 had a positive impact on the company’s finance and made the company’s net profit attributable to the parent positive, in view of the above objective environment and its own operating factors, the company’s net profit after deducting non-profit in 2015 was still negative. In this debt restructuring and major asset restructuring (asset sale), the company stripped off the loss making businesses such as Chinese restaurant, fast food and environmental protection, and retained only the slightly profitable catering group meal business, which solved the problem of debt default and obtained the opportunity of secondary development. After completing the final work of cashing the “Hunan Hubei debt” and repaying the Beijing trust loan involved in the debt restructuring and asset restructuring in December 2015, the company implemented a major asset restructuring in April 2016 and planned to acquire relevant photovoltaic assets. Later, due to major changes in the market environment, policies and other objective conditions at that time, and the on-site verification of the target assets, the actual situation did not meet the company’s restructuring expectations, the company terminated this major asset restructuring in August 2016. After the previous major asset restructuring (asset sale), the company’s main business was only catering group meal. Due to the limited profitability and small scale of catering group meal business, the catering group meal business failed to fully cover the overall expenditure of listed companies, resulting in negative net profit after deduction in 2016.
At the beginning of 2017, Meng Kai, the former controlling shareholder of the company, had the situation of “multi-party authorization and repeated authorization”, and the control right of the company was controversial. The instability of corporate governance has further affected the stability of the company’s operation and personnel, and had a negative impact on the company’s market image, business development, customer relations, suppliers and other aspects. The group meal project failed to renew when it was due, and the outward expansion was blocked, resulting in the company’s operating revenue falling or even falling below 100 million yuan for two consecutive years in 2017 and 2018, while the cost of the company’s headquarters was high, resulting in the company’s The net profit after deducting non-profit in 2018 is still negative.
In July 2018, the current controlling shareholder Shanghai Zhenxi enterprise management consulting partnership (limited partnership) (hereinafter referred to as “Shanghai Zhenxi”) obtained the shares held by the original controlling shareholder Meng Kai through judicial auction and became the new controlling shareholder of the company. The situation of “multi-party authorization and repeated authorization” of the rights of the controlling shareholders for more than one year was completely eliminated. Since then, the new controlling shareholder recommended the relevant management team to settle in the company in November 2018. With the support of the controlling shareholder and the actual controller, the company actively revitalized the non-performing creditor’s rights assets and further improved the company’s financial situation.
(2) 2019 to current stage
In 2019, the company took many measures to reduce costs and increase efficiency, optimize internal structure and business processes, streamline personnel and institutions, actively expand the incremental business of catering group meal, and achieve certain business growth. However, due to the limited profit space and small business scale of group meal business, the net profit after deduction is still negative. In order to motivate the business team and improve the company’s financial situation, the company implemented the equity incentive plan in November 2019. Through this equity incentive, the company raised business development funds to lay the foundation for further business expansion.
Since 2020, while consolidating and expanding the catering group meal business, the company has actively introduced the Internet game promotion and operation business through market-oriented means, so as to further improve the profitability of the company and form a business layout of “catering group meal + Internet game promotion and operation”. In 2020, the company achieved an operating income of RMB 272041100 and a net profit of RMB -11350300. The net profit after deducting non recurring profits and losses was RMB -516900. After excluding share based payment, the net profit after deducting non recurring profits and losses was RMB 268806 million; In 2021, the company realized an operating income of 3171721 million yuan, a net profit attributable to shareholders of listed companies of 4.747 million yuan, a net profit of -139700 yuan after deducting non recurring profits and losses, and a net profit of 4.594 million yuan after deducting non recurring profits and losses after excluding share based payments. The company’s revenue has increased significantly to more than 300 million yuan for two consecutive years. Excluding share based payment and deducting non recurring profits and losses, the company has made profits, the overall operating condition has been fundamentally improved and the sustainable operation ability has been further improved. While improving its financial situation, the company actively handled problems left over by history, including various lawsuits and arrears, and paid a total of more than 40 million yuan.
To sum up, before the change of the controlling shareholder and actual controller of the company, due to the major changes in the general environment of the high-end catering industry, the overall operation of the company’s catering business was difficult, superimposed with the heavy debt burden of the company and its subsequent material breach of contract, the company’s operating environment continued to deteriorate and its revenue continued to decline sharply, resulting in a negative net profit from 2013 to 2015. After stripping off the restaurant assets at the end of December 2015, the company’s business structure was single, the scale was small, and the new business was not injected as scheduled. In addition, the dispute over the company’s control caused a series of problems such as the company’s business expansion was blocked and the expired projects were not renewed, resulting in a negative net profit from 2016 to 2018.
After the change of the controlling shareholder and actual controller of the company, the company increased the expansion of the original catering group meal business. Combined with the business development and actual situation of the company, the company launched the equity incentive plan, expanded the Internet game promotion and operation business and strengthened management. The company achieved a leap in operating revenue from less than 100 million yuan in 2019 to 270 million yuan in 2020 and 317 million yuan in 2021. Especially in 2020 and
