After Being Criticized, The New Distribution Mode Is Still Hard For Investors To Rest Assured.

In October 10th, the Shanghai Stock Exchange issued a total of three documents pointing to the bird of honor (603555, SH), one of which was the disciplinary decision and the other two were the Shanghai Securities Regulatory Commission.

Li Zhiping, the chief financial officer of the company and the company's chief financial officer, was criticized; while Zhou Shiyong and hung Chun Chun, the board member of the company, were given attention to supervision; the annual audit firm of Tianren (special general partnership) and the annual auditor Huang Zhiheng and Zhang Tianci were supervised.

The reporter noted that the cause of the problem was derived from the previous distribution mode in which the dealer provided financial support. However, these funds were not submitted to the shareholders' meeting in time for consideration, nor did they fulfill the obligation of information disclosure in time.

Since last year, you have taken the initiative to adjust the dealer system. But the new mode has led to fierce growth in costs, coupled with declining industry boom and intensified competition, resulting in losses in the 2019 year and the first half of this year.

　　 Provide financial assistance to distributors

According to the decision of the Shanghai Stock Exchange disciplinary decision No. 2019 [50], the decision on criticizing Li Zhiping, the timely chief financial officer of Limited by Share Ltd (hereinafter referred to as "decision on disciplinary decision"), showed that the birds contributed 1 billion 942 million yuan, 1 billion 745 million yuan and 1 billion 419 million yuan to the distributors in 2015, 2016 and 2017 respectively. They accounted for 86.85%, 73.2% and 50.9% of the audited net assets of the company for the latest period, respectively. The balance of financial assistance at the end of 3 years was 67 million 13 thousand yuan, 103 million yuan and 90 million 270 thousand yuan respectively.

What exactly is this fund?

Prior to this, the "good bird" in the "2017 annual report on the company's annual audit report reply to the notice," said that the company to provide short-term financial support to dealers, mainly to support distributors retail operations.

In addition to paying their own funds, the dealers will also pay money to the birds after they get the funds through financial institutions or non-financial institutions. When the supply chain financing business of the dealer expires, the company will provide short-term financial support to the dealer, so that the dealer can repay the loan due to the payment of expensive birds. Subsequent dealers repay the birds by renewing their funds, or reimburse them through their own sales.

If you do not operate well in the brand retail chain, you will have a negative impact on the sales performance of the company and its distributors. Therefore, when helping the dealers, the precious birds adopted the method of "providing short term financial support without interest", instead of no store rental subsidies, decoration subsidies, rebate orders, etc.

The company said that the period from the company's support to the dealer to its repayment date is mostly within 1 months, and a small part is 2~3 months. The interest of the short-term funds is not charged to the dealer. There is no direct use of the funds directly to purchase new goods from the company, and there is no case of inflated sales revenue.

　　 Bulletin by exchange

Although it may sound very big for dealers to make financial support, there are three problems in the aforesaid financial support: the first is not approved by the general meeting of shareholders; secondly, the "noble bird" has not disclosed the matter before; lastly, there are problems in the way of accounting treatment.

The "decision on disciplinary decision" of the Shanghai Stock Exchange shows that the financial aid matters have reached the criteria for shareholders' meeting and information disclosure standards, but the company has not submitted the above matters to the shareholders' meeting in a timely manner, nor has it fulfilled the obligation of information disclosure in time. It was not until April 28, 2018 that the precious birds disclosed 2017 financial assistance matters.

In May 18, 2018, the precious birds only convened the annual general meeting of shareholders in 2017 to consider and approve the 2017 financial assistance matters, and disclosed the financial support matters for 2015 and 2016 in the reply notice of the annual report inquiry letter.

At the same time, according to the decision of disciplinary decision made by the Shanghai Stock Exchange, these external financial aid items are not accounted for according to the essence of transactions. The amount of funds generated by financial assistance should be accounted for through other accounts receivable, while the expensive bird will be included in accounts receivable.

The consequences of taking account of accounts receivable are: "financial subsidies can not be differentiated from normal sales". This leads to more than 5 million 680 thousand and 100 yuan and 2 million 638 thousand and 500 yuan of bad debt preparation in 2015 and 2016, respectively. The net profit is 3 million 422 thousand and 400 yuan and 1 million 532 thousand and 800 yuan less, accounting for 1.03% or 0.52% of the net profit attributable to shareholders of listed companies respectively.

In addition, the "disciplinary decision" also refers to the existence of "noble birds" in advance to confirm the disposal of assets. The 2017 confirmed land disposal income totaled 4 million 561 thousand and 100 yuan, which is recognized in advance.

According to the contract, the two contracts for the purchase and storage of the right to the use of state-owned construction land signed by Quanzhou people's reserve center and the land reserve center of the people's Republic of China shall be signed by the two sides on the delivery of land, and the "state land use warrants" shall be delivered to the Quanzhou soil reserve center by the noble birds.

However, in 2017, the precious birds did not sign the confirmation of delivery with the Quanzhou soil reserve center. The Quanzhou soil reserve center only issued a receipt in March 2, 2018 to confirm the receipt of the state land warrant. As a result, the land acquisition and storage transaction was not completed in 2017. In 2017, the 4 million 561 thousand and 100 year old land disposal income was violated by the company's accounting standards.

Based on this, Li Zhiping, chief financial officer at that time, was criticized. The then Secretary of the board of directors, Zhou Shiyong, Hong Zaichun, the annual audit firm Tianjian accounting firm and the annual auditor Huang Zhiheng and Zhang Tianci, were all given regulatory attention.

　　 New mode raises sales cost

The 2019 semi annual report shows that the amount of "financial support" received in other subjects related to business activities has reached 0 this year, and no details of "dealer funding support" have been found in other receivables subjects. From a financial point of view, does this mean that in the first half of this year, the birds have not yet provided financial assistance to dealers?

In response, the reporter sent an interview letter to the GUI Ren bird, asking whether the fund support for dealers has been stopped in 2019. Is the decline in operating income in the first half of 2019 related to your company's failure to provide financial assistance to dealers?

"We have ceased to provide financial assistance to dealers," said a member of the company.

In fact, in the announcement of the 2018 annual report on the post audit inquiry letter, the bird said: "in order to support the retailer's retail operation, the company used short-term funds to support distributors in the previous year. Starting in March 2018, the company ceased to provide short-term financial support to dealers and support dealers through sales rebates.

In addition, since last year, the "noble bird" has been negotiating with some of the brand business customers (or "dealers"), and gradually transformed the original part of the traditional noble bird brand distribution and authorization cooperation mode into a direct cooperation mode.

For this new type of direct cooperation mode, the bird described it in 2018 annual report as follows: the direct sales mode is the benefit community between the noble bird and the franchisee. Franchisees raise their own funds, go through business tax registration procedures in their own name, set up shops or rental shops / market stalls, franchisees legally have the right to use shops / shopping stalls, and franchisees entrust companies with internal management of the shops to be responsible or independent.

In this mode, the sale settlement between the noble bird and the franchisee is commissioned by the consignment mode. The birds have the ownership of the goods, and the franchisee does not take the risk of unsalable stock. After the final sale of the goods, the franchisees and the birds are divided according to the agreement.

In this mode, the cost of expensive birds increases fiercely. The 2019 semi annual report shows that after excluding the financial data of Jay and BOY, the company's sales expenses increased by 99.68% compared to the same period last year, mainly due to the increase in sales rebates and the adjustment of the company's sales pattern, which resulted in the increase of the salesmen and the increase of wages and welfare benefits.

In the 2019 semi annual report, the precious birds said: "the tight liquidity has led to a series of slow implementation of the business strategy in the main business, coupled with the slow growth of the industry, the increased competition, the increase in the terminal sales pressure of the brand, and the slow repayment of the customers from the downstream dealers. The company has increased the provision for bad debts. Since the beginning of last year, the sales of the direct selling shops of the" noble bird brand "have been launched, and some of the original distributors in the direct camp area have been absorbed, and the new franchisee support policy has been implemented, resulting in higher costs, resulting in the overall decline in the company's current performance.

In addition, the $647 million bond of the noble bird expired in December 3, 2019. As of the end of June 30, 2019, the company's consolidated financial statements are not enough to cover the maturity of the debt.

You will continue to dispose of non core assets, promote capital operation, actively introduce financial or strategic investors, do their best to deal with the company's credit debt centralization and payment in the second half of the year, cooperate with the controlling shareholders to solve the risk of equity pledge, ensure that the listed companies overcome difficulties in liquidity, and push the company back to the track of healthy development.