Net profit dropped sharply by 36.51% Great Wall Animation's reorganization is in trouble again

Performance continues to be sluggish, the downward trend in the coking industry is intensifying, and the animation industry, which has received high hopes, has failed to demonstrate its value. Where will Great Wall Animation go?

Since 2014, Sichuan Shengda, which is under the jurisdiction of Great Wall Film and Television Group, has held high in the capital market and invested 1.016 billion yuan to acquire seven game and animation companies at a high premium, thereby realizing the transformation from a coal company to a game and animation company. The transformation of the company has attracted great attention from the market.

But two years have passed, and the listed company, which has changed its name to Great Wall Animation, has not soared as investors expected. Its share price has been sluggish and its performance has worsened.

The 2016 semi-annual report released by Great Wall Animation on the evening of August 28 showed that Great Wall Animation's net profit attributable to shareholders of listed companies turned from profit to loss, with a loss of 94.6479 million yuan, a decrease of 3,651.09% from the same period last year.

Although Great Wall Animation has been undergoing transformation for nearly two years, judging from the composition of its main business, the coking industry is still one of the main sources of operating income. In the first half of the year, revenue was 65.2355 million yuan, accounting for nearly 40%, second only to the gaming industry's operating income of 71.416 million yuan. In addition, the animation industry and the tourism industry achieved operating income of 31.2402 million yuan and 7.844 million yuan respectively.

It is worth noting that although the coking industry accounts for a relatively large proportion of operating income, it has also caused large losses due to the coking industry's three major dilemmas of "a sharp contraction of the market, a sharp increase in environmental protection pressure, and a shortage of liquidity". Data shows that Shengda Coking, a subsidiary of Great Wall Animation, suffered losses of 39.8305 million yuan and 116 million yuan in 2015 and January to May 2016 respectively, which had a significant adverse impact on the performance of listed companies.

Great Wall Animation stated that the company has initially formed a large-scale cultural enterprise covering animation business such as animation design, production, animation games, creative tourism and toy sales. However, the company's performance in animation and related industries in the past two years is not optimistic.

From 2014 to 2015, Great Wall Animation spent 1.016 billion yuan to acquire seven game and animation companies at a high premium, but the company's large-scale acquisitions did not bring much help to the company's performance. The company's 2015 annual report shows that it achieved a net profit of 18.3865 million yuan, but after deducting non-recurring gains and losses, the net profit lost 18.0561 million yuan.

Although its performance has not improved, it does not seem to have stopped Great Wall Animation's deployment in the animation industry. At the end of June this year, the company once again spent 708 million yuan to acquire two animation industry chain companies, Lingjing Technology and Mini World.

Southwest Securities said in its research report,"Lingjing Technology and Mini World have great growth potential and highlights in their own operations, and the synergy effect may exceed expectations."

However, Southwest Securities also pointed out in the risk warning of the research report that "the risk of implementing the M & A plan falling short of expectations, the risk of emerging relevant alternative technologies, the risk of making adjustments to the acquisition plan, and the performance of the acquired company being achieved or falling short of promises."

In addition, the reporter noticed that after the plan to acquire Lingjing Technology and Mini World, two animation industry chain companies, was released, the Shenzhen Stock Exchange issued inquiry letters twice, asking Great Wall Animation to explain the many existing problems.

In fact, Great Wall Animation's optimism about related industries has not brought about substantial improvement in the company's performance. Not only that, the company's financial constraints have also followed suit.

The semi-annual report released by Great Wall Animation showed that the net cash flow generated by Great Wall Animation's investment activities during the reporting period was-90.7495 million yuan, and the net cash flow generated by operating activities during the same period was 5.44 million yuan, a significant drop of 78.47% compared with the same period last year. The debt ratio is as high as 76%.

Perhaps affected by poor performance in the past two years, Great Wall Animation has just experienced a round of personnel changes. On August 18, Great Wall Animation issued an announcement stating that Shen Xijie, vice chairman and general manager of the company, and Pan Xianyun, director of the company, resigned due to personal reasons. Shen Xijie's successor is Ma Liqing, director of Tianmu Pharmaceutical, and the major shareholders of Tianmu Pharmaceutical and Great Wall Animation are both Great Wall Group. However, judging from Ma Liqing's experience, he has no experience in the animation industry.

Regarding the impact of the company's decline in performance, high debt ratio, and changes in the board of directors on the company, a relevant person from the company's secretarial office only told reporters,"Please refer to the semi-annual report announcement for performance issues. The changes in directors are related to the future development of the company's animation industry. Specifically, you are welcome to attend the company's board of directors on September 8 for face-to-face exchanges."

Editor: yvonne