Great Wall Animation's 7 target companies and 4 have not fulfilled performance commitments. Fierce market competition is the main reason

At the same time as the 2016 annual report was released, investors in Great Wall Animation received three "letters of apology" from the company. In the past year, Tianrui Economic and Trade, Dongfang Guolong, and Zhuji Mermaid, subsidiaries of Great Wall Animation,"deeply regretted" and "sincerely apologized" for failing to fulfill their performance commitments.

Original title: Great Wall Animation acquired 7 companies and 4 of them changed their performance in the second fiscal year.

At the end of 2014, Great Wall Animation went public on a backdoor basis in Sichuan Shengda and spent 1 billion yuan in cash to acquire 7 animation and game companies at a high premium, constituting the "entire animation and game industry chain" that it has always wanted to layout.

At the end of 2016, after two years of divesting coking assets that contributed a lot to revenue but suffered serious losses, Great Wall Animation officially became a game and animation company. However, the performance of its assets has a red light. In the second year after acquiring seven animation assets, four companies failed to fulfill their performance commitments.

As a result, while the 2016 annual report was released, investors in Great Wall Animation received three "letters of apology" from the company. In the past year, Tianrui Economic and Trade, Dongfang Guolong, and Zhuji Mermaid, subsidiaries of Great Wall Animation,"deeply regretted" and "sincerely apologized" for failing to fulfill their performance commitments.

On December 31, 2014,"Sichuan Shengda" officially changed its name to "Great Wall Animation". Before changing the name, Great Wall Animation acquired 100% equity of Hangzhou Great Wall, a wholly-owned subsidiary of 7 companies in the animation and game industry chain-Great Wall Film and Television Culture Enterprise Group Co., Ltd.(hereinafter referred to as Great Wall Group)(holding 100% equity of Zhuji Mermaid and Chuzhou Creative Park 54.26% equity), as well as 100% equity of Hongmeng Cartoon, Dongfang Guolong, Xinyu Brothers, Tianrui Economic and Trade Co., Ltd., Xuancheng Technology and 45.74% equity of Chuzhou Creative Park.

The price of seven asset transactions was 1.016 billion yuan, of which the highest value-added rate was 23883.6%. The valuation premium rates of Xuancheng Technology, New Entertainment Brothers, Tianrui Economic and Trade, and Dongfang Guolong reached 17,098.27%, 12,769.54%, 23,883.6% and 1,072.76%, respectively. A high premium corresponds to a high performance commitment, and the "high" performance is relative to the historical profitability of the target. The reporter found that Great Wall Animation once mentioned that at the time of acquisition, Hongmeng Cartoon, Dongfang Guolong, Tianrui Economic and Trade and Xuancheng Technology had poor historical profitability, Zhuji Mermaid had not yet been sold to the outside world, and Chuzhou Creative Park had not yet realized revenue.

The 2015 annual report shows that in the first year after the acquisition of the above animation assets, multiple projects "barely" fulfilled their performance commitments. In the second year of the merger and acquisition, most of the performance of the above projects fell short of commitments. The company disclosed that "products were not available as scheduled" and "fierce market competition" were the main reasons.

On April 29, the 2016 annual report released by Great Wall Animation showed that Xuancheng Technology, which is responsible for online game development, promised to complete a net profit of 6.5 million yuan in 2016, and actually completed 6.4091 million yuan; Zhuji Mermaid, which is mainly engaged in original animation, achieved a net profit of 2.5956 million yuan, lower than the promised 3.6 million yuan; Dongfang Guolong's performance of 2.5672 million yuan is still far from the promised 3.38 million yuan; Tianrui Economic and Trade promised a performance of 11.25 million yuan, but only completed 2.5672 million yuan; Tianrui Economic and Trade's actual performance and commitment were huge differences, so Great Wall Animation accrued goodwill impairment, resulting in a decrease of 34.34 million yuan in profits; In the other three companies, New Entertainment Brothers, which focuses on the game field, achieved a net profit of 65.246 million yuan, less than 250,000 yuan higher than the promised performance; Hongmeng Cartoon, which has the IP of "Rainbow Cat Blue Rabbit", has no performance commitment; Chuzhou Creative Park also has no performance commitment.

On May 3, the reporter called Great Wall Animation. Regarding the question of whether the animation and game assets whose performance suddenly changed, a staff member of the Securities Department said,"There is no way to answer this question."

Editor: Nancy