Huace Film and Television launches a second round of equity incentive plan with 40 million shares to stimulate talents

On June 1, 2017, Huace Film and Television held a shareholders 'meeting and approved the draft of the second equity incentive plan released on the evening of May 16.

Original title: Huace Film and Television launches a round of equity incentive plan to stimulate talent dividends

"What is the most expensive in the 21st century? Talent!" This classic line in the movie "No Thieves in the World" has now become a true portrayal of the cultural market.

As a typical asset-light industry, this is especially true in the field of TV dramas: high-quality talents not only create profits for the company, but also constitute the driving force for the company's sustainable development. Therefore, for Huace, the frontrunner, how to achieve a delicate balance between size and development speed is inseparable from the word "talent".

On June 1, 2017, Huace Film and Television held a shareholders 'meeting and approved the draft of the second equity incentive plan released on the evening of May 16. The announcement shows that the total number of incentive recipients awarded by this incentive plan is 338, including serving directors, senior managers, middle managers and core technical (business) backbones. It is planned to issue 40 million shares, accounting for approximately 2.29% of Huace's total share capital of 1.74,625,500 shares. Huace launched the first equity incentive plan in 2011, which played an important role in the company's rapid development in the early stage. However, the plan did not cover Kerton Media, which completed the acquisition in 2014. At present, Huazecton has 16 production teams including 8 subsidiaries including Shanghai Drama Cool Culture Communication and Shanghai Syndicate Film and Television. It is reported that Huace Kerton, which has just completed a three-year gambling contract, is one of the many subsidiaries covered by the equity incentive of Huace Film and Television.

The implementation of this equity incentive marks the official launch of Huace's long-term incentive system at the group level. Huace released a very clear message through the announcement-it is necessary to establish a long-term and stable long-term incentive system through various methods, including equity incentive plans, and establish a shared, co-created and shared entrepreneurial mechanism in the golden period of "secondary entrepreneurship"., deeply integrate employee interests with shareholder interests, and inspire employees to create better performance and greater value for the company and shareholders.

Regarding this move by Huace, the secondary market also gave a positive signal. At the close of the first day of opening (May 17) after the draft announcement was disclosed, Huace Film and Television's share price rose 7.65%. As of the close of the shareholders 'meeting (June 1), the share price rose by 10.20%. During the same period, the Shenwan Media Industry Index fell 4.20%.

2.290%, 3-year options, what story does Huace want to tell?

This can't help but make people curious. What kind of story does Huace Film and Television, which chose to release the equity incentive plan at this time, want to tell the capital market?

Let's go back to the textual details of the announcement for some traces. According to the announcement of Huace Film and Television on the evening of May 16, the incentive plan plans to grant a total of 40 million rights and interests to incentive recipients, accounting for approximately 2.290% of the company's total share capital of 1,746.6255 million shares at the time of the announcement of the incentive plan. Among the first equity issuance, 11.4453 million stock options were awarded to 181 middle managers and core technology (business) backbones, with a waiting period of one year and exercised in three installments; There are 28.5547 million restricted shares, awarded to a total of 224 directors, senior managers, middle managers, and core technology (business) backbones. The restricted shares are restricted for 12 months from the date of completion of the grant registration. The restricted shares granted for the first time will be released from sales restrictions in 3 installments, and the reserved shares will be released from sales restrictions in 2 installments.

Like previous stories, this equity incentive is also linked to the company's performance. Whether it is the exercise of options or the lifting of restricted stocks, it is based on Huace's performance meeting expectations. The announcement shows that the exercise target is that the net profit in 2017 will not be less than 650 million yuan, or the operating income will not be less than 5.2 billion yuan; the net profit in 2018 will not be less than 780 million yuan, or the operating income will not be less than 6.5 billion yuan; In 2019, the net profit will not be less than 1 billion yuan, or the operating income will not be less than 7.5 billion yuan.

Huace Film and Television's 2016 annual report shows that Huace's revenue in 2016 was 4.445 billion yuan and its net profit was 478 million yuan, which means that Huace's revenue growth in 2017 needs to reach 17%, or its net profit increase by 36%; According to the 2019 indicator, compared with 2016, it requires a revenue growth of 69%(three-year average annual growth of 19%) or a net profit growth of 109%(three-year average annual compound growth of 27.9%). Observing Huace's past performance growth, it is not difficult to find that the conditions for the exercise of equity incentives are relatively reasonable, but today, when competition for top content is becoming increasingly fierce, it is also quite challenging.

From Huace's perspective, such a linkage is consistent with Huace's goal of the entrepreneurial mechanism of sharing, co-creation, and sharing in the "secondary entrepreneurship" stage. It deeply integrates employee interests with shareholder interests and can better inspire employees to create better performance and greater value for the company and shareholders.

What layout signals do film and television companies reveal when promoting equity incentives?

So, in addition to uniting the team, what interesting signals did Huace reveal in this layout?

Analysts from many brokerage media sectors believe that the launch of equity incentives at this time point in time can be seen that the company's early organizational changes, talent introduction team formation, strategic reconstruction and other work have been completed. Huace's management team is currently confident about the company's performance and industry status in the future. We will maintain firm confidence in maintaining stable and sustained growth in the past three years. In addition, based on the general practice of listed companies in providing equity incentives, it can be speculated that the company's management believes that the company's stock price is currently at a low level, the stock price has sufficient performance support, and the stock price has reached an inflection point.

After the unveiling of Huace's new round of equity incentives, there is no lack of positive interpretations in the market. For example, Shen Wan Hongyuan's analysis report believes that "the current exercise conditions are pre-judgments made based on conservative expectations that the company is still undergoing a comprehensive business upgrade and the cost is large. In the future, under the premise of continued growth in the industry and the continuous consolidation of the company's leading position in the content field, the company's actual performance is expected to be even better."

Coincidentally, on May 27, just before the Dragon Boat Festival, the China Securities Regulatory Commission had just issued the "Several Provisions on Shareholders and Directors of Listed Companies to Reduce Shares"(China Securities Regulatory Commission Announcement [2017] No. 9). The new regulations further regulate the reduction of holdings by major shareholders of listed companies, specific shareholders of listed companies and directors, supervisors and senior managers of listed companies. The starting point is to protect the interests of investors in the secondary market, especially small and medium investors.

For the market, the new regulations not only bring short-term negative news, but also send two positive signals. "First, it is good for the leader of value. The lengthening of the reduction cycle will help solve the market chaos, reduce the speculative and arbitrage space in the primary and secondary markets, which will be more conducive to the A-share market moving towards value investment and long-term investment concepts, and the market will pay more attention to performance."Analysts in the media sector of a well-known brokerage firm believe," This is beneficial to companies like Huace, whose main business performance growth expectations are stable." In addition, the equity incentive policy launched by Huace this time clarifies the performance indicators for exercising rights, which also fully demonstrates the company's confidence in performance growth. The above analysts believe that since the proportion released by equity incentives is not high and there are few regulatory factors, the biggest change is that the pressure on short-term holdings has become less.

Leading companies promote equity incentives, not only because of talents. From a macro economic perspective, the cultural industry will be built into a pillar industry of the national economy, and the film and television entertainment industry will be at the forefront of consumption upgrades. This is a rare historical opportunity period. From an industry perspective, the film and television industry is currently returning to rationality. With the rapid rise of video playback platforms, the content industry has entered a critical window period of imminent explosion. Observing from these two dimensions, combined with Huace Group's repeated emphasis on "secondary entrepreneurship" to achieve leapfrog development, the introduction of equity incentives at this time is undoubtedly a key step in achieving talent aggregation in the development outlet and improving strategic execution.

In fact, the uniqueness of the cultural industry lies precisely in that the gathering of talents is the prerequisite for the birth of phenomenon-level works. As a typical asset-light company, Huace, as the industry leader, how to retain its group of content elites through balance of interests and bind the company's interests with their personal interests is a problem that needs to be solved during the "leapfrog development" stage. It is also a leading attempt by leading companies in the process of "soaring" the industry. The film and television entertainment company, which is regarded by the outside world as having strong project-based characteristics, has launched an equity incentive mechanism, indicating that the company has the ability to platform content and has the rudiment of a platform-enabled company.

"According to the transformation process of the American imaging industrialization system, it is crucial to establish a platform-based, efficient and innovative organizational ecosystem." In the view of Huace, which is benchmarking the U.S. TV production industrialization system, this is also an essential measure to respond to the "secondary entrepreneurship" strategy and achieve large-scale collaboration of talents and group platformization. Huace is building an industrialization platform system based on big data in a low-key manner that continuously obtains market results inspection, evaluation, and R & D systems. In the future, this enabling platform with content as the core and building IP content resources, screenwriter and director resources, technical resources, multi-content distribution systems, etc. will have an impact on the company's leap-forward development and even the industry that cannot be ignored.

It is foreseeable that as the company's SIP strategy begins to show its results, top content and high-quality content such as "Three Lives of the Third Life of Ten Miles Peach Blossom" and "The Legend of the Condor Heroes" continue to emerge. What Huace should do is to consolidate existing On the basis of production capacity, and focus on the content level that he is good at, he should explore the model and determine the performance of opening up the industrial chain and diversified realization. Equity incentives are not only a defense line for building talent barriers, but also a catalyst for stimulating and releasing talent dividends. The launch of the equity incentive policy coincides with the new policy of reducing holdings. The proactive choice at the company level inadvertently echoed the policy support at the regulatory level. From the outside world's perspective, it has formed a synergy to strengthen the talent wall of Huace."Under the new regulations, Dong Jiangao's reduction behavior is more transparent, and the reduction cycle is longer. Policy factors promote the interests of the core team to be more consistent with the interests of the company and shareholders, and promote the core team to become more stable." The above analyst added.

Editor: jessica