Closing stores and running away, arrears of wages, and difficulties in protecting the rights of suppliers...... Recently, Dongyi Risheng, a veteran home improvement company that has been established for nearly 30 years and listed for 10 years, has been in turmoil, and this matter has also attracted the attention of the Shenzhen Stock Exchange. After replying to the letter of concern issued by the Shenzhen Stock Exchange, Dongyi Risheng deliberated and voted to pass the "Proposal on the Proposed Sale of the Company's Assets" and "The Proposal on the Company's Borrowing with the Equity Pledge of the Holding Subsidiary and Accepting the Guarantee of the Actual Controller and Related Party Transactions". On the evening of June 27, Dongyi Risheng also announced the cumulative litigation and arbitration.
concern
Whether it is true that the store is closed, suspended, deregistered, or bankrupt
"Recently, relevant media reports show that there are rumors of 'running away' in your company's branches in Wuxi, Zhengzhou, Wuhan and other places, saying that they have 'basically lost their ability to perform their contracts', employees are forced to leave their jobs and are owed wages, and some consumers and suppliers have difficulty protecting their rights." On May 23, the Shenzhen Stock Exchange issued a letter of concern to Dongyi Risheng, requiring Dongyi Risheng to fully verify and explain the main business operations and personnel management of the company, its subsidiaries and branches, whether there are any business activities such as store closure, suspension, cancellation, bankruptcy and other serious impacts, and whether the above media reports are true.
The Shenzhen Stock Exchange pointed out that, if it is true, it should explain the proportion of the operating income and net profit of the relevant subsidiaries and branches in the company's operating income and net profit, sort out the number and amount of consumers and suppliers involved in the failure of the relevant entities to perform the contract, whether there are disputes or potential disputes, the impact on the company's ability to continue operations, and the measures that the company intends to take and has taken to safeguard the legitimate rights of consumers and suppliers and their feasibility. At the same time, combined with the above circumstances and duration, it is explained whether the company's production and business activities have been seriously affected and are not expected to return to normal within three months, whether there is a situation where the main bank account is frozen, and whether it has touched the situation that requires other risk warnings for the company's stock trading as stipulated in the Stock Listing Rules (2024 Revision) of the Shenzhen Stock Exchange. If not, clearly state the reasons and basis, and fully warn of the risks.
On May 24, Dongyi Risheng's share price closed at 3.10 yuan, down 9.88%, and closed with a fall limit.
Response
28 stores were closed, and the arrears exceeded 200 million
On May 31, Dongyi Risheng issued an announcement in response, saying that since the end of 2021, in order to adapt to market changes, optimize the internal operating structure, and reduce inefficient stores, the company has orderly integrated and closed some stores, such as integrating small stores into large stores in the same city and closing some inefficient stores. As of the end of 2023, Dongyi Risheng has a total of 79 directly operated branches with independent accounting. Since 2023, the company has closed a total of 28 stores. Among them, in 2023, branches in Beifen, Qingdao, Hangzhou, Tianjin, Wuhan, Suzhou, Zhengzhou, Lanzhou, Ningbo, Nanjing and other places will be closed, with a total of 15 stores; Close 13 in the first four months of 2024.
According to the announcement, as of now, incomplete statistics show that 1,792 customers who have not fulfilled their contracts according to the original process due to store closures, with an amount of about 163 million yuan, and 716 supply chain manufacturers are involved, with an unpaid purchase amount of about 85.6 million yuan. A total of 248.6 million yuan.
Regarding the problem of store closure and arrears, Dongyi Risheng said that the company has set up a working group to connect with customers, suppliers and relevant personnel, and successively send a "Letter to Customers and Partners" to customers and partners involved in store closure, explaining the difficulties faced by the company and the measures to be taken. The branch involved in the closure of the store will be organized to verify the accounts and capital transactions of the construction project that has not been performed, the availability of materials and the construction progress, and negotiate with the customer including extending the delivery period, deferring the payment of the unfulfilled part of the contract amount and other solutions, and properly handle the owner's demands; The branches involved in the closure of the store will be organized to verify and identify the accounts with the suppliers, and negotiate with the suppliers to include solutions such as deferred payment, discounts, return of unused materials, and physical offset.
As of the close of trading on June 5, Dongyi Risheng's share price closed at 2.59 yuan per share, down 7.17%. Since the second quarter, the cumulative decline has reached 53.16%.
progress
It is planned to sell 11 company assets and borrow 30 million
In reply to the Shenzhen Stock Exchange's letter of concern, Dongyi Risheng also said that the company is making every effort to raise debt repayment funds by increasing the collection of accounts receivable, promoting multi-channel and multi-form financing, and disposing of the company's office buildings, factories, warehouses and other assets, as well as the mortgage loans of subsidiary assets, so as to alleviate the financial pressure faced by the company; Chairman Chen Hui, as the actual controller, will also make every effort to promote external financing and introduce funds; The company is also actively looking for external strategic investors.
On June 25, Dongyi Risheng once again issued an announcement announcing the progress, saying that the company held a meeting in the conference room of Dongyi Building, located in Chaoyang District, Beijing, and deliberated and voted on the "Proposal on the Proposed Sale of the Company's Assets" and "The Proposal on the Company's Borrowing with the Equity Pledge of the Holding Subsidiary and Accepting the Guarantee of the Actual Controller and Related Party Transactions".
The "Proposal on the Proposed Sale of the Company's Assets" mentions that the company intends to transfer the company's land and real estate by means including but not limited to public listing, with the original book value of these assets of 681 million yuan and the net book value of 558 million yuan, and the sale price will refer to the appraisal price or market price of professional institutions, and the final transaction price shall prevail. The transaction is intended to be carried out by looking for interested parties in the market and publicly listing, and there is no confirmed transaction party at present, and it is impossible to determine whether it constitutes a related party transaction.
According to reports, the assets to be sold are 11 assets under the name of the company and its subsidiaries located in Beijing, Langfang, Hebei, Xi'an, Qingdao, Nanjing, Chengdu and other 11 assets, including investment real estate and fixed assets, of which 6 assets are still in a mortgage state.
Dongyi Risheng said that if the assets to be sold involve mortgage matters, the company will negotiate with the mortgagee and the counterparty to conduct the transaction with the consent of the mortgagee or after the mortgage is released. After the completion of the transaction, it will be conducive to further revitalizing the company's existing assets, improving the efficiency of the company's asset use, meeting the needs of the company's overall development strategy, and helping the company optimize its asset structure and safeguard the interests of shareholders.
The "Proposal on the Company's Borrowing with the Equity Pledge of Holding Subsidiaries and Accepting the Guarantee of the Actual Controller and Related Party Transactions" mentions that the company intends to borrow RMB 30 million from Norma (Shanghai) Investment Consulting Co., Ltd. for a period of one year due to its own capital and business needs, and Dongyi Risheng will provide pledge guarantee to Party A with its 54.4697% equity in Shanghai Chuangyu Industrial Co., Ltd., and complete the corresponding pledge registration before June 30, 2024.
Dongyi Risheng also set up a mortgage registration for ten properties located in Zhongshan North Road, Nanjing City, and provided mortgage guarantee for all the claims of Party A to Party B under the loan contract. Party A and Party B shall separately sign a Mortgage Contract for the mortgage of the property.
As of the close of trading on June 27, 2024, Dongyi Risheng closed at 2.25 yuan, down 1.75%.
On the evening of June 27, Dongyi Risheng also announced the cumulative litigation and arbitration, involving engineering construction contract disputes, sales contract disputes, etc. According to the announcement, up to now, excluding the litigation cases with China Railway 12th Bureau Group Co., Ltd., which have been specially disclosed by the company, the company has not concluded a total of 234 cases involving litigation and arbitration matters in 12 consecutive months, with a total amount of about 110 million yuan. Among them, the amount of the case in which the company is the plaintiff is 17.5846 million yuan, and the amount of the case in which the company is the defendant is 90 million yuan.
review
In 2020, he temporarily got out of the predicament by selling real estate
In fact, Dongyi Risheng avoided a crisis by selling houses before, and turned its performance into a profit.
According to public information, Dongyi Risheng was established in November 1996, and on February 19, 2014, it ushered in the bell moment of listing, becoming the first A-share listed company in China, also known as "the first share of home decoration".
With the continuous development, the corporate positioning and business scope of Dongyi Risheng are also changing. Different from the traditional home decoration model based on design, construction and integration of products at the beginning of its establishment, Dongyi Risheng Group provides a series of services such as home decoration design, construction, main materials and self-produced wood products, soft decoration design and hardcover home furnishing products. The main brands of the group are: Dongyi Risheng Decoration, Original International Design, Sumei Super Home, Ruizhu Mansion Decoration, Dongyi Risheng Hardcover, Jiai Interior Design, Chuangyu Home Furnishing (Guan Zhenquan), Qiu Deguang Design, these brands correspond to different market segments and segments, and the business system basically covers the overall home decoration, home decoration packages, customized hardcover, high-end villa decoration and other scopes.
In November 2017, Dongyi Risheng was recognized as the "first batch of prefabricated building industrial bases"; Since 2020, it has laid out the field of Internet home decoration and implemented the home improvement brand upgrade strategy.
According to the company's financial report, in 2018 and 2021, the company's total operating income exceeded 4.2 billion yuan. Specifically, in 2019, the company completed an operating income of 3.8 billion yuan, a year-on-year decrease of 9.62%; Net profit attributable to shareholders of listed companies was -250 million yuan, and the company achieved operating income of 3.4 billion yuan in 2020, a year-on-year decrease of 9.27%; net profit attributable to shareholders of listed companies was 180 million yuan, a year-on-year increase of 172.34%.
It is worth mentioning that behind the sharp rise in net profit in 2020, Dongyi Risheng sold the company's 19 properties in Dongdaqiao, Beijing at a total price of 120 million yuan. In that year, because of continuous losses, the stock was faced with ST, and Dongyi Risheng returned about 84 million funds after selling the property, and the performance turned into a profit at the last moment, and the company turned the corner.
However, from 2021 onwards, Dongyi Risheng's operating income has declined sharply. According to the annual report data, in 2021, the company achieved operating income of 4.292 billion yuan, a year-on-year increase of 24.52%; the net profit attributable to the parent company was 77.5431 million yuan, a year-on-year decrease of 57.00%; The operating income in 2022 and 2023 will drop to 2.524 billion yuan and 2.934 billion yuan respectively, and the net profit attributable to the parent company will be -744 million yuan and -208 million yuan respectively, which has been a loss for two consecutive years. In the first quarter of 2024, Dongyi Risheng's performance is still sluggish, with an operating income of 440 million yuan, a year-on-year decrease of 20.68%, and a net profit loss attributable to the parent company of about 116 million yuan.
I wonder if the sale of 11 land and housing assets this time can help Dongyi Risheng survive the crisis.
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Text/Beijing Youth Daily reporter Song Xia
Editor/Fan Hongwei