Why does Lenovo's sci-tech innovation board "sudden stop"?
Lenovo Group responded to the withdrawal of the application for listing on the Science and Technology Innovation Board: the decision was made taking into account the complexity of the business and the capital market
On October 8, the Shanghai Stock Exchange issued an announcement stating that Lenovo Group and the sponsor CICC, which had previously submitted the prospectus on September 30, applied to withdraw the application documents for listing on the Science and Technology Innovation Board. Review of the listing on the creation board.
This also means that this plan of Lenovo Group will be completely defeated.
Why did Lenovo choose to announce the financing plan the day before the National Day holiday, and then withdraw the application on the first day after the holiday?
On October 10th, Lenovo Group issued an announcement on the Hong Kong Stock Exchange stating that considering the company’s business scale and complexity, the financial information in the prospectus may become invalid during the review process of the application. At the same time, it considers the latest issuance and listing and other related capital markets. After the situation, it was decided to withdraw the application for listing on the China Science and Technology Innovation Board.
Lenovo also stated that the group's business operations are in good condition and the withdrawal of the application will not have any adverse impact on the group's financial condition.
During the two days when Lenovo was silent on the reasons for the withdrawal, the outside world conducted various analyses and speculations on the reasons for Lenovo's withdrawal. Some professionals believed that Lenovo Group did not meet the requirements for listing on the "Science Innovation Board".
Including Lenovo’s R&D expenses, which account for less than 3% and mainly consist of personnel salaries and depreciation. The Sci-tech Innovation Board requires at least 5%; Lenovo’s financing purpose is 45% to reinvest and supplement liquid assets, while the Sci-Tech Innovation Board requires raising Funds should be invested in the field of scientific and technological innovation.
And what role its sponsor CICC played in it has also been questioned.
In addition, the high salary of Lenovo's directors and supervisors has also been questioned.
The Beijing Youth Daily found that Lenovo Group CEO Yang Yuanqing received a salary package of up to 168 million yuan in fiscal 2021, but there are two other undisclosed executives who have higher salaries than him, up to 197 million yuan.
The average annual salary of Lenovo’s 27 executives is 34.55 million yuan per capita, and the total salary for a year is as high as 933 million yuan, accounting for 7.77% of the company’s pre-tax profits.
At the same time, Lenovo Group's financial situation is not healthy.
In the past three years, Lenovo's debt-to-asset ratio has remained at a high level of around 90%, and its current ratio is below 1, and its debt solvency is worrying.
Among its assets, more than 50 billion assets are "goodwill", the book value of customer relationships and deferred income tax assets. It is also believed that its actual solvency may be lower than expected.
question
Nearly half of the funds are used
Supplement liquidity and investment?
On September 30, the last working day before the National Day holiday, the Shanghai Stock Exchange website disclosed that the application for listing on the Science and Technology Innovation Board of Lenovo Group Co., Ltd. became "accepted".
On October 4, Lenovo Group announced that it had submitted an application to the Shanghai Stock Exchange and received a letter of "confirmation of acceptance" of the application.
In January of this year, Lenovo announced that the board of directors has approved the possible issuance of China Depository Receipts, and applied to the Shanghai Stock Exchange Science and Technology Innovation Board for CDR listing and preliminary recommendations for trading.
At that time, Lenovo’s chairman and CEO Yang Yuanqing said: “Lenovo’s plan to return to the A-share listing will help strengthen the company’s strategic connection with the booming domestic capital market, enhance the convenience for mainland investors to invest in Lenovo, and further release Lenovo. The value of this allows us to invest more in technological innovation, service transformation and intelligent transformation, and to better promote the digital and intelligent transformation and upgrading of various industries."
According to the prospectus (declaration draft) for the public offering of depositary receipts on the Science and Technology Innovation Board submitted by Lenovo, Lenovo intends to publicly issue no more than 1.338 billion Chinese Depository Receipts (CDRs), which will account for no more than 10% of the total shares after the issuance. %, 10 billion yuan will be raised.
The sponsor of this issuance is CICC, and the joint lead underwriters are Goldman Sachs and CITIC Securities.
It is worth noting that Lenovo Group's planned financing amount is 10 billion yuan, and the implementation cycle is 3 years.
Among them, 55% are used to invest in new product and solution research and development projects, 10% are used in industrial strategic investment projects, and 35% are used to supplement working capital.
A reporter from Beijing Youth Daily noted that the “Regulations for the Registration of Securities Issuance of Listed Companies on the Science and Technology Innovation Board (for Trial Implementation)” issued by the China Securities Regulatory Commission previously stipulated that “funds raised should be invested in the field of technological innovation and comply with the requirements of national industrial policies and land environmental protection regulations... …The funds raised from the issuance of convertible bonds shall not be used to make up for losses and non-productive expenses".
In other words, out of the tens of billions of billions Lenovo has raised on the Science and Technology Innovation Board, 45 billion will be used for further investment and supplementary liquidity, and this is also closely related to the high debt of Lenovo Group.
According to Lenovo’s previous financial report, the company’s "current ratio" for three consecutive years was 0.82 times, 0.81 times, and 0.85 times, which was far lower than the 1.61 average of Lenovo’s horizontal comparison of Xiaomi and Inspur Information, which means Lenovo’s current liabilities. The current assets have been exceeded for many years, and the solvency is worrying.
Debt
Lenovo Group's total liabilities
Almost close to its total assets
Lenovo's high debt ratio has always been regarded as an indicator of unhealthy development of the company.
As of the 2021 fiscal year, Lenovo's debt-to-asset ratio has exceeded 90%.
Judging from the financial indicators of the past three years, the asset-liability ratio in 2019 is 86.34%, in 2020 it is 87.37%, and in 2021 it is 90.50%. Its asset-liability ratio and total amount of liabilities continue to increase, that is to say, the total liabilities of Lenovo Group Almost close to its total assets.
From the analysis of its disclosed debt structure, Lenovo Group's debt in 2021 is as high as 225.922 billion yuan.
This data has been increasing at a rate of more than 10% for three consecutive years. In 2019, the amount of debt was 174.34 billion yuan. In 2020, it will increase by 14% to 198.871 billion yuan. In 2021, it will continue to increase by 13.6% to 225.922 billion yuan. Liabilities are as high as 179.867 billion yuan, accounting for 79.6%; non-current liabilities are 46.055 billion yuan.
Lenovo Group explained that as of March 31, 2019, March 31, 2020, and March 31, 2021, the company's current liabilities accounted for 79.14%, 82.86%, and 79.61% of total liabilities, respectively. The company's current liabilities accounted for It is relatively high, mainly because the company’s operating liabilities and other accounts payable and accrued expenses accounted for a relatively large amount during the reporting period, and the company’s liability structure was consistent with the company’s asset structure and actual operating conditions.
This number is much higher than that of companies in the same industry.
According to data previously listed by the media, among the asset-liability ratios of the Sci-tech Innovation Board and ChiNext industry in 2018, the asset-liability ratio of the Internet and related service industries is 39.5%, and the asset-liability ratio of the computer, communications and other electronic equipment manufacturing industry is 39.5%. 55.7%, which is far below the 90% figure of Lenovo Group.
R&D
Less than 3% of Lenovo Group's R&D expenses
Lower than the average level of science and technology companies
The Science and Technology Innovation Board that Lenovo Group wants to impact has placed more emphasis on the "Science and Innovation" attribute. The Shanghai Stock Exchange and the China Securities Regulatory Commission have issued multiple documents to refine the indicators of science and technology enterprises, among which R&D capabilities are highly valued.
For example, the "Guidelines for the Evaluation of Attributes of Science and Technology Innovation (for Trial Implementation)" stipulate that the company’s R&D investment in the last three years accounted for more than 5% of its revenue or the cumulative R&D investment in the last three years was more than 60 million yuan, and the main business income was formed. More than 5 items can meet the requirements.
Lenovo’s R&D investment was accused of not complying with the regulations of the Science and Technology Innovation Board.
Lenovo Group’s prospectus shows that in 2019, 2020, and 2021, Lenovo Group’s R&D investment will be 10.203 billion yuan, 11.517 billion yuan, and 12.038 billion yuan, accounting for 2.98%, 3.27%, and 2.92% of each period’s revenue, respectively. .
In other words, Lenovo Group's research and development expenses average 3%.
These expenses are mainly used to pay for employee salaries and depreciation and amortization expenses. Among them, the salary of R&D personnel accounts for nearly 60%, and the depreciation and amortization expenses account for 14%.
The prospectus compares this data with companies such as Hewlett-Packard, Xiaomi Group, Inspur Information, etc., and believes that the absolute amount of accumulated R&D investment and R&D expenses in the past three years is relatively high, which is at a relatively high level compared with comparable companies.
However, recent statistics from the Sci-tech Innovation Board show that nearly half of the Sci-tech Innovation Board companies have R&D intensity as high as 12%, and the rate is increasing at an annual rate of 2%. Some companies even invest as high as 40% in R&D.
So what are the main R&D achievements of Lenovo Group?
According to the prospectus, its core technologies include 31 technologies such as battery and unit management technology for smart devices, smart antenna technology, audio output technology, industry intelligence voice recognition technology, machine learning predictive analysis, and industrial Internet of Things.
Among them, there are 4 secondary developments (secondary or extension based on the original R&D results) and 3 commissioned developments (Lenovo also provided funds or paid for this).
For some of the awards that Lenovo has won in scientific research projects in recent years, 24 items are also listed in the prospectus, including the "Top 50 Chinese AI Leading Companies" issued by "Qubit", and "Qubit" is just a self-media account.
assets
61.1 billion yuan in intangible assets
"Goodwill" exceeds 30 billion yuan
The other end of the high debt-to-asset ratio is Lenovo's total assets. The most criticized is that of the total assets, 61.1 billion yuan are intangible assets, including "goodwill" 31.85 billion yuan and the book value of customer relations 4.4 billion yuan. , The balance of deferred income tax assets was 15.4 billion yuan.
According to the prospectus, Lenovo Group's total assets totaled 249.648 billion yuan as of the 2021 fiscal year.
Lenovo Group believes that at the end of the reporting period, the company's total assets were 20.927 billion yuan, 227.631 billion yuan, and 249.648 billion yuan, showing a steady upward trend. During the reporting period, the company's asset composition was relatively balanced and in line with the company's actual operating needs.
However, the outside world thinks that this number is "moist".
Based on the latest data in 2021 alone, Lenovo Group’s current assets are 153.344 billion yuan, of which accounts receivable, accounting for 57%; inventory, accounting for 27.34%; cash and equivalents, accounting for 13 %.
Among them, the proportion of "inventory price fall reserves" has dropped from 11% in 2019 to 7% today, but it is still higher than the industry average of 2% to 4%.
Lenovo said that this is mainly due to the company's rapid product update and iteration. For inventories such as long-aged out-of-season products and warranty parts, the company has made a higher percentage of inventory depreciation reserves.
Among non-current assets, Lenovo Group's non-current assets are mainly intangible assets. Among intangible assets, the most important part is "goodwill". From 2019 to 2021, the book value of Lenovo Group's goodwill is 33.279 billion yuan and 334.08 billion yuan. 100 million yuan and 31.854 billion yuan.
Specifically, Motorola's mobile phone business, IBM PC business, System X server business, and NEC PC business accounted for major goodwill shares. For example, the goodwill of Motorola mobile phone and other mobile device businesses is worth 9.528 billion yuan.
In this regard, Lenovo Group also recognizes this problem.
He said: At the end of the reporting period, the book value of the company's intangible assets was 56.054 billion yuan, 56.572 billion yuan and 55.232 billion yuan, of which the book value of goodwill was 33.279 billion yuan, 33.408 billion yuan and 31.854 billion yuan, which was a relatively large amount. , Mainly due to the company's past acquisitions.
The company evaluates whether goodwill has been impaired at the end of each fiscal year. Although the company did not make any provision for impairment of goodwill during the reporting period, it does not rule out that the assets acquired in the future may contain commercial assets due to poor management and changes in the macroeconomic environment. The book value of the lowest level combination of related cash flows (or combination of cash-generating units) of reputation is higher than the recoverable value, resulting in impairment of goodwill, thereby reducing the risk of the company's profitability.
So what is Lenovo's operating status?
Judging from its prospectus, Lenovo’s revenue in the past three years was 342.3 billion yuan, 352.6 billion yuan, and 411.6 billion yuan; net profits were 4.4 billion yuan, 5.5 billion yuan and 8.9 billion yuan; the profit margin was 2.8% this year. This number has more than doubled from last year.
It can be seen that Lenovo's profit margin has been maintained in the low range of 1% to 3%.
RAM
CICC: The Ninth IPO Sponsor Failure Was Questioned This Year
The sponsor of Lenovo's IPO is CICC.
According to statistics, since the beginning of this year, CICC has terminated the review of nine science and technology innovation board IPO sponsorship projects, including Lenovo Group. Applicants include Geely Automobile, Yunzhisheng, Tianguangshi Biology, Jikai Gene, and Tiandi Environmental Protection.
On September 30th, Lenovo Group under the banner of "Red Chip CDR Back to A First Share", submitted the prospectus at the Shanghai Stock Exchange and was accepted, but after 7 days of the National Day holiday, its application was withdrawn.
Therefore, some insiders questioned that some of the indicators did not meet the requirements of the Sci-tech Innovation Board, and the application was withdrawn after one working day was too unprofessional. Why did CICC fail to make professional and due diligence judgments as soon as possible?
Lenovo Group: Will not affect the financial status of the group
On October 10, Lenovo Group issued an announcement on the Hong Kong Stock Exchange in response to the withdrawal of the application for listing on the Science and Technology Innovation Board.
Lenovo Group stated that considering the company's business scale and complexity, the financial information in the prospectus may become invalid during the review process of the application. At the same time, after considering the latest issuance and listing and other capital market-related conditions, it decided to withdraw the application for listing on the China Science and Technology Innovation Board. .
Lenovo also stated that the group's business operations are in good condition and the withdrawal of the application will not have any adverse impact on the group's financial condition.
Related
Lenovo executive salaries have risen sharply in the past two years
Although the profit margin of Lenovo Group is not high, the salary of executives is very high, and there has been a sharp rise in the past two years.
According to the prospectus, during the three-year reporting period, the company’s directors, senior management and core technical personnel received 933 million yuan in pre-tax remuneration from the company.
This figure was 909 million yuan last year, and it was only 564 million yuan the year before. That is to say, the total compensation of executives has risen by more than 65% in two years.
27 senior executives per capita of 34.55 million yuan
At present, Lenovo has a total of 27 directors, supervisors, and senior staff, including 9 directors, 13 senior managers and many core technical personnel.
Based on this calculation, 27 senior executives received 933 million yuan of pre-tax salary, or 34.55 million yuan per capita.
The salary they receive accounts for 7.77% of the company's pre-tax profits.
This data has dropped a lot from the 12.85% of the company's pre-tax profits taken by senior executives last year, which is related to the increase in Lenovo's overall profit margin.
Judging from Lenovo’s latest financial report in 2021, as Lenovo’s CEO, Yang Yuanqing received a total salary package of US$26.16 million last year, which is approximately 168 million yuan.
Among them, his salary is 1.3 million U.S. dollars, discretionary bonus is 5.855 million U.S. dollars, long-term incentive award is 18.448 million U.S. dollars, pension plan contribution is 137,000 U.S. dollars, and other benefits are 425,000 U.S. dollars.
The salaries of three executives including Yang Yuanqing all exceed 168 million yuan
In fact, Yang Yuanqing, who received 168 million yuan, is not the employee with the highest remuneration from Lenovo, and there are even two people who are higher than him.
According to the financial report, one of Lenovo’s directors and supervisors has a 2021 remuneration of 30.37 million U.S. dollars or more, or about 195 million yuan; another director and supervisor has a 2021 remuneration of 28.7 million U.S. dollars or more, or 184 million yuan. .
There are also three senior executives whose annual salary can reach more than 8 million US dollars per year, at least more than 50 million yuan.
The financial report did not disclose the specific information of these executives.
Independent Dong Yang Lan took more than 2 million yuan a year
The remuneration and stock awards provided by Lenovo Group to each independent director are also very expensive.
For example, Yang Lan, a former host who became an independent director of Lenovo in May 2020, received an annual director's remuneration of US$330,000 (approximately 2.34 million yuan), including US$100,000 in cash and US$230,000 in equity.
Yang Lan is the one with the least remuneration and equity ownership among independent directors. At present, Lenovo Group has 6 independent directors, and the remaining 5 independent directors hold more than 0.01% of the equity. William Otto Grabe holds 3.88 million ordinary shares. The total value of shares and 4.01 million award shares (according to the closing price of the previous trading day) is HK$69.51 million, which is approximately RMB 57.54 million.
Lenovo’s financial report shows that in fiscal 2021, eight independent non-executive directors received a total salary of US$2.43 million, which is about 15.65 million yuan, including fees and long-term incentives. The average salary is nearly 2 million yuan per year. The data is also relatively close.
In contrast, in A-shares, according to the data compiled by each company's 2019 annual report, Minsheng Bank, which ranks first in independent directors' salary, has an average annual salary of 950,000 yuan, and Focus Media, which ranks second, has an average annual salary of 850,000 yuan, ranking third. The average annual salary of Vanke A is 600,000 yuan, which is less than half of the salary of Lenovo’s independent directors.
Previous data in 2017 showed that the average salary paid to independent directors by listed companies that year was 226,000 yuan, which was about one-tenth of the salary of independent directors of Lenovo Group.
This edition / our reporter Wen Jing