Hongxing Sports accused of inflating cash and bank deposits by RMB 1.15 billion

China Hongxing Sporting Goods Co., Ltd. listed in Singapore (hereinafter referred to as “Hongxing Sports”) has been accused of huge errors in financial data. According to an independent audit report, in the financial year 2010, the cash and bank deposits in the Hongxing Sports Financial Statements were RMB 1.417 billion (RMB, the same below), but the audit found that it was only RMB 263 million, and the inflated cash and bank deposits reached 11.54. 100 million yuan.
China Hongxing Sporting Goods Co., Ltd. listed in Singapore (hereinafter referred to as “Hongxing Sports”) has been accused of huge errors in financial data. According to an independent audit report, in the financial year 2010, the cash and bank deposits in the Hongxing Sports Financial Statements were RMB 1.417 billion (RMB, the same below), but the audit found that it was only RMB 263 million, and the inflated cash and bank deposits reached 11.54. 100 million yuan.

An organization named “nTan” issued the above independent audit report a few days ago. The report pointed out that in the fiscal year 2010, Hongxing Sports had avoided the closing of stores in Beijing, Shanghai and Tianjin, and stimulated more new stores. Hongxing Sports spent 335 million yuan in expenses for distributors. In addition, Hongxing Sports paid 467 million yuan of interest-free short-term loans to dealers in six provinces such as Anhui and Fujian. Hongxing Sports is also new in inventory. With an increase of RMB 212 million in expenditures and an additional RMB 140 million in other expenditures, Hongxing Sports’ actual cash and bank deposits in fiscal 2010 was only RMB 263 million.

The independent audit report also pointed out that Hongxing Sports has a number of illegal operations in the financial sector. One of the cases is that in the financial year 2010 and fiscal year 2011, some of the major subsidiaries of the Hongxing Sports Group had a total expenditure of 887 million yuan in the expansion of the market, far exceeding the amount of the company’s board of directors not exceeding 750 million yuan. The upper limit; Some subsidiaries of the Hongxing Sports paid interest-free loans to distributors. As early as 2009, the board of directors of the Hongxing Sports had banned such activities.

"nTan"'s audit report shows that the financial director of the Hongxing Sports explained in the survey that the entire company's financial statements are based on the relevant data submitted by each subsidiary. The data submitted by the financial default subsidiary is true and accurate.

Industry insiders told the "First Financial Daily" that the huge outflow of Hongxing Sports financial data has a certain relationship with the chaos of its subsidiaries. In order to expand its market share, Hongxing Sports has opened branches in many regions and has established direct sales stores that belong to the Hongxing Sports. However, the pace of self-operating is too fast, causing great pressure on the company’s cash flow. The turnover of goods in the stores was slow, and the amount of inventory increased. The rapid expansion of direct-operated stores also depressed the enthusiasm of franchisees, and franchisees did not give them a boost. Eventually, inventory deteriorated.

According to the "nTan" report, in the fiscal year of 2010, the inventory of Hongxing Sports reached 469 million yuan, accounts receivable amounted to 893 million yuan, and other receivables totaled 475 million yuan; in fiscal year 2009, Hongxing Sports stock amount The figures for accounts receivable, accounts receivable, and other receivables were 166 million yuan, 363 million yuan, and 115 million yuan respectively, and the figure for fiscal 2010 was more than double the 2009 fiscal year.

Dividing inventory, providing credit support for dealers and other expenses, so that Hongxing sports costs surge. In fiscal year 2010, the operating expenses of Hongxing Sports reached RMB 2.243 billion, resulting in a net loss of HK$ 1.635 billion for Hongxing Sports. In the previous fiscal year and 2008 fiscal year, the net profit of Hongxing Sports was RMB 131 million and RMB 449 million, respectively. yuan.

Since the end of February 2011, due to financial data problems, the Hongxing Sports Stocks ceased trading. During this period, the secretary of the Hongxing Sports Board resigned. “nTan” was invited to conduct a more than one-year audit of the Hongxing Sports and the 2011 financial report. It has not been announced yet that this independent audit report reveals many loopholes in the internal control of the Hongxing Movement. There is no clear statement as to what the Singapore Stock Exchange will handle.

The industry believes that despite the poor performance of the Hongxing Sports in recent years, there are still many innovations in marketing. The setbacks experienced before were mainly due to too fierce expansion in the sales channels, and there was some confusion in management, if the future product development and Better marketing integration, there is still hope.

The Hongxing Sports announced that the company’s growth was strong. In the first three quarters of this year, the order amount was 3.709 billion yuan. Despite various challenges and growth pressures in the domestic sports goods market, it will continue to look for opportunities to expand coverage of the Chinese market. Strategic sponsorship activities and marketing have expanded the influence of the “Erk” brand, but the Hongxing Movement also stated: “In the current economic situation, we will prudently implement business expansion plans.”

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