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Interface News reporter | Ding Jingjing

On the evening of August 23, Xi'an Qujiang Culture and Tourism Co., Ltd. (hereinafter referred to as "Qujiang Tourism”; Stock code: 600706) released its 2024 semi-annual report. The report showed that Qujiang Culture Tourism achieved operating income of 770 million yuan in the first half of this year, an increase of 11.9% year-on-year; and the corresponding net profit attributable to the parent was -187 million yuan, not only turning from profit to loss, but also expanding the loss by more than 15 times year-on-year.

Regarding the sharp decline in net profit, Qujiang Culture and Tourism stated that it was mainly due to changes in the expected credit loss model of accounts receivable compared with the same period last year, resulting in an increase in the amount of bad debt provisions.

Datang Never Sleeps City only earned 235,300 yuan in half a year, Qujiang Cultural Tourism is in a huge loss dilemma

Founded in 1992, Qujiang Tourism Group is a state-owned listed company controlled by Xi'an Qujiang Cultural Industry Investment (Group) Co., Ltd., a subsidiary of Xi'an Qujiang New District Management Committee. Qujiang Tourism Group owns a number of well-known scenic spots including Tang Paradise, Qujiang Ocean Park, Big Wild Goose Pagoda Scenic Area, Tang Da Ci'en Temple Ruins Park, and Tang Dynasty City That Never Sleeps.

In 2012, Qujiang Tourism Group went public through a backdoor listing. From the time of its listing until 2019, Qujiang Tourism Group's revenue and net profit remained relatively stable. During this period, Qujiang Tourism Group's annual revenue was around 1 billion yuan, and its net profit hovered around 10 million yuan, but did not exceed 100 million yuan.

However, since 2019, affected by the epidemic, Qujiang Tourism's net profit in 2019 was almost halved; in 2020, Qujiang Tourism suffered its first loss since its listing; in the four years from 2020 to 2023, only in 2021 did it barely make a profit of 70 million yuan, and the net profit attributable to the parent company in the other three years was a loss. In the first half of this year, Qujiang Tourism's net profit attributable to the parent company not only turned from profit to loss, but the loss amount reached 187 million yuan, close to the loss of 195 million yuan in the whole of last year, and the loss margin increased by more than 15 times compared with the same period last year.

From the perspective of segmented businesses, Qujiang Culture and Tourism operates a variety of businesses including scenic spot operation and management, cultural theme hotel management (including catering management), travel agency business, and performance and performing arts business. Among them, scenic spot operation and hotel catering business have become the current main businesses, contributing more than 80% of the revenue in the first half of this year.

Specifically, most of Qujiang Culture and Tourism's subsidiaries suffered losses in the first half of this year. Jiemian News noted that there are currently 20 holding companies under Qujiang Culture and Tourism that actually carry out business, of which only 8 are profitable, and the remaining 12 are in a loss-making state.

Among them, the most popular one is the continuously popular Datang Never Sleeps City. However, compared with its continuously popular passenger flow, Datang Never Sleeps City is not as profitable as expected. Financial report data shows that Datang Never Sleeps City achieved operating income of 39.383 million yuan in the first half of this year, and net profit was only 235,300 yuan.

In this regard, some industry insiders pointed out that although the Tang Dynasty City That Never Sleeps has a large passenger flow, since tickets and activities are free, and the expenses for daily operation and maintenance, publicity, etc. are high, the Tang Dynasty City That Never Sleeps has a large passenger flow but does not make much profit.

In addition, among the many loss-making subsidiaries of Qujiang Culture and Tourism, Daming Palace Ruins Park Company suffered the most serious loss in the first half of this year. In the first half of this year, Daming Palace Ruins Park Company achieved a revenue of 67.985 million yuan, but a net loss of nearly 60 million yuan, which is more than twice the total profit of the eight subsidiaries of Qujiang Culture and Tourism.

Jiemian News found that the Daming Palace Ruins Park Company's net profit in the first half of this year was comparable to the same period last year, but it lost more than 60 million yuan compared with last year. Comparing the financial report data, it was found that this was related to the increase in accounts receivable and bad debts of Qujiang Cultural Tourism.

At the same time, as of the first half of this year, the top five debtors of Qujiang Culture and Tourism owed a total of about 1.396 billion yuan, accounting for 84.66% of the total balance of accounts receivable and contract assets at the end of the period, and accumulated bad debts of 582 million yuan. Most of Qujiang Culture and Tourism's accounts receivable and bad debts came from Xi'an Qujiang New District Business Asset Management Center, Xi'an Qujiang Daming Palace Ruins Area Protection and Reconstruction Office, and Xi'an Qujiang Cultural Industry Development Center.

Among them, the Xi'an Qujiang Daming Palace Ruins Area Protection and Reconstruction Office and the Daming Palace Ruins Park Company are both affiliated to the Xi'an Qujiang New District Management Committee. The Xi'an Qujiang Daming Palace Ruins Area Protection and Reconstruction Office is specifically responsible for the Daming Palace Ruins Protection Area. As of the first half of this year, the Xi'an Qujiang Daming Palace Ruins Area Protection and Reconstruction Office had accounts receivable of 425 million yuan and a balance of bad debt reserves of 164 million yuan, an increase of 59 million yuan and 75 million yuan respectively over the same period last year.

In recent years, the collection speed of the above three companies has not been ideal, which has led to a continuous increase in the accounts receivable of Qujiang Culture and Tourism. The reporter found that in the three periods from mid-2022 to mid-2024, the accounts receivable of Qujiang Culture and Tourism were 931 million yuan, 1.17 billion yuan and 1.396 billion yuan respectively.

In April this year, due to "bad debts", Qujiang Tourism also had a "big change" in its 2023 performance forecast. In January this year, Qujiang Tourism issued an announcement that it would make a profit of 17 million to 23 million yuan in 2023, but in April, the company suddenly released a revised performance forecast to a loss of about 195 million yuan. Then on June 28, the Shanghai Stock Exchange issued a notice criticizing the relevant responsible persons.

Selling core assets several times to save itself

Qujiang Culture and Tourism has always adopted a light-asset operation approach, that is, Qujiang Culture and Tourism does not invest in the construction of scenic spots, nor does it bear risks and costs. It only acts as a trustee for operations and charges management fees and profit sharing. This operation model has always been controversial.

In a previous interview with China Newsweek, Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, pointed out that although Qujiang Culture and Tourism's light asset operation model can quickly respond to market changes, reduce fixed asset investment, and improve capital operation efficiency, since the ticket revenue of the scenic spot will not flow directly into the company, Qujiang Culture and Tourism collects management fees paid by the relevant management departments. This will lead to Qujiang Culture and Tourism's weak control over physical assets, especially in accounts receivable management. Once problems arise, it may cause great pressure on the company's cash flow and profitability.

At present, Qujiang Tourism is suffering from this. Since April this year, Qujiang Tourism has suffered equity freezes several times because of a large number of uncollected accounts receivable and high debts that cannot be repaid.

Financial report data shows that as of the first half of this year, Qujiang Culture and Tourism’s total liabilities were 2.692 billion yuan, and its asset-liability ratio has continued to rise in the past three years, from 67.48% in mid-2022 to the current 80.94%.

A large amount of debt is overdue. In June this year, China Securities Credit Rating Co., Ltd. issued an announcement stating that as of May 31 this year, the total amount of overdue debts of Qujiang Culture Holdings and its subsidiary Xi'an Qujiang Culture Industry Investment (Group) Co., Ltd. was 253 million yuan. As of April 30, 2024, Qujiang Culture Holdings' consolidated interest-bearing debt was 90.429 billion yuan.

At the same time, Qujiang Tourism's debt repayment capacity is also weakening and it is facing great financial pressure. Financial report data shows that Qujiang Tourism's total debt cash coverage ratio has been declining in the past three semi-annual reports, and the ratio of broad money funds to total debt is 20%, 14% and 11% respectively.

Faced with the above situation, Qujiang Culture and Tourism has sold its core assets several times this year to accelerate cash flow and save itself.

In April this year, Qujiang Culture and Tourism announced that it would transfer its 51% stake in Xi'an Shanhe Scenic Area Operation Management Service Co., Ltd. to Xi'an Shanhe Tourism Development Co., Ltd. The equity transfer price was tentatively set at 2.2868 million yuan.

Since June this year, Qujiang Tourism has announced the sale of its two core assets, Tangyi Company and Daming Palace Heritage Park Company. On June 7, Qujiang Tourism announced that it plans to transfer 100% of the equity of its wholly-owned subsidiary Xi'an Qujiang Daming Palace National Heritage Park Management Co., Ltd. to Xi'an Qujiang Daming Palace Investment (Group) Co., Ltd., with the equity transfer price initially set at 42.0138 million yuan. On July 2, Qujiang Tourism issued an announcement stating that the company plans to publicly list and transfer 40% of the equity and 167 million yuan of debt of its wholly-owned subsidiary Xi'an Qujiang Tangyi Investment Co., Ltd.

Qujiang Tourism is also speeding up the collection of corresponding payments. Qujiang Tourism issued an announcement last night stating that the company has always attached great importance to accounts receivable. On the one hand, the company actively communicates and negotiates with relevant parties and continues to follow up on the collection; on the other hand, the actual controller has a plan to reduce accounts receivable, and the relevant process is being promoted.

At the same time, Qujiang Tourism issued an announcement to adjust the management fees of scenic spots such as Qujiang Pond Ruins Park, Tang City Wall Ruins Park, Hanyao Scenic Area (formerly the open area, Qin Ershi Mausoleum Ruins Park, Da Ci'en Temple Ruins Park, Shaanxi Opera Grand View Garden (including Beichitou Leyou Garden and other areas) and so on.

Qujiang Tourism said that the adjustment of scenic spot management remuneration will not have a significant impact on the company's future revenue. In addition, the company will follow the re-approved price standards, further optimize the scenic spot operation and management model, reasonably control costs and expenses, actively carry out various business activities, strengthen business expansion, and continuously improve its operating capabilities.