Ruyi Group'S Annual Enquiry Letter Asks For The Existence Of Solvency Risk.

In the early morning of July 6th, Ruyi group received annual enquiry letter, focusing on currency funds and prepayment, and asked whether the company had solvency risk.

As China's largest wool textile and Garment Group, the 2019 annual report of Ruyi group, which was postponed in May 28th, showed that its revenue and net profit were 1 billion 150 million yuan and 48 million 170 thousand yuan respectively, down 13.39% and 51.35% compared with the same period last year.

The audit report of the auditor's annual report and the audit report issued by the CPA firm questioned whether there was a 1 billion 100 million yuan related transaction in the Ruyi group, and whether the 310 million yuan prepaid account could receive the goods or recover the money. The final balance of the 440 million yuan accounts receivable and the provision of doubtful accounts that the accounting firm felt was unable to determine 26 million 480 thousand yuan were fully accounted for.

The annual report shows that at the end of the reporting period, the balance of the company's Monetary Fund was 361 million yuan, the balance at the end of last year was 785 million yuan, the balance of interest bearing liabilities such as short-term loans and long-term loans was 1 billion 453 million yuan, the balance at the end of last year was 1 billion 187 million yuan, and the proportion of Monetary Fund's own interest liabilities was 25% and 66% respectively.

The inquiry asked the Ruyi group to explain whether the rights limitation of the location, time limit, interest rate, whether there is a pledge freeze or not, whether it is deposited in the co management account with the controlling shareholder or other related parties, is used to guarantee the mortgage for the controlling shareholder or other related parties.

At the same time, Ruyi group needs to specify the company's financing situation, including financing channels, amount, interest rate, time limit, usage, available collateral and so on, and analyze whether your company has solvency risk.

At the end of the reporting period, the balance of other "illiquid financial assets" of Ruyi group is 1 billion 99 million yuan, which is an investment fund for Yinchuan Weixin Industrial Fund partnership (limited partnership) (hereinafter referred to as "Weixin fund"). The auditor held reservations about the nature, presentation and financial implications of the relevant investment funds.

Ruyi group replied that the company will promptly coordinate all parties to handle the business change procedures of the trust fund in accordance with the law. According to the agreement signed with the China Aviation trust Limited by Share Ltd (hereinafter referred to as "China Aviation trust"), the company will act on behalf of the company before the trust fund business change is completed.

The inquiry asked the Ruyi group to clarify clearly whether the relevant measures of the company are sufficient to eliminate the impact of the issues of reservations, and whether there are substantial obstacles to the progress of the business change procedures of the trust fund.

At the end of the reporting period, the balance of "prepayment" of Ruyi group was 330 million yuan, up 1459% from the end of last year. The auditor held reservations about the commercial nature of some prepaid accounts.

Ruyi group said the measures to eliminate the impact of the reservations were to recover relevant prepayments or goods as soon as possible. The letter asks for information about the recovery of the relevant funds and goods up to now.

Meanwhile, the payment time of the prepaid accounts of three suppliers involved by the Ruyi group was before June 30, 2019 and has not yet been delivered.

The inquiry asked the Ruyi group to explain the amount and time of delivery to suppliers involved in the past two years, whether the relevant purchase has the essence of transaction, whether the amount of advance payment and the payment schedule are reasonable, whether it is in line with the practice of the contract industry, and verify whether the prepaid payment is occupied by other parties in the company.

According to the annual report, the sales volume of the five customers of Ruyi group was 502 million yuan, accounting for 43.65% of the total annual sales, of which the related party's sales amount was 328 million yuan, accounting for 28.52%, and the related party's receivables amounted to 326 million yuan.

The letter asks for a description of the basic situation of the affiliate's sales, including the transaction background and necessity, sales products, gross margin and so on.

At the same time, the proportion of accounts receivable should be close to 100%. Ruyi group needs to explain the reason and reasonableness of the accounts receivable formed by the related party's sales. Whether the progress of the collection is consistent with the expected period and whether the loss of the bad debts is fully accounted for in the reporting period.

In the past two years, the Ruyi group has applied the same accounting estimate for the provision of bad debts for accounts receivable of related parties. The auditor should explain the reason and rationality of reservations on the accounts receivable account for loss of accounts receivable in 2019.

In addition, the enquiry also asked Ruyi group to explain the three consecutive years of decline in operating cash flow, the drop in stock of "wool textile and garment industry", the loss of all the three subsidiaries, the controlling shareholder of the company, Shandong Ruyi science and Technology Group Co., Ltd. and Shandong's Ruyi wool spinning Refco Group Ltd.