Zhongheng Group Linkao: Executives Change Blood to Meet Industry Dilemma

category:Finance
 Zhongheng Group Linkao: Executives Change Blood to Meet Industry Dilemma


A series of personnel changes have already taken place in the past half a year. The board of directors and management have almost achieved a big change of blood.

A person close to Zhongheng Group said that most of the previous senior management team was recruited by the large shareholder Guangxi Investment Group Ltd. (hereinafter referred to as Guangzhou Investment Group) through the high-salary market, and the large shareholders had high expectations. The change was due to the large shareholdersdissatisfaction with the results achieved by the team. Meaning.

Zhongheng Group is of special significance to Guangxi, one of the reasons is that it is the earliest case of state-owned enterprises rescuing private enterprises in Guangxi, as early as the rescue tide of private enterprises in 2018. As early as 2015, because of the centralized outbreak of the original controllers, Zhongheng Group was once on the verge of extinction, and Guangzhou Investment Group, a state-owned company in Guangxi, finally took over. Therefore, as a listed company of state-owned enterprises in Guangxi, Zhongheng Group is relying on Guangxis ambition to vigorously develop the big health industry.

However, with the change of a series of national medical policies and the emergence of problems in the pharmaceutical industry, a series of problems, such as relatively single products on sale and insufficient R&D investment, are urgently needed to be changed in China Heng Group, which has good performance in recent years.

Past generations: the object of state-owned capital relief in Guangxi

Zhongheng Group is a large-scale production enterprise of traditional Chinese medicine injection. Its business scope includes pharmaceuticals, health food and other businesses. At present, Zhongheng Group mainly owns Guangxi Wuzhou Pharmaceutical (Group) Co., Ltd. and Xueshuantong for Injection (freeze-drying) is the main core medicine.

Zhongheng Group, the owner of state-owned enterprises in Guangxi, originated from a private enterprise relief operation in 2015. At that time, Zhongheng Group was experiencing the break of the capital chain of the accuser. Xu Shuqing, the former accuser and chairman of the board of directors, was investigating and taking compulsory measures for the suspected unit bribery crime, which pushed the enterprise to a desperate situation.

Xu Shuqing directly holds 22.52% of the shares of Zhongheng Group through Zhongheng Industry, which is controlled by Xu Shuqing. He is the largest shareholder and actual controller of the company.

On September 18, 2014, Zhongheng Industries pledged 62 million shares of Zhongheng Group to Zhongrong International Trust Co., Ltd. (hereinafter referred to as Zhongrong Trust) and borrowed 370 million yuan from Zhongrong Trust. The repayment date is September 26, 2015. But as the borrowing period approached, Zhongheng Industries was unable to repay the loan, and the equity pledge crisis broke out. After consultation, China Finance Trust agreed to extend the repurchase period for half a year.

In addition to the equity pledged to Zhongrong Trust, Zhongheng Industries pledged almost all its shares in Zhongheng Group, totaling 709.095 million shares, with a market value of 354 million yuan and a pledge ratio of 90.6%. Roughly estimated, Zhongheng Industrial pledge financing amount is about 1.4 billion to 1.5 billion yuan.

Under the storm, the business of Zhongheng Group has also been greatly affected. The agent of Xueshuantong, its fist product Xueshuantong Series Products, fell into wait-and-see, which led to a sharp decline in sales of Xueshuantong, and consequently led to a sharp decrease in income earned by Zhongheng Group. This is reflected in the annual report of 2015 released a few months later: the performance of Zhongheng Group in 2015 showed a cliff-like decline, net profit decreased by 67.38% year-on-year.

At the same time, Zhao Xuewei, the former deputy general manager of the company and Xu Shuqings son, is also suspected of insider trading, bribery and other illegal acts.

In the midst of storm and storm, Guangxis state-owned capital came to the rescue.

On October 11, 2015, Zhongheng Industries and Guangzhou Investment Group signed the Share Transfer Intention Letter, which intends to transfer 20.52% of its shares to Guangzhou Investment Group.

According to the public data, Guangzhou Investment Group was established in 1988 and is an important investment and financing entity and state-owned asset management entity in Guangxi Zhuang Autonomous Region. The registered capital of Guangzhou Investment Group is 10 billion yuan. It mainly invests in and operates electric power, aluminium and finance industries. In 2018, it achieved business income of 138.8 billion yuan, total profit of 3 billion yuan and total assets of 356.2 billion yuan, ranking 128th among the top 500 Chinese enterprises.

The final transfer agreement was completed on January 23, 2016. On the same day, Guangzhou Investment Group and Zhongheng Industry signed an equity agreement. Guangzhou Investment Group received 20.52% of the shares of Zhongheng Group held by Zhongheng Industry at a price of 544 yuan per share, with a total transfer price of 3.88 billion yuan. On January 27, the Guangxi SASASAC also approved the share transfer. A few days later, Xu Shuqing resigned from all positions of chairman of the listed company.

The Problems of Recruitment Industry

The entrance of Guangzhou Investment Group is based on Guangxis ambition for the development of a healthy industry. Open information shows that since 2016, Guangxi has clearly put forward the idea of combining health care with health care to build a large health industry. Guangxi has special natural ecological conditions, such as longevity, health preservation and health. It has rich resources of traditional Chinese medicines. It is a natural pharmacy, gene Bank of biological resources and hometown of traditional Chinese medicines. It has a good foundation for the development of large-scale health industry.

The entrance examination of Guangzhou Investment Group is the first time that Zhongheng Group has handed in a good answer.

Three years after Guangzhou Investment Group became the owner of Zhongheng Group, the performance of Zhongheng Group is remarkable: in the three years from 2016 to 2018, the operating income of Zhongheng Group is 1.67 billion yuan, 2.048 billion yuan and 3.299 billion yuan respectively, and the net profit is 489 million yuan, 605 million yuan and 613 million yuan respectively.

However, the deep-seated problems of Zhongheng Group are gradually exposed along with the dramatic changes and various disturbances in the pharmaceutical industry in recent years.

With the implementation of a series of policies, such as the adjustment of the national medical insurance catalogue, the reappraisal of the effectiveness of traditional Chinese medicine injections and the centralized purchasing of medicines with quantity, the competitive pressure of many pharmaceutical industries has increased dramatically, and the prospects of Xueshuantong, the fist product of Zhongheng Group, have become variable and its sales have been greatly affected.

In addition, the step-by-step pharmaceuticals of another pharmaceutical enterprise has aroused the concern of the society about the high proportion of sales expenses of pharmaceutical enterprises, and it is difficult for Zhongheng Group to be independent.

In this regard, China Heng Group has explained to the outside world that the implementation of the two-vote system policy is the main reason. The marketing promotion work originally undertaken by the agent needs to be promoted jointly by the company and the agent. Therefore, the increase of marketing promotion fee greatly affects the increase of the current sales cost.

Another rather awkward reality is that, in sharp contrast to the continued rise in sales costs, R&D investment is a drop in the bucket. In 2018, the total R&D investment of Zhongheng Group was only 44.7449 million yuan, which only amounted to 2% of the sales expenses. The total number of employees in 2018 is 2434, but the number of R&D personnel is only 65.

Break and Stand

At the beginning of this year, Zhongheng Group ushered in a new leader Jiaoming, assistant general manager of Guangxi Investment Group Co., Ltd., who formally became chairman of Zhongheng Group on February 22. At that time, this was seen as unusual by some people who paid attention to Zhongheng Group.

In the next few months, some members of the original senior management team of Zhongheng Group resigned for personal reasons. On June 6, Ouyang Jingbo, Vice Chairman and General Manager of Zhongheng Group, announced his resignation. Less than half a month later, Liao Zhi resigned as Vice-General Manager. In addition, Cui Dingchang, former Vice-General Manager and Secretary of the Board of Directors, was dismissed this time. In the past half year, a series of major personnel changes have taken place in Zhongheng Group, and the companys director has also resigned. The Council and management have almost changed blood. Most of the previous teams were recruited from outside by Guangzhou Investment Group in a market-oriented way. The adjustment of the team shows that Guangzhou Investment Group is dissatisfied with the team. People close to Zhongheng Group said.

One detail that attracts considerable attention from the outside world is that the 2018 earnings report shows that Ouyang Jingbos annual salary alone amounts to 43.241 million yuan. All these highlight the great expectations of Guangzhou Investment Group for Zhongheng Group.

At the beginning of this year, when Jiaoming formally took over Zhongheng Group, Zhou Lian, Secretary of the Party Committee and chairman of Guangzhou Investment Group, mentioned in his internal speech that Zhongheng Group is an important enterprise in the medical and health sector of Guangzhou Investment Group. In the next stage, we should focus on the following tasks: adhering to the construction of Zhongheng, promoting the overall improvement of construction quality and level, comprehensively improving the level of enterprise management, strengthening technological research and development and product innovation, and striving to build leading pharmaceutical enterprises in Guangxi. After the Great Change of Blood, before Jiaoming and other new management levels is a Zhongheng Group which urgently needs to develop innovative business and get rid of the industry predicament.

According to the people close to Zhongheng Group, the companys interior is also dynamic and static in the past six months. Internal determination of the company is the most important way to solve the existing dilemma and strengthen R&D and M&A.

The information of a mid-year Workshop on the official website of Zhongheng Group also highlighted these two items: finding new breakthroughs through R&D innovation and cultivating new growth points through investment and mergers and acquisitions. The person said that Zhongheng Group is about to establish a large platform for drug and food research and development, integrating resources of institutions of higher learning and R&D institutions such as the Chinese Academy of Sciences, Peking University, Sichuan University, Chinese Academy of Sciences, in order to improve the level of R&D. At the level of capital operation, the pace of mergers and acquisitions is obviously accelerated. The company has set up a leading group of mergers and acquisitions, which will set up and adjust the mergers and acquisitions in the fields of biomedicine, pharmaceutical enterprises, health food and other fields in the future. In fact, Guangzhou Investment Group has been relatively open-minded, has always stressed the need to respond to the plight of the company in a market-oriented manner, but also explicitly mentioned the need to improve the incentive and performance appraisal mechanism. To some extent, a market-oriented mechanism has already been half the success of the companys entrance examination. Those close to Zhongheng Group believe that. Source: Author of Economic Observation Network: Editor-in-Charge of Hu Zhongbin: Zhong Qiming_NF5619

The information of a mid-year Workshop on the official website of Zhongheng Group also highlighted these two items: finding new breakthroughs through R&D innovation and cultivating new growth points through investment and mergers and acquisitions.

The person said that Zhongheng Group is about to establish a large platform for drug and food research and development, integrating resources of institutions of higher learning and R&D institutions such as the Chinese Academy of Sciences, Peking University, Sichuan University, Chinese Academy of Sciences, in order to improve the level of R&D. At the level of capital operation, the pace of mergers and acquisitions is obviously accelerated. The company has set up a leading group of mergers and acquisitions, which will set up and adjust the mergers and acquisitions in the fields of biomedicine, pharmaceutical enterprises, health food and other fields in the future. In fact, Guangzhou Investment Group has been relatively open-minded, has always stressed the need to respond to the plight of the company in a market-oriented manner, but also explicitly mentioned the need to improve the incentive and performance appraisal mechanism. To some extent, a market-oriented mechanism has already been half the success of the companys entrance examination. Those close to Zhongheng Group believe that.