Search For Special Transformation Into A Blank

In November 2010, 002503.SZ IPO raised 1 billion 500 million yuan and listed on the small and medium sized board, mainly engaged in the design and sales of "fashion front" brand youth casual wear products.

After the listing, the growth rate has not diminished. But in 2013, with the pressure of the domestic economic downturn, the growth of the domestic clothing consumption market slowed down, the strong invasion of the international leisure brands, and the vigorous development of e-commerce, in 2013, it encountered a bottleneck and bid farewell to the rapid growth. Cash flow from operating activities for the first time was -3281.14 yuan, far less than the 303 million yuan in 2012.

Then, in 2014, search results fell sharply, and cash flow from operating activities continued to run out of money, -4411.66 million yuan.

Then, in 2015, following the hottest topics in the clothing industry -- mergers and acquisitions, integration, and cross boundary search, we launched 10 brand sub brands on the one hand and implemented the upgrading of the company's brand. On the other hand, by strengthening internal management, improving product design level, optimizing sales channels, supporting franchisee development and improving the "fast fashion" mode and other measures, the sales performance of the company's brand clothing has been greatly increased. At the same time, it is seeking transformation and upgrading, and has formulated a new development strategy plan for the company.

According to the new development strategy of search special, the company has established several supply chain management and brand management companies to provide efficient and low-cost value-added services such as centralized procurement, warehousing, distribution, store management, commodity display, marketing and promotion for many businesses and customers. The development goal has changed from "become a leading and internationally known youth casual wear brand enterprise" at the time of listing to "become China's leading fashion lifestyle industry comprehensive service provider".

Transformation brings rapid growth

This development strategy has enabled the company to resume rapid growth in a short time.

In 2015, the search business revenue, net profit and net profit were 1 billion 983 million yuan, 194 million yuan and 183 million yuan respectively. In 2016 and 2017, the operating revenue of the search company was 6 billion 324 million yuan and 18 billion 349 million yuan respectively, up 218.93% and 190.14% compared with the same period last year. Net profit was 362 million yuan and 613 million yuan respectively, up 86.48% or 69.43% over the same period last year. However, operating income in the first half of 2018 and 2019 was 18 billion 519 million yuan and 6 billion 88 million yuan respectively, up 0.93% and -44.11% compared with the same period last year, with net profit of 369 million yuan and 185 million yuan, up by -39.72% and -56.94% compared with the same period last year.

The explosive growth of supply chain management has become the main source of revenue and profit.

In the year of 2016, the supply chain management company under its special unit achieved a total operating income of 4 billion 300 million yuan, accounting for 68.37% of the total business income of the whole year, and realized a net profit of 170 million yuan, accounting for 46.92% of the company's net profit.

In 2017, the supply chain management company achieved a total operating income of 14 billion 800 million yuan, accounting for 80.68% of the total business income of the whole year, and realized a net profit of 462 million yuan, accounting for 75.38% of the company's net profit.

In 2018, supply chain management companies increased by 4.09% over the same period last year, and realized operating income of 15 billion 400 million yuan, accounting for 83.20% of the company's total annual revenue. However, the gross profit margin declined, making the related net profit decrease by 39.01% compared with the same period last year, achieving a net profit of 282 million yuan, accounting for 76.26% of the company's net profit for the whole year. Supply chain management is still a source of revenue and profit for major businesses.

In the first half of 2019, the supply chain management company achieved a total operating income of 5 billion 83 million yuan, accounting for 83.49% of the total revenue of search and sales, which was 44.01% lower than the same period last year. Because the atomic company Shaoxing Xing Lian Supply Chain Management Co., Ltd. (hereinafter referred to as "Shaoxing Xing Lian") was changed from a controlling subsidiary company to a joint venture enterprise in October 2018, and no longer included in the consolidated statement of the company (Shaoxing Xing Lian achieved 1 billion 883 million yuan in the same period last year). Moreover, the net profit of supply chain management companies also dropped to 69 million 316 thousand and 200 yuan, down 70.40% from the same period last year.

Investment projects are expected too well.

In October 2016, in search of special funds raised by non-public offering of stock, 2 billion 500 million yuan was raised, and investment projects were expected to generate 29 billion 505 million yuan in third years. According to the entry threshold of 2019 Chinese top 500 companies for 32 billion 325 million yuan, it is also a step away from the top 500. Coupled with the original business, search in the specific hope to enter the top 500?

One of the projects to be invested is to set up a wholly owned subsidiary, "Dongguan search special supply chain management Co., Ltd.", to develop a supply chain management project around the fashion industry. The total investment of the project is 1 billion 200 million yuan. It is estimated that the sales revenue will be increased by 10 billion yuan, 17 billion yuan and 22 billion 700 million yuan in the next three years. It is estimated that the net profit of the fashion industry supply chain management project in the next three years will be 222 million yuan, 361 million yuan and 474 million yuan respectively.

Two of the project is the establishment of a wholly owned subsidiary, "Dongguan search special brand management Co., Ltd.", to carry out brand management projects around the fashion industry. The total investment of the project is 500 million yuan. It is estimated that in the next three years, new business revenue will be increased by 1 billion 400 million yuan, 3 billion 640 million yuan and 6 billion 804 million yuan, respectively. The net profit attributable to shareholders of listed companies is 43 million yuan, 108 million yuan and 194 million yuan.

When the funds were in place, they began to expand in large scale.

Since the second half of 2017, the company has announced that it intends to set up East China regional headquarters in Zhen Ze town, Wujiang District, Suzhou, with its own funds no more than 500 million yuan, and to set up southeast regional headquarters in Nanchang economic and Technological Development Zone with 1 billion 200 million yuan in its own capital. It plans to invest 1 billion 50 million yuan to set up a fashion industry supply chain base in Dongguan road Kau Town, and plans to invest 2 billion 500 million yuan in Shatin Town, Dongguan. The industry's supply chain management center projects utilize the high-quality location resources of these regions to further promote the development of the supply chain management business.

The actual benefits of the project were 144 million yuan, 491 million yuan, 252 million yuan and 68 million 324 thousand and 700 yuan in the first half of 2016 and 2018 respectively, which amounted to 956 million yuan, which was very good. However, there were still many gaps in the expected benefits of 1 billion 402 million yuan in the three years. Moreover, the best record in 2017 has rapidly declined.

If this recession continues, the equity investment projects will probably end up in huge losses. After all, a huge amount of assets and interest bearing liabilities are brought by investing in huge profits, and assets are faced with great risk of impairment loss. Interest bearing liabilities need to pay a large amount of interest.

When operating income has not exceeded 20 billion yuan, the search has begun to decline, and it seems to be getting further away from the top 500.

Fog of supply chain

Search for the transition to supply chain management, it is reported that the supply chain management company as a platform for operation, in the country's textile and garment industry cluster areas and partners to invest in the establishment of a subsidiary company, converging the region's supply chain resources and market resources, the use of the company for many years in the centralized procurement, design and development, production management and warehousing, distribution and other aspects. To provide efficient and low-cost supply chain services for customers of fashion industry, such as brand manufacturers and manufacturers, and to build a supply chain service system with wide coverage and strong supply capability in the whole country. During the reporting period, the company has 12 supply chain management subsidiaries in various parts of the country.

From the related description, it is a very good mode to provide value-added services. The purchase is done with orders, which avoids the risk of backlog and avoids the risk of downloading of inventory prices. Giving customers a longer account period, providing advance payment support to suppliers and a relatively short payment cycle, tightly linking customers and suppliers.

From the perspective of relevant financial data, the search is running counter to its strategy.

Because of the support of customers and suppliers, the amount of accounts receivable (the amount of provision for bad debts preparation) increased from 534 million yuan at the end of 2015 to 1 billion 710 million yuan at the end of 6 in 2019, and the advance payment increased from 261 million yuan to 1 billion 578 million yuan. But from the inventory point of view, it is far from reliable. From the end of 2015 to the end of 2018, the inventory at the end of each year (the amount of provision for the provision of inventory depreciation) was 634 million yuan, 1 billion 264 million yuan, 1 billion 902 million yuan and 2 billion 745 million yuan respectively, and 3 billion 467 million yuan at the end of 2019 in 2019. In 2018, business income and operating costs increased by 171 million yuan and 446 million yuan respectively compared with 2017, but the stock increased by 843 million yuan. In the first half of 2019, operating income was 6 billion 88 million yuan, down 4 billion 806 million yuan compared with the same period last year, operating cost was 5 billion 555 million yuan, and the decrease was 4 billion 455 million yuan compared with the same period last year. In 2019, the stock at the end of 2019 increased by 901 million yuan compared with the end of 2018.

In the 2019 semi annual report, she found that since the second half of 2018, the company has been slowing down the growth of supply chain management business, thanks to the impact of Sino US trade friction and weak market consumption. At the same time, as the price of raw materials such as cotton and cotton yarn decreased in the first half of 2019, the level of gross margin of supply chain management decreased.

Since the industry continues to descend in the future, the company also slows down the growth rate on its own initiative. Why not slow down the growth rate of the inventory, but it is still increasing rapidly? Is it already deviating from the strategic direction of the company providing value-added services? If we provide value-added services, is it necessary to swallow so much inventory? And, according to the company, the company is concentrating the customer's orders to the suppliers again. Orders, inventory delivery speed should not be slow, stay in the company will not be very long, why inventory so much?

Let's take a look at accounts payable. At the end of 2015, 82 million 718 thousand and 600 yuan and 132 million yuan at the end of 2018 increased by 48 million 905 thousand and 700 yuan. In 2015, the operating income was 1 billion 983 million yuan, the operating cost was 1 billion 258 million yuan, the operating income in 2018 was 18 billion 519 million yuan, the operating cost was 17 billion 42 million yuan, the operating cost increased by 1255.10%, and the accounts payable increased by 40.88%. In 2018, the average daily operating cost was close to 50 million yuan, so the supplier's account period was only 3 days. Then look at the advance payment, which is 1 billion 622 million yuan at the end of 2018, which is far more than the accounts payable. That is to say, it is very good for suppliers.

In fact, there are not enough funds in search of special funds, so we have to raise funds through various channels, including but not limited to issuing bonds, loans and bills. At the end of 2018, the amount of notes payable was 1 billion 762 million yuan, compared with 277 million yuan at the end of 2015, and short-term loans increased from 168 million yuan to 1 billion 577 million yuan. The substantial increase in interest bearing liabilities has led to a substantial increase in financial costs. From $41 million 68 thousand and 700 in 2015 to $181 million in 2018, interest payments increased from $45 million 245 thousand and 800 to $149 million, and bank charges and other charges increased from $1 million 169 thousand to $14 million 18 thousand.

At the end of 2018, total accounts receivable, prepayment and inventory totaled 6 billion 323 million yuan, accounting for 62.19% of total assets. Inventory is facing the risk of unsalable and falling prices. It is too risky to search for too many commitments. At the end of 9 2019, the total assets of the three assets continued to increase to 7 billion 327 million yuan, the proportion of total assets increased to 65.62%, and the risk continued to accumulate.

The operating income of search supply chain management is mainly reflected in material trading. In 2015, the income of material trading was 295 million yuan, accounting for 14.88% of business revenue and 9.17% of gross profit margin. In 2016, the income of material transactions was 4 billion 444 million yuan, accounting for 70.15% of operating income and 7.70% of gross profit margin, and became the main source of revenue of the company. In 2017, the income of material trading was 15 billion 558 million yuan, accounting for 84.88% of business income and 6.93% of gross profit margin. In 2018, the income of material transactions was 15 billion 840 million yuan, 85.65% of gross income and 5.27% of gross profit margin. In the first half of 2019, the income of material transactions was 5 billion 41 million yuan, accounting for 82.94% of operating income and 4.55% of gross profit margin. Despite the rapid increase in material trading revenue, gross margin has been declining, from 9.17% in 2015 to 4.55% in the first half of 2019.

Another business is developing rapidly. Fashion electronics, home textiles and other products only recorded 11 million 178 thousand and 500 yuan in 2016, 1 billion 217 million yuan in 2017, 1 billion 127 million yuan in 2018, and 359 million yuan in the first half of 2019.

Generous dividends

In October 2016, it was searched for $2 billion 500 million on the issue of public offerings, followed by generous dividends. In 2017, the cash dividend was 625 million yuan, exceeding the net profit of that year. Several cash dividends before 2017 totaled only 112 million yuan. If there are no good projects and sufficient funds, such cash dividends are understandable. But the search for special funds is still relatively tight.

At the end of 2015, 396 million yuan of Monetary Fund was available, of which 1/3 had been pledged. Due to the transformation, the net cash flow of operating yuan in 2016 was 612 million yuan, and the net outflow in 2017 was more than 882 million yuan. In order to solve the funding problem, the search increased by 1 billion yuan at the end of 2017. When the expected benefits of investment projects are very substantial, search for tannin's willingness to borrow money also requires large sums of money for dividends rather than funds left behind for company development.

Ma Hong, as a major shareholder, is naturally the biggest beneficiary of cash dividends. As of February 14, 2020, Ma Hong and his co operative persons held 1 billion 125 million shares of the company, accounting for 36.39% of the total share capital of the company, and used 688 million shares of the pledge (corresponding to the balance of 840 million yuan), accounting for 61.17% of their shares. In recent trading days, Ma Hong's stock price has risen by about 40%. In February 14, 2020, the total value of the search company was 6 billion 927 million yuan, and the shares of the company held by him and its co operators were about 2 billion 521 million yuan, which was about 3 times the amount of financing. However, the performance of the search firm is still declining rapidly, and the company's share price is under some pressure, coupled with the huge three assets.

Is the black swan in the fourth quarter still coming?

In the three quarter earnings report of 2018, he found that the net profit attributable to shareholders of Listed Companies in 2018 was -5.00% to 10%. The reason for the slowdown is: in the second half of the year, in order to adapt to the changes in the market environment, we optimized the supply chain business mode, strengthened the supply chain business management, and adjusted the development speed of the supply chain business, thus slowing the supply chain business.

In January 29, 2019, profits in 2018 were also forecast to decline by 45%-25% over the same period last year. The reason is that the supply chain management in the fourth quarter declined due to the changing market environment. As the company's financing costs increase, the financial expenses to be paid will increase considerably compared with the same period last year. At present, the garment industry is under great pressure. With the increase of inventory, we need to make adjustments according to the market changes.

In the first three quarters of 2018, the performance was better, with a loss of 194 million yuan in the fourth quarter. By comparison, in the four quarter of 2019, will the search engine get even worse in the same period?

First look at the 2018 four quarter loss data analysis: operating income is less than the other quarters 1 billion -20 billion yuan, gross profit margin decreased; period costs compared with other quarters did not decrease; asset impairment losses (the first three quarters of 5 million 950 thousand yuan, while the four quarter 174 million yuan. The loss of assets impairment mainly refers to provision for bad debts and inventory depreciation, and the investment loss is 93 million 260 thousand yuan.

Let's take a look at the first three quarters of 2019. The provision for bad debts in the first quarter of the year is 34 million 965 thousand and 900 yuan, which is included in the newly opened subject, the credit impairment loss.

In 2018, the credit loss was 58 million 121 thousand and 200 yuan, and the impairment loss of other assets was 122 million yuan (of which 102 million yuan was inventory), totaling 180 million yuan. That is to say, in search of the financial situation and operating situation in the first three quarters of 2019, the loss of assets impairment in 2019 is entirely possible to exceed 2018.

On the last day of 2019, in search of special announcement, the audit institution of the annual financial report was changed from Tianjian accounting firm to Asia Pacific (Group) accounting firm. After 12 years, the audit agency went away. It is worth looking at the earnings report in 2019.