On October 30, BBK recently announced that the company received the "Civil Ruling" served by the Xiangtan Intermediate People's Court on October 26, and the court ruled to accept the reorganization application of Dragon Food Co., Ltd. for the company. "The first share of private supermarkets" is heading for bankruptcy reorganization.
It used to have annual sales of nearly 20 billion, but now it can't afford to pay more than 3 million
According to the data, BBK Group was founded in Xiangtan, Hunan Province in 1995 by Wang Fill and Zhang Haixia, and in 2008, BBK was successfully listed on the Shenzhen Stock Exchange, when BBK's revenue reached 5 billion yuan.
In 2019, BBK's revenue reached a peak of 19.7 billion yuan, and in the 2020 list of China's top 100 chains, BBK Group ranked 12th with 815 stores and sales of 43 billion yuan (covering the business of unlisted companies). Since 2022, BBK has encountered a phased liquidity crunch. From the end of 2021 to the end of the first half of this year, the number of BBK stores in various formats dropped sharply to 181.
It is understood that Dragon Food is a local condiment company in Hunan and one of the important condiment suppliers of BBK. On July 7 this year, because BBK owed more than 3 million yuan in arrears and had no solvency, Dragon Food applied to the Xiangtan Intermediate People's Court for the reorganization of BBK Company.
The Xiangtan Intermediate People's Court held that BBK shares could not pay off the due debts and obviously lacked solvency, which met the conditions for bankruptcy reorganization. BBK shares in the supermarket, department store business for many years, in Hunan, Guangxi and other places of the retail market occupies a large market share, the store is located in the city's core business district or has a good development potential of the commercial center, the geographical position is superior, has a certain market competitive advantage. During the pre-reorganization period, all work was carried out in an orderly manner, and the recruitment of investors progressed smoothly, which can be determined to have reorganization value and the possibility of rescue. In accordance with the provisions of Article 2, Article 7, Paragraph 2, Article 70, Paragraph 1 and Article 71 of the Enterprise Bankruptcy Law of the People's Republic of China, it was decided to accept the reorganization application of Dragon Food for BBK shares.
BBK announced that because the company was ruled by the court to accept the reorganization, according to the provisions of the "Shenzhen Stock Exchange Stock Listing Rules", the company's shares will be suspended for one day on October 30, 2023, and will be subject to delisting risk warning since the resumption of trading on October 31, 2023, the stock abbreviation will be changed to "*ST BBK", the stock code will still be "002251", and the daily rise and fall of the stock price will be limited to 5%.
After the reorganization is completed, the company will apply to the Shenzhen Stock Exchange to revoke the delisting risk warning, and the company's shares will resume normal trading after approval.
Self-built real estate layout shopping malls, debt ratio continues to rise
As a retail enterprise with abundant cash flow, why does BBK have tight liquidity? The reason is that it is burdened by the high investment model of its self-built properties in the later stage.
According to the data, from 2018 to 2022, BBK has invested nearly 6.8 billion yuan in self-built real estate to lay out shopping malls, which also makes its debt ratio continue to rise. From 2018 to 2022, BBK's asset growth could not keep up with the rise in debt, with the debt ratio increasing from 58% in 2018 to 81% in 2022.
On July 9, 2021, the groundbreaking ceremony of Pingjiang BBK Xintiandi (picture from the official website of BBK Real Estate)
Chairman Wang Chu also said that BBK invested billions of dollars in building a shopping center, but suddenly encountered a financial crunch and failed to apply for sufficient loans from banks, resulting in cash flow problems.
To this end, BBK sold part of the business to make up for the losses.
According to Jiemian News, an investor survey shows that BBK has 53 self-built department stores since 2021, occupying a huge amount of capital, in order to stop losses, BBK has previously sold the business in the Chongqing market to Chongqing Department Store, sold the electrical business to JD.com, and returned the focus to supermarkets and department stores.
In addition, BBK's own retail business failed to successfully transform itself under the impact of multi-format competition such as e-commerce and community group buying, resulting in a decline in revenue for three consecutive years.
What further plunged BBK into the cash flow abyss was a wave of concentrated shopping runs triggered by BBK cardholders in June last year. At that time, there was unfavorable news about BBK in the market, and customers with BBK prepaid cards poured into BBK's supermarkets and shopping malls, frantically swept the goods and cleared the cards, and the run crisis broke out.
In exchange for a respite, in January 2023, BBK exchanged 10% of the shares for 518 million funds, at the cost of Wang Filling losing his controlling stake in BBK, and Xiangtan SASAC took over and became the actual controller of BBK.
13 of its wholly-owned subsidiaries submitted applications for reorganization
On October 11, BBK announced that in order to simultaneously resolve the business crisis and debt risk and preserve the company's operating value to the greatest extent, its nine wholly-owned subsidiaries had submitted a reorganization application to the relevant court on October 10, but there is still uncertainty about whether the application can be accepted by the court and whether it will enter the reorganization procedure.
BBK said in the announcement that these 9 companies are mainly engaged in supermarkets and department stores, and together with BBK they form a business ecosystem, and they have fallen into debts and operational difficulties to varying degrees, all of which belong to the situation of "unable to pay off due debts, and assets are insufficient to pay off all debts or obviously lack solvency" stipulated in the "Bankruptcy Law", which meets the conditions for reorganization.
BBK said that if these subsidiaries can implement reorganization and coordinate with the reorganization, make overall use of debt repayment resources to restructure debts, and revitalize assets and improve operating conditions by introducing investors to inject incremental resources, they can maximize their core operating value and comprehensively resolve debt and operating risks.
In fact, this is not the first time that a wholly-owned subsidiary of BBK has submitted a reorganization application.
On September 15 this year, four other wholly-owned subsidiaries of BBK submitted reorganization applications to the relevant courts, and the relevant courts have ruled to accept the reorganization applications of two of the companies.
The loss of the sum of the net profit of the previous years in one year triggered an inquiry from the Securities Regulatory Commission
In 2022, BBK will lose 2.544 billion yuan, more than the sum of its net profits since its listing in 2008, and at the same time, BBK's revenue has been in decline for three consecutive years.
This huge loss has also triggered inquiries from the Securities Regulatory Commission. In the 2022 annual report inquiry letter reply announcement, BBK said that in addition to the impact of the general environment and goodwill impairment, since 2021, it has closed and transferred stores with low performance and no hope of turning around losses - 52 stores will be closed in 2021, and 139 stores will be closed in 2022 due to the strategic adjustment of supermarkets (withdrawing from the Sichuan and Jiangxi markets), resulting in a large store closure expenditure.
In addition, recently, due to the large difference between the 2022 performance forecast and the audited net profit, BBK received a warning letter from the Hunan Securities Regulatory Bureau.
According to the warning letter, after investigation, on January 16, 2023, BBK disclosed the "2022 Performance Forecast", and it is expected that the net profit attributable to shareholders of listed companies in 2022 will be a loss of 13000000 yuan - 1950000 yuan. On April 28, 2023, the "2022 Annual Report" disclosed by the company showed that the audited net profit in 2022 was a loss of 254361 million yuan.
The estimated net profit disclosed by BBK in the "2022 Annual Results Forecast" is quite different from the audited net profit in 2022, which violates the provisions of Article 3, Paragraph 1 of the Administrative Measures for Information Disclosure of Listed Companies (Decree No. 182 of the CSRC). In accordance with the provisions of Article 52 of the Administrative Measures for Information Disclosure of Listed Companies, the Hunan Securities Regulatory Bureau decided to take administrative supervision measures to issue a warning letter to the company, which will be included in the integrity file of the securities and futures market.
BBK said that after receiving the warning letter, the company and relevant personnel attached great importance to the problems raised in the warning letter, deeply reflected on the problems and deficiencies in the company's information disclosure work, and the company strictly followed the requirements of the Hunan Securities Regulatory Bureau, actively rectified, and implemented internal accountability. The company will strengthen the study and comprehension of the relevant laws and regulations such as the Administrative Measures for Information Disclosure of Listed Companies by directors, supervisors and senior managers, further standardize the company's operation level, continuously improve the quality of information disclosure, and earnestly fulfill the obligation of information disclosure in accordance with the law, so as to prevent the recurrence of such incidents.
According to the financial report, in the first half of this year, BBK's revenue was about 1.788 billion yuan, a year-on-year decrease of 69.29%; The net loss was about 449 million yuan, a year-on-year decrease of 2162.98%. As of June 30 this year, BBK's current assets totaled about 1.542 billion yuan, non-current assets of about 23.580 billion yuan, current liabilities of about 13.926 billion yuan, and non-current liabilities of about 6.578 billion yuan.
At present, it seems that the new owner has obviously not been able to give in to the bail-out. BBK announced that the company's liquidity shortage has not been fundamentally solved, and the shortage of supermarket stores is serious, and BBK's current operation has been greatly affected.
Whether bankruptcy reorganization can rejuvenate the "first share of private supermarkets", Tiantian Consumption will remain concerned.