"Ten miles of Nanjing Road, a new world." For a century-old Chinese long-established enterprise, New World, a well-known brand in the Shanghai retail industry, the company's development in the past few years is somewhat "bleak": the new consumption model has impacted traditional department store retail, the epidemic has aggravated the decline of the main business, and the continuous low valuation has attracted "barbarians" to knock on the door.
It is worth thinking about that although the alarm for the control of the new world has been lifted, from the perspective of its own operation, the overall performance has shown a downward trend is an indisputable fact, and how to effectively transform and boost the main business is a problem that the new world cannot avoid.
After hours on October 28, New World's latest three-quarter report showed that the company's revenue and net profit in the third quarter were still difficult to say optimistic.
Third-quarter results fell short of expectations
"Since 2017, under the impact of new consumption models such as online shopping and live streaming, the company's department store retail industry has been affected by it, and the net profit has declined; in 2019, the company upgraded and transformed, and the sales and profit losses during the store closure period were larger; in 2020, affected by the epidemic, the company's department store retail industry and hotel service industry revenue and profit declined." This is New World's recent public reply to the business situation, and a few words have roughly outlined the company's business dilemma in recent years.
However, this situation does not seem to have improved significantly in the company's latest disclosure of the third quarter of 2021.
Financial data show that in the first three quarters of this year, New World's operating income was 844 million yuan, an increase of 17.29% year-on-year; net profit was 81.1201 million yuan, an increase of 329.4% year-on-year. However, some analysts believe that the company's large net profit growth in the first three quarters is not unrelated to the low performance base last year, excluding these abnormal factors, the company's performance is still lower than expected.
According to the data, the company's net profit in the first half of last year was less than 200,000 yuan affected by the epidemic, and the first three quarters were only more than 18 million yuan. In other words, the increase in net profit under a low base does not objectively reflect the true business situation of the company.
In the third quarter of this year, the company achieved revenue of 283 million yuan, a slight increase of 0.78% year-on-year; net profit of 19.5077 million yuan, an increase of 4.34% year-on-year. "In the third quarter of last year, all walks of life have begun to recover, and the indicators in the third quarter are relatively objective, but compared with the same period last year, after a series of measures such as improving quality and efficiency of New World City proposed by the management of New World, the company's performance in the third quarter of this year may not meet the standard." The analyst said.
On the other hand, if you look at it from a month-on-month basis, the relevant operating indicators of the New World even show signs of decline. Compared with the second quarter of this year, the company's revenue and net profit in the third quarter decreased by 2.99% and 48.55% respectively. In contrast, the company's revenue and net profit in the second quarter increased by 8.26% and 60.01% respectively.
Department stores are in decline
New World also announced the third quarter operating data while disclosing the third quarter report. Combined with the operating data of the first half of the year, the relevant indicators have also declined to a certain extent.
According to the announcement, the revenue of joint venture and self-operated sales of New World Department Store's business from July to September was 67.65 million yuan and 6.17 million yuan, respectively. Compared with the same period last year, the business's joint sales revenue even declined year-on-year.
In addition, in terms of quarters, the corresponding data of the business in the first quarter of this year were 77.36 million yuan and 4.53 million yuan, and the corresponding data of the second quarter were 80.86 million yuan and 4.6 million yuan, respectively.
In terms of gross profit margin, in the third quarter of this year, the gross profit margin of the joint venture and self-operated sales of New World Department Store was 70.73% and 8.1% respectively, while the corresponding data in the first half of the year were 72.56% and 8.43%, respectively.
Under the impact of the e-commerce model, the traditional department store retail industry has been struggling in recent years, and the gradual decline of the department store retail industry has almost become the consensus of the industry. Taking New World as an example, in the main revenue structure composed of department store commerce, pharmaceutical sales, hotel service industry and other businesses, compared with other incomes, the revenue scale of department store business has shown a downward trend year by year.
Source: Wind
According to the data, from 2017 to the end of the first half of 2021, the commercial revenue of New World Department Store was 1.943 billion yuan, 1.889 billion yuan, 779 million yuan, 296 million yuan and 167 million yuan, respectively.
"New World City's New World City store is strategically located and is a major source of revenue for the company's commercial sector." Some industry analysts told reporters that due to the pressure of transformation, New World City closed its stores for decoration in March 2019 and did not officially open until the end of that year, "During the closure period, the company's operating pressure was huge, which also shows that the company's dependence on a single project in New World City is more serious." ”
It is also in 2019, after experiencing the impact of e-commerce and the impact of store closure transformation, the net profit of New World fell to the bottom and has not yet recovered.
In order to renovate the New World City, the company's short-term borrowings also increased from 200 million yuan at the end of 2018 to 800 million yuan at the end of 2019, an increase of 300% year-on-year. According to the third quarter report of this year, the company's short-term borrowings remain at a level of about 800 million yuan.
The decline in sales revenue due to the closure of the store and the impact of the epidemic has also shown a downward trend in the overall net cash flow of operating activities in new world in recent years. In 2019, the company's net cash flow from operating activities plummeted by 81% from 2018 to about 63 million yuan. At the end of the first three quarters of this year, the indicator was about 134 million yuan (less than half of 2020), and the overall level was still hovering at a low level.
The big health plate may encounter bottlenecks
In the face of difficulties, New World has pinned its hopes on diversification in order to alleviate the pressure from the department store business, and one of the important directions is to expand the big health business.
In June 2015, New World announced a non-public offering plan, at which time the company planned to raise about 1.7 billion yuan to four investors, including the controlling shareholder. At the same time, the company intends to acquire the remaining 40% equity of Cai Tongde Pharmaceutical held by New World Group. The company said that after the completion of the transaction, New World will establish a health care industry chain with Cai Tongdetang as the core and a traditional Chinese medicine diagnosis and treatment industry chain for tumors and incurable diseases with Qunli Herbal Shop as the core.
It is worth mentioning that in the revised draft of the fixed increase plan at the end of 2015, the issuance object of the above fixed increase has been reduced to the Chengding No. 1 asset management plan and Zan Shengda's Variety Holdings, and the Huangpu District State-owned Assets Supervision and Administration Commission and New World Group that appeared in the plan have disappeared. According to the final offering report, Chengding No. 1 Asset Management Plan subscribed for 30.5512 million shares, and Variety Holdings subscribed for 84.5249 million shares, of which the former had reduced its holdings to less than 9 million shares as of the end of the third quarter of this year, while Variety Holdings had not changed its shareholding since it officially entered the market in September 2016. This also laid the groundwork for the follow-up Shen Guojun and Zan Shengda to join forces to stage the "Barbarian at the Door".
According to the announcement, at that time, the new world fixed increase price of 11.43 yuan / share, Zan Shengda used nearly 1 billion yuan of funds. However, with the company's stock price constantly withdrawing, Zan Shengda, who has taken out "real money and silver" to support the transformation of the new world, has lost a large degree of floating losses.
However, from the perspective of financial reports over the years, New World pharmaceutical sales have indeed grown into one of the company's main businesses, but in recent years, the development has begun to encounter bottlenecks. According to financial data, from 2016 to the first half of 2021, the revenue of New World Pharmaceutical business was 821 million yuan, 798 million yuan, 594 million yuan, 649 million yuan, 602 million yuan and 298 million yuan, respectively.
Source: Company Announcement
According to New World's semi-annual report this year, except for Cai Tongde Pharmaceutical, the rest of Hu Qingtang and Qunli Herbal Medicine have not shown strong growth momentum. A sign also shows that the big health industry in the new world at this stage seems to be mainly based on Cai Tongde as a breakthrough point. At the end of September this year, New World disclosed that the State-owned Assets Supervision and Administration Commission of Huangpu District agreed to increase the capital of Cai Tongde Pharmaceutical to Xu Chongdao Chinese Medicine Tablet Company, and after the completion of the capital increase, Cai Tongde Pharmaceutical held 80% of the shares and Shanghai Pharmacy held 20% of the shares.
On the other hand, the hotel service business, which is defined by New World as "survival in danger", also seems to have little relevance to the future transformation of New World. According to the disclosure, the company's hotel business revenue in the third quarter of last year was 24.3 million yuan, compared with 25.01 million yuan in the same period of this year, which shows the difficulty of operation.
The change of board of directors has been continuously postponed
Back in late August last year, due to a termination agreement, Shen Guojun, the head of the "Yintai Department" who had formed an alliance and coveted the controlling right of new world, and Zan Shengda, who was at the helm of the "Variety Show Department", announced that they would no longer seek a controlling stake in New World. The acquisition also ended with the successful "ShouHuan" of the State-owned Assets Supervision and Administration Commission of Shanghai Huangpu District, the actual controller of New World.
For this "episode", at that time, some insiders believed that the low valuation caused by poor profitability was one of the core reasons why New World became the acquisition target, and the entrants also tried to reconstruct the "imagination space" on the grounds of the rediscovery of the value of traditional commercial retail listed companies.
As the dust settles on the controlling stake, New World's share price has gone all the way down after climbing to a recent high on July 13 last year.
On August 17 this year, New World Disclosure received a regulatory work letter clarifying regulatory requirements on matters such as the postponement of the company's board of directors and supervisory board. Looking at the announcement, the company issued an announcement as early as June last year that the term of office of the tenth board of directors and the board of supervisors will expire on June 27, 2020, in view of the nomination of the candidates for the eleventh board of directors of the company and the candidates for the supervisors of the eleventh board of supervisors is still in planning, in order to maintain the continuity of the work of the board of directors and the board of supervisors of the company, the replacement of the board of directors and the board of supervisors of the company will be postponed.
As we all know, the board of directors of listed companies has a number of powers such as the appointment and dismissal of senior executives, the convening and proposal of shareholders' meetings, and major business decisions, and the seat on the board of directors is also crucial to the stability of the company's control.
An investment banker in Shanghai told reporters that in practice, most of the cases in which the change of office has been postponed, and there is more or less a game of shareholders' control over the company. However, the Company Law does not clearly state whether it is possible to hold office for an extended period of time, and the articles of association generally do not specify it, so it is feasible to postpone the change of office in the strict sense.
However, the investment banker also believes that in practice, most companies will issue announcements in a timely manner to explain the reasons for the postponement of the change, especially for listed companies that have just experienced a controlling right dispute, the regulator and the market will pay more attention to the disclosure, so they should pay more attention to the disclosure of relevant matters.
Editor: Cao Shuai