Overseas subsidiaries acquired by heavy investment have poor performance
Interface news reporters noted that on May 3, 2018, SEMA clothing announced the acquisition of 100% equity and creditors rights of sofizasas, with a transaction price of 110 million euros (about 844 million yuan). SEMAR said that through the acquisition of sofisasas, it would achieve the purpose of acquiring all the assets of kidiliz group. Sofizasa owns 100% equity of kidiliz group and is the only shareholder of kidiliz group.
Founded in 1962 in the south of France, kidiliz group has gradually developed into a leading enterprise in the middle and high-end childrens wear industry in Europe. It has 10 own childrens wear brands and 5 authorized business brands. It provides diversified product choices from middle end to high-end positioning, from newborn to teenagers, and from different ages.
Headquartered in Paris, France, kidiliz group has 8 subsidiaries worldwide, with 11000 sales outlets and 829 stores. Its main businesses include: Z brand business, absorba brand business, catmini brand business, kidiliz multi brand collection store business; authorized brand business mainly includes kenzokids, Levis kids, Paul Smith Junior, etc., and other private brand approval Development business and e-commerce business.
As of December 31, 2017, the total assets of kidiliz group were 496 million euro, and the total liabilities were 210 million euro. In 2017, the operating revenue was 427 million euro, the pre tax net profit was - 24 million euro, and the after tax net profit was - 27 million euro.
After the completion of the acquisition, sofizasas was incorporated into the scope of the merger of SEMAR apparel on October 1, 2018. However, judging from the performance of sofizasas, it is obvious that the expected acquisition effect has not been achieved. In the fourth quarter of 2018, 2019 and January March 2020 (without audit), the operating revenue of sofizasas was RMB 795 million, RMB 3.024 billion and RMB 560 million respectively, and the total profit was RMB - 48.8358 million, - 307 million and - 121 million respectively.
Semir apparel said that novel coronavirus pneumonia business continued to decline in the main business of Kidiliz group, and its business was decreasing year by year. The main business losses were serious and the losses were magnified. Especially after the outbreak of the new crown pneumonia outbreak in the world, Kidiliz group and the whole European market economy suffered heavy losses and the risk of operation was further increased. The main business areas of Italy were also suffering from a new outbreak of the new crown pneumonia outbreak. Amplification will have an adverse impact on the companys performance and bring significant uncertainty to the companys future operating performance. Through the sale of sofizasas, the company realized the divestiture of the assets and business of the kidiliz group, which helps to reduce the operational risk and avoid greater loss of performance.
Cheng Weixiong, a textile and garment brand expert and general manager of Shanghai Liangqi Brand Management Co., Ltd., analyzed that the development of kidiliz in the Chinese market was not in line with the local conditions, and the business risks in the international market were also gradually increasing, and the loss was becoming increasingly serious. Considering the performance, it was not unreasonable for the company to separate it.
Childrens wear business has become a performance support
It is worth noting that although the overseas childrens wear business is not well developed, the domestic childrens wear business of SEMAR seems to have become the performance support of listed companies.
According to the annual report of SEMA clothing in 2019, Balabala brand occupies the absolute advantage of childrens clothing market, ranking first in domestic market share for many consecutive years. From the financial data, the operating income of childrens clothing business of the company was 12.663 billion yuan, accounting for 65.49% of the total revenue, with a year-on-year increase of 43.5%; the revenue of leisure clothing was 6.544 billion yuan, accounting for 33.84% of the total revenue, with a year-on-year decrease of 3.64%.
In 2019, the net profit of childrens clothing business was 5.833 billion yuan, with a year-on-year increase of 56.5%. Cheng Weixiong said that in recent years, it is because of Balabalas childrens clothing business support that SEMA clothing can go to today. With the continuous layout of many enterprises, it is a big challenge for the childrens clothing business of SEMA clothing.
Although childrens clothing business has achieved rapid growth, this year, affected by the epidemic, the overall performance of SEMA clothing is in a downward trend. In the first quarter of 2020, the revenue of SEMAR clothing was 2.738 billion yuan, a year-on-year decrease of 33.51%; the net profit attributable to shareholders of listed companies was 14.7825 million yuan, a year-on-year decrease of 94.96%.
After announcing the sale of its 100% stake in sofizasas, semma apparel received a letter of concern from the Shenzhen Stock Exchange. Since sofiza was sold to the person acting in concert of the companys controlling shareholders, the letter of concern asked SEMAR to explain whether the transaction formed horizontal competition, and if so, how to solve the horizontal competition. The letter of concern also requires the reasons and rationality of selling sofiza again in a short period after the completion of the acquisition, the creditors rights and debt relationship between the company and sofiza, and whether the sale of sofiza will lead to capital occupation or financial assistance by the controlling shareholders.
In addition, the Shenzhen Stock Exchange also pays attention to the total amount of funds invested by SEMAR clothing during the period of holding sofiza, and whether the benefits generated by the capital investment meet the expectations. If not, it is required to analyze the reasons specifically, and explain whether there is benefit transmission when the assets are sold to the persons acting in concert of the controlling shareholders after making a large investment in sofiza.
Since the announcement of the sale of sofiza, the share price of SEMA clothing has risen for three consecutive days. Although the share price fell on July 24, it still increased by 22% compared with the closing price of 6.81 yuan on July 20.