居然之家(000785) - 2018 Q4 - 年度财报

Section I Important Notice, Table of Contents, and Definitions This section provides an important notice, the table of contents, and definitions relevant to the report Important Notice The company's board of directors, supervisory board, and senior management ensure the truthfulness, accuracy, and completeness of this annual report, with all directors attending the review meeting, and no profit distribution planned for 2018 - Company management guarantees the truthfulness, accuracy, and completeness of the report content and assumes corresponding legal responsibilities[3] - The company plans not to distribute cash dividends, bonus shares, or convert capital reserves into share capital for 2018[3] Section II Company Profile and Key Financial Indicators This section outlines the company's basic information and presents its key financial performance metrics Company Basic Information Wuhan Zhongshang Group Co., Ltd. (stock code: 000785) is a Shenzhen Stock Exchange-listed company with no significant changes in its main business since listing Company Basic Information | Item | Content | | :--- | :--- | | Stock Abbreviation | Wuhan Zhongshang | | Stock Code | 000785 | | Listing Exchange | Shenzhen Stock Exchange | | Legal Representative | Hao Jian | Key Accounting Data and Financial Indicators In 2018, revenue slightly increased by 1.18% to 4.04 billion dollars, but net profit attributable to shareholders significantly decreased by 81.44% to 66.36 million dollars due to large asset disposal gains in the prior year, while non-recurring adjusted net profit grew by 135.16%, indicating improved core business profitability 2018 Annual Key Financial Data | Indicator | 2018 | 2017 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Operating Revenue (dollars) | 4,043,730,920.64 | 3,996,625,654.56 | 1.18% | | Net Profit Attributable to Listed Company Shareholders (dollars) | 66,362,381.25 | 357,535,294.19 | -81.44% | | Net Profit Attributable to Listed Company Shareholders (Excluding Non-recurring Items) (dollars) | 22,795,668.25 | 9,693,504.39 | 135.16% | | Net Cash Flow from Operating Activities (dollars) | 239,058,897.42 | 288,016,513.34 | -17.00% | | Basic Earnings Per Share (dollars/share) | 0.26 | 1.42 | -81.69% | | Weighted Average Return on Net Assets | 5.86% | 37.49% | -31.63% | | Total Assets (dollars) | 2,725,958,558.97 | 2,831,507,312.57 | -3.73% | | Net Assets Attributable to Listed Company Shareholders (dollars) | 1,148,567,253.33 | 1,132,449,211.68 | 1.42% | - Non-current asset disposal gains in 2018 were 61.75 million dollars, a significant decrease from 390 million dollars in 2017, which was the primary reason for the substantial year-over-year decline in net profit attributable to shareholders[15] Section III Business Overview This section provides an overview of the company's main business operations and its core competitive advantages Company's Main Business and Core Competencies The company primarily operates retail businesses including modern department stores, shopping centers, and supermarkets, with its network centered in Wuhan and radiating across Hubei province, leveraging its regional market position, prime self-owned properties, management team, and omnichannel strategy - The company's main business formats are modern department stores, shopping centers, and supermarkets, operating 9 department stores, 1 shopping center, and 51 supermarkets, primarily located in Wuhan and 10 major cities within Hubei province[19] - In 2018, department store format revenue accounted for 49.39% of total revenue, while supermarket format accounted for 43.53%[21] - The company's core competencies include a leading regional market position, cost advantages from self-owned properties in prime commercial districts, a professional management team, and an integrated online-offline omnichannel operating capability[24] Section IV Management Discussion and Analysis This section discusses the company's operational performance, industry-specific information, main business analysis, and future development outlook Overview of Operations In 2018, the company achieved 4.04 billion dollars in revenue, a 1.18% increase, with net profit attributable to shareholders significantly declining due to reduced asset disposal gains, yet non-recurring adjusted net profit grew by 135.16%, indicating improved core business profitability, while various formats actively transformed, promoting smart retail and omnichannel integration - During the reporting period, the company's operating revenue was 4.04 billion dollars, a 1.18% year-over-year increase; net profit attributable to shareholders was 66.36 million dollars, an 81.44% year-over-year decrease, primarily due to a 330 million dollars reduction in asset disposal gains compared to the previous year[25] - The supermarket format focused on direct procurement and self-operation, with direct procurement sales accounting for 17% and a gross margin of 13.8%; it also collaborated with Ant Alliance to develop its private label "Zhongshang Youxuan," achieving a gross margin of 39%[26] - The Xiaopinmao Shopping Center, positioned as a "consumption hub for urban young new families," achieved operating revenue of 240 million dollars and total profit of 105 million dollars[26] - The company actively developed smart retail, promoted the "counter checkout" system, and expanded online channels through platforms like "JD Daojia," with self-checkout orders accounting for 15.85% of total orders in standard supermarkets[27] Retail Industry Operating Information During the reporting period, the company opened 11 new campus supermarkets with no store closures, with department store and shopping center formats profitable while supermarkets incurred losses, accumulating 1.436 million members accounting for 40.15% of sales, achieving 6.899 million dollars in online transactions via third-party platforms, and with the top five suppliers accounting for 8.38% of total purchases 2018 Operating Performance by Business Format | Format | Number of Stores | Operating Revenue (CNY in 10,000s) | Net Profit (CNY in 10,000s) | Net Profit YoY Change | Efficiency (CNY/㎡/year) | | :--- | :--- | :--- | :--- | :--- | :--- | | Department Store | 9 | 199,715.54 | 4,103.40 | 18.86% | 9,121.39 | | Supermarket | 51 | 176,042.12 | -2,365.62 | -124.18% | 10,021.83 | | Shopping Center | 1 | 24,009.24 | 7,881.96 | 17.39% | 2,182.67 | - As of the end of 2018, the company's total membership reached 1,435,648, with member sales accounting for 40.15%; online transaction volume through third-party platforms like "JD Daojia" was 6.899 million dollars[32] - The company's top five suppliers accounted for 276 million dollars in purchases, representing 8.38% of the total annual procurement[32] Main Business Analysis The company's main business is divided into commercial and leasing segments, both achieving year-over-year growth in revenue and gross margin, with the commercial segment at 18.74% and leasing at 65.63%, while finance expenses significantly decreased by 77.16% due to reduced net interest expenses, and net cash flow from investing activities declined by 61.47% due to lower asset disposal gains Operating Performance by Industry Segment | Industry Segment | Operating Revenue (dollars) | Operating Cost (dollars) | Gross Margin | Operating Revenue YoY Change | Operating Cost YoY Change | Gross Margin YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commercial | 3,757,576,681.05 | 3,053,292,566.31 | 18.74% | 0.92% | 0.07% | 0.69% | | Leasing | 280,578,351.27 | 96,445,288.72 | 65.63% | 5.48% | -6.84% | 4.55% | Period Expense Changes | Expense Item | 2018 (dollars) | 2017 (dollars) | Year-over-Year Change | Significant Change Explanation | | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 44,919,649.92 | 43,630,540.62 | 2.95% | / | | Administrative Expenses | 671,498,579.79 | 628,091,247.90 | 6.91% | / | | Finance Expenses | 6,835,928.75 | 29,928,360.86 | -77.16% | Primarily due to reduced net interest expenses | - Cash inflow from investing activities decreased by 83.63% year-over-year, and outflow decreased by 89.88%, primarily due to reduced investments in and redemptions of bank wealth management products, as well as lower asset disposal gains[45] Outlook on Company's Future Development The company will adhere to three strategic directions—department store shopping center transformation, direct procurement and self-operation, and omnichannel management—to transform into an "Internet+" technology-driven smart commercial group, aiming for approximately 4 billion dollars in revenue in 2019, while acknowledging operational and management risks during this transformation - Company development strategy: Adhere to three main directions—department store shopping center transformation, direct procurement and self-operation, and omnichannel management—to evolve into a new "Internet+" omnichannel, technology-driven, diversified commercial group[60] - 2019 operating target: Strive to achieve operating revenue of approximately 4 billion dollars[61] - Key points of the 2019 operating plan include: repositioning the department store format, developing new supermarket models like "Youpin Hui" and community mini-supermarkets, creating IP-driven marketing for Xiaopinmao, and optimizing smart information systems with a focus on "mini-programs"[61][62] - The main risks faced by the company are intensified industry competition, and the difficulties and risks associated with strategic transformation and operational innovation in terms of resource integration and operational management[64] Section V Significant Matters This section details the company's profit distribution plans, ongoing commitments, major litigation, related party transactions, and other significant events Profit Distribution and Commitments The company proposes no profit distribution for 2018 to ensure sustainable development, and the controlling shareholder Wuhan Shanglian (Group) Co., Ltd.'s commitment to resolve horizontal competition issues remains ongoing - The Board of Directors has decided not to distribute cash dividends, bonus shares, or convert capital reserves into share capital for 2018, to meet the company's operational needs and ensure sustainable development[69][71] - Controlling shareholder Wuhan Shanglian (Group) Co., Ltd. committed in July 2014 to gradually resolve horizontal competition issues with Wushang Group and Zhongbai Group within five years, and this commitment is still being fulfilled[73] Major Litigation and Related Party Transactions During the reporting period, the company was involved in multiple lawsuits concerning housing lease contracts, and also disclosed a significant related party transaction related to the "three supplies and one property" separation and transfer, aiming to divest social functions and reduce operational burdens - The company is involved in multiple major lawsuits, primarily concerning housing lease contract disputes, with some cases concluded or settled, and others still ongoing[84][85] - In November 2018, the company approved a resolution regarding the separation and transfer of "three supplies and one property" (water, electricity, heating, and property management) for enterprises, which constitutes a related party transaction aimed at divesting social functions of state-owned enterprises and reducing their burdens[91] Other Significant Matters Post-reporting period, in January 2019, the company disclosed a major asset restructuring plan to acquire 100% equity of Easyhome New Retail via share issuance, which is expected to constitute a backdoor listing, changing the controlling shareholder to Easyhome Holdings and the ultimate controller to Wang Linpeng - In January 2019, the company announced plans for a major asset restructuring, intending to acquire 100% equity of Beijing Easyhome Furnishing New Retail Chain Group Co., Ltd. through share issuance[108] - The preliminary valuation of this transaction is no less than 36.3 billion dollars, constituting a backdoor listing; upon completion, the listed company's controlling shareholder will change to Easyhome Holdings, and the ultimate controller will become Wang Linpeng[108] Section VI Share Changes and Shareholder Information This section details changes in the company's share capital and provides an overview of its shareholder structure Share Changes and Shareholder Structure During the reporting period, the company's total share capital of 251 million shares remained unchanged, with 19,114 shareholders as of year-end 2018, and Wuhan Shanglian (Group) Co., Ltd. as the controlling shareholder with 41.25% stake, while the actual controller is Wuhan State-owned Assets Management Co., Ltd - The company's total share capital remained unchanged during the reporting period, with a total of 251,221,698 shares[112] Top Three Shareholders' Holdings (as of end of 2018) | Shareholder Name | Shareholder Nature | Shareholding Percentage | Number of Shares Held | | :--- | :--- | :--- | :--- | | Wuhan Shanglian (Group) Co., Ltd. | State-owned Legal Person | 41.25% | 103,627,794 | | Hubei Provincial High-tech Industry Investment Group Co., Ltd. | State-owned Legal Person | 1.75% | 4,406,387 | | Greenland Financial Investment Holdings Group Co., Ltd. | Domestic Non-state-owned Legal Person | 0.75% | 1,886,274 | - The company's controlling shareholder is Wuhan Shanglian (Group) Co., Ltd., and the actual controller is Wuhan State-owned Assets Management Co., Ltd., which is a local state-owned enterprise[121][122] Section IX Corporate Governance This section describes the company's corporate governance framework and its adherence to regulatory requirements Overview of Corporate Governance The company operates strictly in accordance with relevant laws and regulations, maintaining a sound governance structure and independence from its controlling shareholder in business, personnel, assets, organization, and finance, while acknowledging and committing to resolve horizontal competition issues with Wushang Group and Zhongbai Group, and its internal control self-assessment indicates an effective internal control system - The company's corporate governance practices comply with the requirements of relevant CSRC documents, maintaining complete independence from its controlling shareholder in business, personnel, assets, organization, and finance[139][141] - The company faces horizontal competition issues as its controlling shareholder, Wuhan Shanglian, also controls Wushang Group and Zhongbai Group; the controlling shareholder has committed to resolving this issue, and progress is ongoing[142] - The company's Board of Directors has three special committees: Strategy, Audit, and Nomination & Remuneration, all of which performed their duties normally during the reporting period[147] - According to the internal control evaluation report, the company maintained effective internal controls over financial reporting in all material aspects in accordance with the "Basic Norms for Enterprise Internal Control," with no material weaknesses identified in financial or non-financial reporting[151] Section XI Financial Report This section presents the company's audited financial statements and the auditor's report Audit Report Zhongshen Zhonghuan Certified Public Accountants issued a standard unqualified audit opinion on the company's 2018 financial report, with key audit matters being "recognition of commercial retail revenue" and "determination of significant asset disposals" - The auditing firm, Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership), issued a standard unqualified audit opinion[153] - Key audit matters include: - Recognition of Commercial Retail Revenue: Due to the high volume, small transaction value, and predominantly cash nature of retail business, the accuracy of revenue recognition is crucial[154] - Determination of Significant Asset Disposals: This year, 62.7474 million dollars in asset disposal gains were recognized, significantly impacting total profit, making the accuracy of their recognition timing and measurement a key audit focus[156] Key Financial Statements As of year-end 2018, the company's total assets were 2.73 billion dollars, total liabilities 1.41 billion dollars, and asset-liability ratio 51.77%, with full-year total operating revenue of 4.04 billion dollars, total profit of 167 million dollars, net profit of 110 million dollars, and net cash flow from operating activities of 239 million dollars Consolidated Balance Sheet Key Items (as of end of 2018) | Item | Amount (dollars) | | :--- | :--- | | Cash and Cash Equivalents | 851,927,272.64 | | Inventories | 255,520,796.94 | | Fixed Assets | 611,775,130.36 | | Investment Properties | 485,675,340.93 | | Total Assets | 2,725,958,558.97 | | Short-term Borrowings | 70,000,000.00 | | Notes Payable and Accounts Payable | 413,329,996.84 | | Long-term Borrowings | 132,150,000.00 | | Total Liabilities | 1,411,330,374.99 | | Equity Attributable to Parent Company Owners | 1,148,567,253.33 | | Total Owners' Equity | 1,314,628,183.98 | Consolidated Income Statement Key Items (2018) | Item | Amount (dollars) | | :--- | :--- | | Total Operating Revenue | 4,043,730,920.64 | | Total Operating Costs | 3,932,688,815.46 | | Asset Disposal Gains | 62,747,423.70 | | Operating Profit | 181,591,258.81 | | Total Profit | 166,980,969.29 | | Net Profit | 110,126,720.84 | | Net Profit Attributable to Parent Company Owners | 66,362,381.25 |