China National Travel Service: A leading company in the tourism industry
This is the twenty-ninth article in the series of "What to Read in Annual Reports". Let's interpret the 2018 annual report of China National Travel Service, a leading company in the tourism industry.
Company profile
China International Travel Service Limited, Head Office, (China International Travel Service Limited, Head Office, referred to as China International Travel Service), was formerly known as China International Travel Service Head Office , which was approved by the State Council under the personal instructions of Premier Zhou Enlai. , established in Beijing in 1954, was the first travel agency to receive overseas tourists in New China. It was one of the first travel agencies to obtain national franchise for outbound tourism, the first corporate member of the World Tourism Organization in China, and one of the 5A travel agencies in Beijing. head. CITS has successively joined PATA (Pacific Asia Travel Association), IATA (International Air Transport Association), ASTA (American Association of Travel Agents), WTTC (World Travel and Tourism Council), WTCF (World Tourism Cities Federation) and other international Organization, it is the vice-president unit of China Travel Agents Association.
The establishment of CITS marks the beginning of the tourism industry in New China. The development of CITS is the epitome of the reform and development of China's tourism industry. Since its establishment 60 years ago, CITS has been committed to promoting exchanges between China and the world in various fields and promoting friendly exchanges between China and people from all over the world. It has given full play to its role as a "private ambassador" and has attracted and received dozens of overseas tourists to China. Party and state leaders such as Mao Zedong and Deng Xiaoping have received tens of millions of overseas tourists organized by CITS on many occasions. CITS has made outstanding contributions to China’s foreign exchanges and the development of tourism.
Along with the reform and opening up and the take-off of China's economy, through the hard work and unremitting efforts of several generations of CITS staff, CITS has developed into a company integrating inbound tourism, outbound tourism, domestic tourism, MICE tourism, visa services, business travel services, aviation services, etc. It is a large-scale tourism enterprise that integrates comprehensive services such as services and e-commerce. It is a well-known domestic travel agency enterprise group. CITS has won many national and Beijing municipal government awards such as "Best Tourism Enterprise Award", "Travel Agency's Highest Foreign Exchange Earning Award", "Travel Agency's Highest External Relations Award", "Capital Tourism Forbidden Cup Best Group" and other awards. Won the first place among the top 100 travel agencies in China for the first time. In 2008, as the exclusive logistics support service unit for the Beijing Olympic Torch Relay at home and abroad and the only tourism enterprise participating in the official reception service of the Olympic Games, CITS made positive contributions to the successful hosting of the Olympic Games, and also provided support for the Shanghai World Expo and the Guangzhou Asian Games. National events such as the Xi'an World Horticultural Expo and the Beijing Garden Expo have provided first-class tourism services and won wide acclaim. The "CITS·CITS" brand has become a well-known Chinese trademark that is leading in the country, first-class in Asia, and world-renowned. Among the 500 most valuable brands in China in 2017 released by the World Brand Laboratory, the "CITS" and "CITS" brands were valued at 60.589 billion. Yuan's brand value ranks 48th among China's 500 Most Valuable Brands. It has ranked first among tourism service brands for many consecutive years and continues to lead China's tourism service industry.
In 2004, CITS and China Duty Free Corporation merged and reorganized into China International Travel Service Co., Ltd. . In 2009, it was listed on the Shanghai Stock Exchange as an important subsidiary of China International Travel Service Co., Ltd. . In 2016, with the approval of the State Council, China National Travel Service Group Co., Ltd. and China National Travel Service Group Co., Ltd. reorganized to form China National Travel Service Corporation, and CITS Headquarters became a subsidiary of China National Travel Service Group.Under the correct leadership and strong support of the group and the joint-stock company, in recent years, in accordance with the development strategy of "equal emphasis on three types of tourism and two networks", CITS has continuously consolidated inbound tourism, vigorously developed outbound tourism, and actively expanded domestic tourism. Focus on promoting business MICE tourism, accelerate the layout of overseas visa centers, and strive to create the "CITS·CITS" inbound tourism brand, the "Total Travel (Total Travel)" outbound tourism brand, the "CITS Holidays" domestic tourism brand, and the "CITS Travel World" The core product series and brand system are the "Independent Travel" brand, the "CITS MICE" MICE travel brand and the "CITS Online" e-commerce brand, with travel agency physical network expansion and online travel e-commerce as the main development paths, and the business scale is continuously expanded. and market share.
At present, CITS has 38 wholly-owned and holding companies, 5 joint-stock companies, more than 1,800 travel stores , and hundreds of member agencies of the CITS Council across the country; it has established offices in 12 countries and regions around the world. It has 6 wholly-owned and controlled overseas travel agencies and 19 overseas visa centers, and has established long-term and stable cooperative relationships with more than 1,400 travel agencies in more than 100 countries, forming a modern business network that is based in China and has a global perspective.
In the future, CITS Headquarters will continue to uphold the CITS spirit of "not afraid of difficulties, professional and efficient, teamwork, and brave in innovation", take scientific development as the theme, deepen corporate reform, optimize resource allocation, transform development methods, accelerate transformation and upgrading, and in accordance with professional With the ideas of chemical division of labor, collaborative development and intensive management, we will further strengthen, optimize and expand our main business, becoming China's leading, world-class open tourism platform operator with core resources, and helping China move forward from a major tourism country. Make new and greater contributions to a powerful tourism country!
The company's financial performance
Let's first take a look at the company's financial performance in the past three years: In the past three years, the company's operating income has increased cumulatively by 1.10 times, net non-net profit increased by 75.06%, operating activities cash flow increased by 40.60%, net Assets increased by 28.86%, total assets increased by 55.30%, and the return on net assets increased from 15.16% in 2016 to 20.89% in 2018, an increase of 5.73 percentage points.
Judging from this set of data, the growth of China National Travel Service's revenue and net profit has significantly exceeded the growth of total assets and net assets, indicating that the company's revenue and profitability have been significantly improved. This has been achieved through operating activities. The growth of cash flow and the significant improvement of return on equity can be seen. It has to be said that the attractiveness and profitability of duty-free products are amazing.
Main accounting data disclosed in China National Travel Service's 2018 annual report
Main financial indicators disclosed in China National Travel Service's 2018 annual report
Looking at the quarterly points, revenue in the first quarter of 2018 was a low point, and was basically the same in the last three quarters; net profit and cash from operating activities The traffic volume in the second half of the year was significantly worse than that in the first half of the year. The explanation given by China International Travel Service was that it was due to the merger of Sunrise Shanghai and the development of Capital Airport and Hong Kong Airport duty-free businesses, which increased leasing fees and salaries.
Quarterly financial data disclosed in the 2018 annual report of China International Travel Service
Industry pattern and development prospects
2018 is the first year of the integrated development of culture and tourism , according to the "China Tourism Consumption Big Data Report 2018" released by the Tourism Consumption Big Data Joint Laboratory It shows that in 2018, the tourism consumption market showed the following four characteristics: First, residents’ ability to travel continues to increase and reaches a new high, and popularization of tourism consumption has become a trend; second, young tourists have gradually become the main force in tourism consumption, and the urban leisure customer group is rapidly rising. Consumption has further increased; third, the holiday tourism consumption market has strong demand, and cultural tourism products have entered the public eye; fourth, residents' travel willingness and tourism income in the central and western regions have grown rapidly, and regional balancing trends have emerged.
According to the "Basic Situation of the Tourism Market in 2018" released by the Ministry of Culture and Tourism, the domestic tourism market continues to grow at a high speed, the inbound tourism market has steadily entered a slow recovery channel , and the outbound tourism market has developed steadily . According to preliminary calculations, in 2018, the comprehensive contribution of the national tourism industry to GDP was 9.94 trillion yuan, accounting for 11.04% of the total GDP.Tourism directly employs 28.26 million people, and tourism directly and indirectly employs 79.91 million people, accounting for 10.29% of the total employed population in the country. The
duty-free industry is a sub-industry of the tourism industry. It refers to tourism in which some countries and regions authorize one or several companies to set up stores in
transport vehicles, ports or cities to sell duty-free goods to inbound and outbound passengers. Retail industry . The duty-free industry includes two forms: duty-free shopping and tax refund shopping. Duty-free shopping refers to the exemption of tariffs, consumption tax and value-added tax on the import of goods. The targeted products include cosmetics, perfumes, bags, jewelry, watches, clothing and apparel. , food, toys, cigarettes, wine, etc., usually imported goods; tax refund shopping means to go through the VAT and consumption tax refund procedures after purchasing the goods. The targeted goods are mainly consumer goods for personal use, and the applicable objects are generally overseas personnel. . At present, common duty-free shop formats around the world include entry-exit duty-free shops, offshore island duty-free shops and city duty-free shops. According to different sales places and supply objects, duty-free shops can be divided into airport duty-free shops, in-flight duty-free shops, border duty-free shops, ship supply shops, passenger terminal duty-free shops, railway station duty-free shops, diplomats duty-free shops, and city duty-free shops , Cruise Duty Free Shop.
With the continuous upgrading of the tourism industry, the year-by-year increase in the number of entries and exits from various countries, and the substantial increase in the purchasing power of tourists, the duty-free industry has developed rapidly in recent years and attracted tourists from all over the world to shop and consume with very attractive product prices. has increased significantly. The income from the entire tourism industry chain has enhanced the vitality and attractiveness of tourist destinations, and has a significant role in stimulating and promoting various industries in the destination city.
In recent years, the company has actively responded to the country’s call to attract overseas consumption back to , meet residents’ consumption needs and accelerate the upgrading of tourism consumption. It has seized opportunities and acquired large-scale domestic and foreign enterprises in Beijing, Shanghai, Hong Kong, Macau and other places through mergers and acquisitions, bidding and other methods. With the right to operate duty-free channels, the company’s market share of duty-free business continues to expand, and its international competitiveness and brand influence continue to improve.
At present, the sales targets in the domestic duty-free market are mainly outbound tourists, and the consumer goods are mainly perfumes, cosmetics, cigarettes, wine, and boutique products. According to China Tourism Research Institute data, In 2018, China's outbound tourism market continued to maintain rapid growth . The scale of the outbound tourism market and consumer spending reached a record high, reaching 148 million passengers, a year-on-year increase of 13%, Outbound Tourism With consumer spending of US$120 billion, Chinese tourists are still the largest outbound tourist source in the world with the strongest spending power.
Looking at the composition of outbound tourism consumption, the proportion of shopping in the overall outbound expenditure has declined significantly . According to a survey by the China Tourism Academy, spending on shopping dropped from 34.34% in 2017 to 16.48%, while catering, culture and entertainment, and accommodation consumption grew rapidly. In stark contrast, China's duty-free industry sales reached 39.5 billion yuan in 2018, approaching the 40 billion yuan mark, with a growth rate of 27.3%. (Since you can buy it at the duty-free shop at your doorstep, there is no need to buy it abroad. Not only do you have to carry it with you during the trip, but it also takes up space. This not only increases the sales of the duty-free shop, but also does not let foreigners earn these profits in vain. , kill two birds with one stone.)
According to the "2018 China Luxury Goods Report" released by Yaoke Research Institute, the global luxury goods market was approximately US$347 billion in 2018. Despite the slowdown in the global economy, depreciation of the RMB, political emergencies, Affected by factors such as the Sino-US trade war, the global luxury goods market still achieved 12% growth. Among them, Chinese global luxury goods consumption increased by 7% year-on-year to US$145.7 billion, accounting for 42% of the global luxury goods market. At present, more and more luxury brands are entering the Chinese market and quickly seizing the young market in order to cultivate potential customer sources. According to predictions, the development of all luxury brands will slow down significantly in 2019 Chinese consumers will continue to dominate global luxury consumption . With the help of capital integration and Internet platforms, it is expected that in about 5-10 years, Chinese consumption will Local consumption of luxury goods will exceed overseas consumption.Since duty-free products are mostly luxury goods and fragrance products with relatively high consumption taxes and tariffs, the development of the tax-free industry will help the middle class to upgrade their consumption. At the same time, the development of the domestic duty-free industry can also change the habit of Chinese people shopping abroad, allowing more consumption to be realized domestically, which is in line with the background of policies guiding the return of consumption.
In 2019, my country's development is in a period of important strategic opportunities. Reform and opening up are deepening, economic transformation is accelerating and upgrading, and the general trend of stable growth of the tourism industry has not changed. With the increasing number of international exchanges, the construction of the Hainan Free Trade Zone is accelerating, and immigration and Hainan The continued growth of the customer source market, coupled with the transformation and upgrading of national consumption, and strong mid-to-high-end consumer demand, have brought new opportunities for the company's development.
Company Operations
The main business of China National Travel Service is mainly divided into three parts: CITS Headquarters, which operates travel agency business, China Duty Free Company, which operates duty-free business, and CITS Investment, which operates tourism investment and development.
During the reporting period, the company achieved operating income of 47.007 billion yuan, a year-on-year increase of 66.21%, operating profit of 5.426 billion yuan, a year-on-year increase of 40.81%, a total profit of 5.336 billion yuan, a year-on-year increase of 39.17%, and a net profit attributable to shareholders of listed companies. Profit was 3.095 billion yuan, a year-on-year increase of 22.29%. The main reason was that during the reporting period, the company acquired Rising Shanghai, consolidated and optimized the existing offshore duty-free business, and developed the capital airport and Hong Kong airport duty-free business, which brought an increase of 17.323 billion yuan in revenue, as well as vested The net profit increase for shareholders of listed companies was RMB 504 million.
In terms of revenue, the tourism service industry revenue was 12.290 billion yuan, accounting for 26.35%, a year-on-year increase of 0.10%; commodity sales revenue was 34.336 billion yuan, accounting for 73.65%, a year-on-year increase of 1.20 times. In terms of
products, outbound travel, domestic travel, overseas visas, inbound travel, business travel services and other businesses account for 51.28%, 27.09%, 9.20%, 5.49%, 4.20% and 2.72% of the tourism service industry respectively. %. It can be seen that outbound tourism and domestic tourism are the majority of the tourism industry.
gross profit margin , the gross profit margin of the tourism service industry was 10.01%, a year-on-year increase of 0.41 percentage points; the gross profit margin of the merchandise sales industry was 52.24%, a year-on-year increase of 7.67 percentage points.
In the tourism service industry, the gross profit margins of business travel services and overseas visas are relatively high, at 59.44% and 23.46% respectively. In the merchandise sales industry, the gross profit margin of duty-free goods is 53.09%, and the gross profit margin of taxable goods is 26.91%.
From the perspective of revenue and gross profit margin, the sales of duty-free goods have become the main source of revenue and profit of China National Travel Service. Therefore, its development strategy of focusing on the duty-free industry and divesting the tourism industry is very clear from the perspective of benefits. .
In addition, the annual report also disclosed that Sanya Haitang Bay duty-free shopping mall achieved operating income of 8.010 billion yuan, a year-on-year increase of 31.66%, of which duty-free commodity sales revenue was 7.771 billion yuan, a year-on-year increase of 32.46%. It received 5.97 million customers and 1.7 million shoppers throughout the year. Shanghai Airport Duty Free Shop (including Pudong International Airport and Hongqiao Airport Duty Free Shop, included in the consolidated statements in March 2018) achieved operating income of 10.451 billion yuan , Capital Airport Duty Free Shop (including T2 and T3 airlines) Zhanlou Duty Free Shop) achieved operating income of 7.389 billion yuan.
The revenue structure and gross profit margin disclosed in China International Travel Service's 2018 annual report
In terms of costs , the cost of duty-free goods accounted for the highest proportion, accounting for 56.65%; followed by the cost of outbound travel, accounting for 21.65%; and again the cost of domestic tourism, accounting for 11.33% .
The cost structure disclosed in China International Travel Service's 2018 annual report
Expenses In terms of sales expenses, sales expenses were 11.601 billion yuan, a year-on-year increase of 2.29 times, mainly due to the increase in sales expenses brought by the acquisition of Shanghai and the increase in airport rental fees; management expenses 1.601 billion yuan, a year-on-year increase of 47.92%, mainly due to the increase in management expenses and salary increases brought by the acquisition of Shanghai; financial expenses -6.98 million yuan, a year-on-year decrease mainly due to the increase in exchange losses during the reporting period.
Cash flow In terms of cash flow from operating activities, cash flow from operating activities was 2.722 billion yuan, a year-on-year decrease of 9.77%. This was mainly due to the continued substantial growth of duty-free business, which maintained a net inflow of cash flow from operating activities. However, due to the increase in airport rental fees for duty-free business and seasonal stocking volume It has increased year by year, resulting in a slight decrease in the net amount. The net outflow of cash flow from investing activities was 1.906 billion yuan, a significant decrease from the same period last year. This was mainly due to the timing difference in financial management expenditures in the previous year and the net inflow of China on the acquisition day. This year, the net outflow of acquisition day Shanghai , construction projects and purchases Influenced by factors such as land expenditure. The net cash outflow from financing activities was 1.149 billion yuan, a significant increase from the same period last year, mainly due to the repayment of debts by and the decrease in dividends paid by subsidiaries to minority shareholders.
Expenses and cash flow disclosed in China National Travel Service's 2018 annual report
Development strategy In terms of development strategy, China National Travel Service will continue to focus on the travel retail business, using duty-free business as the core to enhance the value chain, and using travel retail as an extension to upgrade the industrial chain to enhance market competitiveness. Build a world-class global travel retail operator .
Business plan In terms of , in 2019, the company will effectively operate large-scale duty-free stores in Beijing, Shanghai, Hong Kong, Macau, Hainan and other places, strengthen the procurement of key commodities and improve supply capabilities ; comprehensively optimize procurement channels, increase Intensify efforts to introduce marketable products ; integrate membership systems and member resources, adopt flexible marketing strategies and collaborative marketing mechanisms, and give full play to synergy; promote Chinese shopping policies and city store preparations to attract consumer return , actively seize the future strategic market of the domestic duty-free industry; with the further opening of Hainan Islands Duty-Free Policy, actively taps the potential of the offshore duty-free market, actively promotes the construction of China Duty Free Hainan Headquarters, and strengthens the advantages of the offshore market ; and does a good job in bidding for Beijing Daxing International Airport As well as the opening of stores in Hong Kong; taking the tourism retail business as the leader, we will fully promote the expansion of tourism retail commercial complex projects to form a comprehensive tourism and leisure destination with duty-free as the core and covering new retail, culture and entertainment, catering and other elements. ; Promote the opening of the Hexin Island project in 2019.
In terms of internationalization, we formulated and implemented the "Belt and Road" tourism retail expansion strategy, actively paid attention to the duty-free business bidding of key airports in countries along the "Belt and Road", and participated in the opportunity; completed the renovation and expansion project of Cambodia Sihanouk Duty Free Shop and officially opened it. , consolidate and expand market share in Cambodia; focuses on expanding the city's duty-free shop business in Southeast Asia and other countries , focusing on Southeast Asia and other countries along the "One Belt and One Road" to promote key businesses such as duty-free retail to go global; pay close attention to key large-scale businesses in the Asia-Pacific Retail platform bidding and merger and acquisition opportunities, explores the acquisition of domestic and foreign upstream and downstream companies to strive for more channel resources . In terms of
dividends , the company plans to distribute a cash dividend of 5.50 yuan for every 10 shares, and profits account for 34.70%; based on the closing price of 77.49 yuan on April 30, 2019, the dividend rate is 0.71%.
Dividends disclosed in the 2018 annual report of China National Travel Service
Changes in shareholders
China National Travel Service’s major shareholder China Tourism Group allocated 39.0495 million shares to the Hainan Provincial State-owned Assets Supervision and Administration Commission free of charge in the first quarter of 2019 as consideration for operating the sales of duty-free goods on Hainan outlying islands. In addition, Beishang Capital increased its holdings by 18.22 million shares and 10.9875 million shares in the fourth quarter of 2018 and the first quarter of 2019 respectively. UBS successively increased its holdings of 660,800 shares and 2,724,400 shares. Aberdeen Asia A-share Fund first reduced its holdings of 550,100 shares and then increased its holdings of 4,591,100 shares.
It is worth noting that two social security fund portfolios made substantial reductions in their holdings in the first quarter of 2019. One withdrew from the top ten tradable shareholders, and the other reduced its holdings by 6.0089 million shares.
The top ten tradable shareholders disclosed in China National Travel Service’s 2018 annual report
The top ten tradable shareholders disclosed in China National Travel Service’s 2019 first quarter report
Summary
In recent years, China National Travel Service has continued to make strategic moves in the duty-free sales industry through mergers and acquisitions based on its own China Duty Free Company. Expansion:
- In July 2017, the company acquired a 51% stake in China for 39 million yuan, which operates outbound and inbound duty-free shops in the Capital Airport T2 and T3 terminals.
- In February 2018, China Duty Free Corporation, a wholly-owned subsidiary of the company, acquired a 51% stake in Shanghai Shanghai for approximately 1.505 billion yuan. After the acquisition is completed, the company has the duty-free operating rights of Shanghai Pudong International Airport and Hongqiao International Airport.
- In October 2018, the company's controlling shareholder China Tourism Group and Hainan State-owned Assets Supervision and Administration Commission signed an equity transfer agreement for free. The former will hold 51% of the equity of Hainan Province Duty Free Products Co., Ltd. , a subsidiary of Hainan State-owned Assets Supervision and Administration Commission. According to the description in the China International Travel Service announcement, China Tourism Group will initiate the process of injecting 51% of the equity of Hainan Duty Free Co., Ltd. into the company in the future.
China Duty Free Corporation has established nine types of airports, on-board aircraft, borders, foreign ship supply, passenger terminals, railway stations, diplomats, cruise ships and urban areas in 30 provinces, municipalities, autonomous regions (including Hong Kong and Macao) and Cambodia. With more than 200 duty-free shops, it has developed into , a duty-free operator with the most complete types of duty-free shops and the most retail outlets in a single country. It has the largest duty-free commercial complex in the world and has established , the only duty-free logistics and distribution system in the country. . During the reporting period, China Duty Free Company reached a strategic cooperation agreement with Alibaba to continue to optimize the company's channel management and logistics distribution capabilities and enhance the company's core competitiveness.
According to the calculations of Ping An Securities , without considering the injection of 51% equity of Haidu, company's market share in the domestic duty-free industry has exceeded 's 75%.
In order to adjust and optimize the business structure and solve the problem of horizontal competition between the company and its controlling shareholder China Tourism Group, in January 2019, the company’s shareholders meeting approved the transfer of 100% equity of the wholly-owned subsidiary China National Travel Service to China Tourism Group at a transfer price of is 1.831 billion yuan. In the future, the company will focus on its main duty-free business, further enhancing the company's market position and profitability in the duty-free industry.
From this perspective, China International Travel Service, which focuses on the main business of duty-free, will become a company with franchise (duty-free goods exclusive license), low-cost competitive advantage (exemption from tariffs and import taxes for domestic tourists, and Overseas tourists are exempt from value-added tax and consumption tax) and large-scale comprehensive retailers with high passenger flow (for inbound and outbound tourists).
understands this, and it is not difficult to understand why the company's stock price has continued to rise since 2017, reaching record highs.
