On May 15, Jinke Culture held its 2019 annual online performance briefing. Relevant executives responded to issues such as huge performance losses, goodwill impairment, and future business development.

Daily Reporter: Xu Lianlian Editor: Dong Xingsheng

once suffered from the impairment of goodwill due to the acquisition of Jinke Culture (stock code: 300459) of the company behind the well-known IP "Talking Tom Cat" .

html On May 15, Jinke Culture held the 2019 annual online performance briefing. Relevant executives responded to issues such as huge performance losses, goodwill impairment, and future business development. According to the previous annual report, Jinke Culture 's net profit loss in 2019 was approximately 2.78 billion yuan. Outfit7 (the developer of "Talking Tom Cat"), which was previously acquired with a huge sum of money, has not fulfilled its performance commitments.

"Daily Economic News" reporter noticed that Outfit7's performance in 2019 was not up to standard, and the goodwill impairment test amount was as high as 900 million yuan, but this part of the goodwill impairment was not fully reflected in the annual report. Is there any further risk of impairment of goodwill of Jinke Culture ? Will it affect the future performance of Jinke Culture ?

In response, a reporter from the Daily Economic News asked a question at the performance meeting as an investor. Wang Jian, general manager of Jinke Culture , replied that the corresponding goodwill impairment loss has been reflected in the 2019 annual report. In the future, the company will strengthen Manage the operation and management of subsidiaries to improve the overall operating capabilities and profitability of each subsidiary and the company.

As of the close of trading on May 15, the share price of Jinke Culture closed at 2.48 yuan, down 0.4%, with a market value of approximately 8.8 billion yuan.

has a huge net profit loss of approximately 2.8 billion yuan

According to the 2019 annual report of Jinke Culture , Jinke Culture revenue was 1.83 billion yuan, a decrease of 32.83% from the previous year, and the net profit loss was approximately 2.78 billion yuan, which was a profit in the same period last year 842 million yuan, a change in net profit of -430.28%, and a loss after non-net profit reached 2.82 billion yuan. A profit of 816 million yuan in the same period last year, a change of -445.19% after non-net profit.

Picture source: Annual report screenshot

Jinke Culture is also a typical case of a traditional listed company transforming into a game culture enterprise through mergers and acquisitions. Jinke Culture , founded in 2007, was listed in 2015. It was originally mainly engaged in bleaching auxiliaries. R&D, production and sales of SPC and TAED.

However, with three large-scale acquisitions and two transfers of a total of 100% equity of Jinke Daily Chemicals in 2019, Jinke Culture has achieved a complete transformation.

In 2015, Jinke Culture acquired Zhejiang Zhexin for a total price of 2.9 billion yuan, and then in 2017 it acquired Tianjiali for 300 million yuan. The most noteworthy is the acquisition of Outfit7. Through the merger and acquisition of Outfit7, Jinke Culture is an all-in-one IP operator with the "Talking Tom Cat Family" as the core. All three acquisitions were accompanied by large-scale performance bets. Judging from the data disclosed in the annual report, only Zhejiang Zhexin has fulfilled its performance commitments.

's large-scale mergers and acquisitions also brought glory to Jinke Culture . The 2018 annual report shows that Jinke Culture ’s revenue for the reporting period was 2.725 billion yuan, an increase of 95.17% over the same period last year; the net profit attributable to shareholders of the parent company was 842 million yuan, an increase of 113.76% over the same period last year.

However, every reporter noticed that the above three mergers and acquisitions were all high-premium mergers and acquisitions, which brought a large amount of goodwill. According to the 2019 annual report, as of December 31, 2019, the original book value of Jinke Culture company's goodwill was 6.26 billion yuan, the impairment provision was 2.61 billion yuan, and the book value was 3.65 billion yuan. Goodwill suffered large impairment losses, among which the impairment amount of goodwill of Hangzhou Zhexin Company's asset group and that of Outfit7 Company's asset group were larger. Hangzhou Zhexin accrued 2.32 billion in goodwill. As for impairment provisions, Outfit7 has set aside RMB 260 million in goodwill impairment provisions. It is precisely because of the impairment of goodwill of subsidiaries such as Hangzhou Zhexin and Outfit7 that Jinke Culture suffered a huge loss in 2019.

Every reporter noticed that Jinke Culture has received regulatory inquiry letters many times. After the annual report was released on April 30, an inquiry letter for the annual report was received on May 1. The inquiry letter raised 24 questions including goodwill. Jinke Culture announced on May 11 that it would postpone the reply to the Shenzhen Stock Exchange’s inquiry letter.

It is worth noting that the company was also questioned after the release of its 2018 annual report.In the inquiry letter at the time, the exchange questioned the company's precise performance standards. As of the end of 2018, the corresponding goodwill amounts of the company's subsidiaries Outfit7, Hangzhou Zhexin, and Daily Geili reached 3.651 billion yuan, 2.320 billion yuan, and 2.70 billion yuan respectively. billion, and the cumulative completion rates of performance commitments were 100.59%, 109.41%, and 114.49% respectively, indicating that performance accurately met the standards.

The performance of core subsidiaries is not up to standard

From a business perspective, Jinke Culture ’s cards are not bad. Outfit7 holds well-known IP and has also determined a clear development strategy. Focusing on the "Talking Tom Family" IP, it will promote mobile applications, animation films and television online, and continue to develop IP derivatives and licensing businesses, parent-child theme park and other chains offline. Business format. Offline, Jinke Culture also has strategic cooperation with Alibaba .

However, it is undeniable that high-premium mergers and acquisitions have hidden dangers. An industry analyst told reporters that for this type of listed companies, accruing goodwill impairment can get rid of the burden, but Outfit7 has not fulfilled its performance commitments. Performance in 2020 is critical.

Wang Jian revealed Outfit7's revenue proportion in his reply, "In 2019, the company's revenue from overseas was 1.2 billion yuan, and Outfit7's revenue proportion was about 78%."

Jinke Culture explained that due to the macro environment Affected, the global offline amusement, toy market, baby products consumption and other markets have also been affected. The downstream demand for Outfit7's IP licensing business declined and the business progress was slow, resulting in the IP licensing business growing less than expected. In addition, the revenue growth in China, one of the core revenue sources, fell short of expectations, and ultimately failed to fulfill its performance commitments.

Image source: Jinke Culture official website

Specifically, the non-net profits of Outfit7 in the three years from 2017 to 2019 were 78.41 million euros, 93.5522 million euros, and 74.2827 million euros respectively, totaling approximately 250 million euros. As of December 31, 2019, a total of 87.72% of the promised non-net profit deduction has been completed. According to estimates, the amount of goodwill impairment is approximately 900 million yuan.

The risk of future goodwill impairment cannot be ignored. Every reporter noticed that in 2019, Jinke Culture made full impairment provisions for the goodwill of eight companies including Hangzhou Zhexin, Xingbao Paradise, and Haocang Network, but the goodwill of Outfit7 and Daily Power Only a partial provision for impairment is made.

regulators have pointed out that in 2017 and 2018, Outfit7’s performance accurately met the standards, but its performance declined in 2019. For Outfit7, future performance will directly affect the development of Jinke Culture . An investor asked that if Outfit7's goodwill is impaired in 2020, there is a high probability that Jinke Culture will be ST due to negative net profits for two consecutive years, and asked executives whether there are any problems with Outfit7's operations.

In response to this, Wang Jian said that in the future, the company will strengthen the operation and management of subsidiaries based on the all-in-one IP operator strategy, steadily promote collaboration between subsidiaries and business segments, and improve each subsidiary and the company as a whole. Operating capabilities and profitability. Wang Jian also revealed that in the first quarter of this year, Jinke Culture achieved operating income of 452 million yuan, net profit attributable to shareholders of the listed company was 217 million yuan, and net cash flow generated from operating activities was 458 million yuan. The indicators are as expected. Although

has suffered due to the impairment of goodwill caused by mergers and acquisitions, whenever reporters ask whether there are further acquisition plans in the future, Wang Jian still said that focusing on the development strategy of the company's all-in-one IP ecological operator, if there is a suitable merger The company does not rule out strategic investment in targets that help the company achieve strategic goals and create deep synergies with existing businesses, and the investment method is not limited to acquisitions.

Daily Economic News