Hongxing Erke was exposed to inflated profits so far has not resumed trading

When the Chinese Olympic athletes wore the Anta Olympics dragon costume to shine in the London arena, its rival Hongxing Erke did not give up the dream of the Olympic Games. The Hongxing Erke official website listed the news that the company sponsored South African sports athletes to win the gold medal. However, the two companies are honored and the crisis is hidden.

According to the latest announcement, ANTA's performance report for the first half of 2012 shows that from January to June this year, ANTA's turnover reached 3.93 billion yuan, a year-on-year decrease of 11.6%, and its gross profit margin was 41.8%, down 1 percentage point year-on-year. Anta Group stated that the decline in operating revenue was mainly due to the decrease in orders.

However, compared to Hongxing Erke, Anta was lucky. From February 28, 2011, Hongxing Erke, listed in Singapore, has been suspended because the auditor believes that the company's 2010 financial report is suspected of being non-compliant.

Later, the company hired an independent organization called nTan to audit its financial reports. During the audit, Hong Xinger submitted an application to the SGX, requesting that the time limit for publishing the 2010 performance be postponed for another three months. As of December 1, 2011, the deadline for requesting the holding of the 2010 shareholders meeting was delayed by three months until 2012. On January 31 of the same year, it also applied for an extension of the first quarter and second quarter of fiscal year 2011.

The company inflated cash by 1.1 billion yuan?

In 2012, nTan gave a response to Hongxing's disappointment. This report was published on the Singapore Exchange website.

After the audit agency nTan audited Hongxing Erke in 2010, he thought that Erke had a phenomenon of inflated currency cash and bank deposits, totaling 1.15 billion yuan. According to domestic media reports, in 2010, Hongxing Erke spent 335 million yuan in fees from its distributors to avoid closing the stores. In addition, Erxingerke paid 467 million yuan of interest-free short-term loans to distributors in six provinces including Anhui and Fujian. Hongxing Erke also added an additional RMB 212 million in inventory, plus other expenses of RMB 140 million. However, Erke did not deduct these expenses. In fact, the company's cash and bank deposits in fiscal year 2010 were only 263 million yuan.

In addition, nTan believes that some of the expenses of the two subsidiaries of Hongxing Erke have not been approved by the board of directors. For example, in 2010 and 2011, some of the major subsidiaries of the Hongxing Movement had a total expenditure of 887 million yuan in the market expansion activities, and in addition to the company’s board of directors, such activities were not allowed to exceed 750 million yuan; at the same time, the company prohibited distribution to the market. Businesses pay interest-free loans, but some subsidiaries do so. nTan believes that although the Hongxing Erke Group has an internal control department, because the relevant personnel have left the company, it cannot be concluded whether the company's operations and accounting are in compliance.

The Business Times reported on the above incident. The newspaper is part of the Singapore Publishing Group and was established in 1976. At present, this published article has not been found on the media site.

Clarification announcement is unclear

On July 27, the Hongxing Group released a clarification announcement. However, it is worth noting that the company has not clarified nTan’s doubts about the company’s inflated deposits and confusion in its management structure, but clarified the article description of The Business Times.

The Business Times wrote in the article that the Hongxing Group stated that the company still maintains strong growth, and will continue to expand new stores in China and increase the operating efficiency of retail stores.

However, Hongxing Group denied this view in its announcement. The company stated that at present, the company and its subsidiaries are facing domestic uncertain macroeconomic environment and industrial operating environment. The company also stated that the group received a total of 3.709 billion RMB in orders for the first three quarters of 2012, which will continue to increase production efficiency and reduce delivery time. The company stated that it has a positive attitude towards digesting inventory.

The reporter found related personnel through the company’s public phone announcement on the Singapore Exchange, but did not receive any reply. However, the relevant personnel of the company repeatedly emphasized that this matter had been passed for a long time, and it has been 17 months since the suspension of trading.

In fact, Erke has never been able to make effective explanations and failed to resume trading.

Profit model questioned

At present, Hongxing Erke has been suspended for 17 consecutive months and has not announced its 2010 and 2011 financial reports. The financial status of the company has not been disclosed to shareholders. Through the performance of its competitor Anta Group, the development of Hongxing Erke can be foreseen.

Anta Group stated that inventory issues and substantial discounts in the Chinese sporting goods industry continued.

Anta said that competition in the domestic sporting goods industry has continued to be fierce. Although aggressive measures have been taken to deal with uncertain market conditions since the second half of 2011, the profitability of the company and its retailers is still unavoidable. influences. Anta also disclosed that due to the new wholesale discount rate adopted by the company in 2013, it is expected that the amount of orders in the first quarter of 2013 will decrease by 20% to 30%.

Analysts said that the growth in the income of domestic sports brands was mainly due to the expansion of expansion and single-store growth. Extensive expansion refers to constantly opening new stores. "After the new stores were opened to a certain degree, the income of these companies mainly depended on single-store revenue, but at present, the single-store revenue is not ideal, so some stores will suffer losses or even close down."

A securities analyst said that the overall performance of the domestic sportswear industry is currently facing challenges, first of all is the impact of international brands, Nike, Adidas and other brands in the domestic high-end market share is growing, which is targeted at the high-end The market's Li Ning brand has a greater impact. Followed by the impact of other domestic leisure apparel series. For some sports products targeting medium and low-end brands, after the second and third tier markets have expanded to a certain extent, casual wear has also entered this field and has a variety of styles, which has also caused impact on Hongxing and other brands.