Youkeshu received 20 million yuan in additional capital, and the parent company's performance began to "warm up"

The closure of multiple sites in 2021 dealt Youkeshu a heavy blow. As of the first quarter of this year, Youkeshu's total liabilities still increased compared with the previous year, but the revenue of its parent company Tianze Information has stopped falling. Recently, Youkeshu also received 20 million yuan in capital increase from its parent company, but its subsequent development still faces many problems.

Youkeshu received 20 million yuan of additional capital from its parent company

In the past two years, Youkeshu's performance has been hit hard and it has fallen from the top of the cross-border overseas market. The closure of more than 300 sites has sounded the alarm for all cross-border sellers. Whether Youkeshu can get rid of its previous difficulties has always been a concern of sellers.

On July 6, Tianze Information issued an announcement stating that its controlling subsidiary Shenzhen Tianhao Technology Co., Ltd. (hereinafter referred to as "Tianhao") plans to increase its capital by RMB 20 million in the company's controlling subsidiary Changsha Youkeshu E-Commerce Co., Ltd. (hereinafter referred to as "Youkeshu").

It is understood that 1.4286 million yuan of the total amount will be included in the registered capital , so the registered capital of Youkeshu will increase from the previous 10 million yuan to 11.4286 million yuan, and the remaining funds will be included in its capital reserve. After this capital increase, the equity of Youkeshu has undergone minor changes. After the capital increase is completed, Tianze's subsidiary Tianhao will hold 12.50% of the equity of Youkeshu , Tianze Information's equity ratio will change from 60% to 52.5%, and another shareholder Fuxuan's equity ratio will change from 40% to 35%. There are no other changes. Tianze Information stated that this capital increase does not belong to any of the related transactions and major asset reorganizations.

Since Youkeshu’s stores were closed last year, its profitability and funding have been hit hard, with 130 million yuan of funds frozen. In addition, Youkeshu’s total assets and total liabilities have doubled as of the first quarter of this year.

Data shows that by the end of 2021, the audited total assets of Youkeshu were 54.3341 million yuan, and the unaudited total assets were approximately 136 million yuan on March 31 this year. Its total liabilities increased from 54.5825 million yuan at the end of 2021 to 140 million yuan on March 31 this year. In addition, the expansion of its net assets and net profit in the same period was also obvious . Net assets changed from -248,400 yuan to -4.1951 million yuan, and net profit increased from -2.7473 million yuan to -3.9467 million yuan.

In its inquiry letter to the Shenzhen Stock Exchange last month, Tianze Information made an estimate of Youkeshu's revenue and growth rate in the next five years. According to the estimated figures, Youkeshu's growth rate will turn from negative to positive in 2023, and this year's revenue growth rate may be -47.70%.

In 2021, Tianze Information was affected by store closures and low-price inventory clearance, which caused losses in profits that year. Data shows that in 2021 , the gross profit margin of online channel sales of Tianze Information's cross-border e-commerce business was 36.69%, which was lower than that of 2020 , but the overall change was not significant . However, due to the significant reduction in its offline channel sales gross profit margin, the company's cross-border e-commerce gross profit margin was overall lowered.

However, this year, Tianze Information's performance has shown signs of "warming up". In its previous reply to the Shenzhen Stock Exchange, Tianze Information revealed that its net cash flow from overall operating activities in the first quarter of 2022 has turned from negative to positive, up 104.66% over the same period, and the company's operating income in the second quarter has shown signs of stopping falling.

As for the reason for the capital increase, Tianze Information said that it was mainly to optimize its corporate structure and promote the development of its main cross-border e-commerce business , and to provide financial support for the subsequent development of Youkeshu. However, Tianze Information also stated in its announcement that there is a certain degree of uncertainty as to whether Youkeshu can successfully achieve its business development goals in the future .

Tianze Information received RMB 229 million in performance compensation

Since 2019 , cross-border e-commerce export business has become Tianze Information's only core business , and this business has thus become the main source of Tianze Information's revenue and profits .

In addition to increasing the capital of its subsidiaries, Tianze Information has recently received a performance compensation commitment of 229 million yuan , which comes from its shareholder Chen Jin . Previously, when Tianze Information purchased the equity of Youkeshu, shareholders Sun Borong and Chen Jin promised Tianze Information that the net profit of its subsidiary Yuanjiang Information would not be less than 145 million yuan. However, the company did not achieve the performance promised by the two in 2018 and 2019, so Tianze Information filed a lawsuit with the Shenzhen International Arbitration Court.

In May last year , the Shenzhen International Arbitration Court officially accepted the case, and the Kaifu District People's Court of Changsha City subsequently froze more than 13 million shares of the company held by Chen Jin. It is understood that the total compensation required by Tianze Information in the lawsuit is about 314 million yuan.

It is worth noting that the above-mentioned Yuanjiang Information is the former subsidiary of Tianze Information. In 2016, Tianze Information purchased Yuanjiang Information by issuing shares at a transaction price of 1 billion yuan. However, the company suffered serious staff loss and losses in the later period, and coupled with the adjustment of Tianze Information's own business, the company was sold at an amount lower than the transaction price.

Public data shows that Yuanjiang Information's net assets in 2020 were 42.7256 million yuan, but its losses reached 306 million yuan. In the first three quarters of last year, its losses were 215 million yuan, its performance declined significantly and it was difficult to collect payments. This also forced Tianze Information to take measures to minimize its adverse effects. Tianze Information once stated that Yuanjiang Information would no longer be included in its consolidated financial statements from November 30, 2021, and the adverse effects on its business development would not be sustainable.

However, the relationship between Tianze Information and Yuanjiang Information was not cut off all at once. When transferring Yuanjiang Information, Tianze Information stated that within three years after the completion of the transaction, after deducting reasonable direct recovery costs, it would still enjoy 50% of the net amount of accounts receivable collected by Yuanjiang Information . In addition, Tianze Information will also provide joint and several liability guarantee for the remaining principal of 68 million yuan of bank loans under Yuanjiang Information and the corresponding interest, penalty interest, etc., and is obligated to pay the unpaid capital contribution of 91 million yuan in Yuanjiang Information.

Although Tianze Information sold Yuanjiang Information and focused on cross-border e-commerce business, it has experienced "pain" due to the previous account suspension and the decline in gross profit margin due to the offline low-price inventory clearance . During this period, the company took measures such as: focusing on the priority expansion of products that are still in the blue ocean market, have a relatively long product life cycle, and are relatively slow to update, abandoning product lines with small marginal contributions, carrying out branding construction, and strategically shrinking the scale of business. At present, the company's registered staff has been reduced to 500, and it has more than 10 operating platforms, including Amazon, eBay, Wish, AliExpress, Shopee, etc.

Although Tianze Information has not yet announced its performance for the first half of this year, given that its cash flow has turned from negative to positive and the decline has stopped, the company's signs of recovery in the first half of this year may be more obvious.