George White's performance threshold is now facing sky-high taxes

On June 25th, Zhejiang George White Apparel Co., Ltd. (hereinafter referred to as “George White”) published a prospectus. The company plans to issue 24.65 million shares, and the total issued share capital is 98.57 million shares.

George White will start the subscription of new shares on July 4th, which is only a short distance from the A-share listing. However, just as the company rushed to rush into the market, its three major ills have made many people in the industry daunted.

“The clothing industry is highly competitive. Compared with other apparel companies, George White products are too concentrated risk and the agent risk is more obvious.” A Shenzhen private equity person who participated in the George White Road show pointed out to reporters: “In addition, the company’s tax benefits will expire. The impact on performance is also very prominent."

Big Brand Landing Business Wear George White Exhibited in Competition

George White is in a large number of traditional apparel industry companies and has low industry barriers to fully compete in the industry. The company's main products are the "George White" brand of professional wear, men's wear and casual wear, and there are numerous potential competitors in the business wear market, and the competition is fierce.

The reporter learned that the company’s competitors, Youngor, Baoxiu, Keno Technology, Xinour, Shanshan, Lilang, etc., have relied on the capital market to increase the scale of production and continue to overwhelm the professional wear business. “How much impact will the existing official retail brand engage in the field of customization in the field of wearable customization? This has always been a concern for the market.” Ma Li, a securities analyst at Galaxy Securities’ textile and apparel industry, bluntly stated.

George White also admitted in the prospectus that the production and operation of formalwear brands such as Youngor and Zhongxin Bird have become easier and their potential market competition is fierce. At the same time, more and more international brands have entered China, occupied the high-end market, and gradually penetrated into the mid-range market.

Compared with brand owners, George White has a huge gap in terms of overall sales scale and market share. According to the data, the business income of Keno Technology’s professional packaging business for the past three years was 555 million yuan, 677 million yuan and 898 million yuan, respectively, which far exceeds the size of George White. The branded merchants Youngor, Baoxiniao and Xinnor’s business wear business also achieved operating revenue of 419 million yuan, 444 million yuan and 160 million yuan in 2011.

It is worth noting that the above-mentioned brands are only trying out the professional wear market, and have not conducted “attack” in this business area. If Youngor's total operating income in 2011 was 11.539 billion yuan, business wear only accounted for 3.6% of total revenue. However, for George White, the business wear business is a "Gate of Life." In 2009, 2010, and 2011, the proportion of sales revenue of business equipment to main business income was 78.84%, 82.28%, and 86.87%, respectively.

If brand owners take a big toll on the business wear market, George White, who is disadvantaged in terms of scale and market share, etc., how to obtain a place to survive?

Five-year tax benefits, faced with a

Despite the "adversity" of competitors entering the business wear market, George White's "internal concerns" should not be overlooked.

It is reported that George White’s income mainly comes from professional service and partial retail business. According to the different characteristics of the two businesses, the company adopts different sales models, and the professional service business adopts a professional sales center and an agent sales sales model. The retail business adopts a sales model combining sales outlets and franchise stores.

“Agents and franchisees are only controlled by the company in terms of business. People, finances, and goods are independent of the company. If the company’s management level can not keep pace with the increasing number of agents and franchisees, or some agents and franchisees The business activities are contrary to the company's brand management objectives, and will have an adverse impact on the company's brand image and future development," said Cheng Yuan, an analyst at Huatai United Securities. It is worth mentioning that China-Thailand alliance is the lead underwriter of George White's IPO.

As a result of Sino-foreign joint venture status, George White was exempted from corporate income tax in 2007 and 2008, and in 2009, 2010, and 2011, it paid corporate income tax at a rate of 12.5% ​​after half reduction. Since 2012, the company will no longer enjoy the above tax benefits. "After the income tax relief policy is terminated, if the company fails to take effective measures in tax reduction, it is expected that the net profit will be reduced, which will have an important impact on future performance," said Galaxy Securities's Mario.

What is even more serious is that the tax benefits enjoyed by George White over the past five years are at risk of being recovered. The reporter noted that on February 9th, 2009, George White’s employee holding company, Westin, subscribed to the company’s new 23.92 million shares at RMB 1,205,568,000, with a share of RMB 5.04 and a shareholding ratio of 32.36%. After the above capital increase was completed, the shareholding of foreign shareholder Chen Liangren fell to 18.06%, which was lower than 25%.

According to the relevant tax law, foreign-funded enterprises with less than 25% of the applicable tax system shall be dealt with in accordance with domestic-funded enterprises, and shall not enjoy the tax treatment of foreign-invested enterprises.

According to financial data, George White's total profit in 2009, 2010, and 2011 was 48.24 million yuan, 83.66 million yuan, and 11.098 million yuan. Based on this calculation, the company's "tax savings" exceeded 30 million yuan in the past three years. There is a risk of tax recovery. In this regard, in the company's prospectus, the actual controllers Chi Fangfang, Chen Yongxia, and Chen Liangren made a commitment: “If the tax authority determines that George White must pay taxes and pay late taxes, I am willing to bear the expenses with my own funds. ."

However, the listed Shenzhen private equity person pointed out: "If George White were to be taxed, even if there are actual controllers' compensation commitments, the impact on the company's image and reputation is inevitable."