This article is from the WeChat public account: Yiyu Observation (ID: yiyuguancha), Wen / Mao Shiyang

On the evening of January 30, Wanda Films issued an announcement in response to an inquiry from the Shenzhen Stock Exchange, explaining the reason for the huge impairment of goodwill.

According to the announcement, the business entity for the impairment of Wanda Film’s goodwill includes three parts: theater, advertising and time network. Among them, the 14 theaters and 2 advertising companies that have been acquired have lost money in 2019, and Shiguang.com, which has been acquired for three years, is expected to maintain a break-even or slightly loss. Therefore, goodwill impairment provisions of 4.5-5.5 billion yuan have been made for the three businesses.

The huge impairment of goodwill is the direct cause of Wanda Film’s 2019 performance loss. On the afternoon of January 20, Wanda Film released a 2019 performance forecast, and it is estimated that the net profit attributable to shareholders of listed companies will be negative 3.3-4.5 billion yuan. If the impact of goodwill impairment is eliminated, Wanda’s current net profit is expected to be between 1 billion and 1.2 billion yuan, which is basically the same as the previous year.

The one-time accrual of goodwill attracted the attention of the Shenzhen Stock Exchange. On January 20, Wanda Film received an inquiry letter from the Shenzhen Stock Exchange, requesting disclosure of the equity involved in the provision for impairment of goodwill.

Actually, the goodwill impairment of Wanda Films has rules to follow. As of the close of the Spring Festival, the market value of Wanda Movies dropped to 35.94 billion yuan. According to previous financial reports, the goodwill of Wanda Movies in 2019Q3 was 13.4 billion yuan. Without impairment, the ratio of goodwill to market value will be too high.

But the reason is that the impairment of goodwill is caused by a premium purchase. According to the announcement, most of Wanda Film’s business entities withdrawing goodwill were acquired between 2014 and 2017, which was the worst year for the film and television industry bubble. In the winter of film and television, theaters and related advertising industries are in a slump, which is considered to be the reason for impairment.

If the depreciation of the asset itself is caused by the general environment, the three businesses involved in the impairment of goodwill are directed to Wanda Group Film and Television, respectively.The strategic core of ecology. Theaters, advertisements, extensions and online are all key links in the Wanda Group’s construction of the closed-loop film and television industry. They are also strategic considerations that have supported many domestic and overseas mergers and acquisitions in the past few years.

Even though the pre-deficit in 2019 is caused by the impairment of goodwill, Wanda Cinema will face a more severe operating environment in 2020. At the business level, the cold winter in advertising, cinema and other industries continued, and the ongoing new crown pneumonia epidemic and the empty Spring Festival stalls have made it even more difficult. At the strategic level, Wanda Group’s concept of creating a film and television ecology has been difficult to implement. In May 2019, many After the asset segment was reorganized with Wanda Films and incorporated into Wanda Movies, the weighted Wanda Movies are no longer “small and beautiful.”

In addition, due to Wanda Commercial Management’s ongoing IPO plan, its rental and financial assistance to Wanda brand theaters is expected to become limited. Rent is one of the core of theater costs, which will weaken Wanda’s movie operations. Financial flexibility.

Integrating the overall environment and the internal situation of the Wanda Group, Wanda Movies, which is moving forward with heavy load, will have a difficult time turning around in 2020.

Cinema and Shiguang.com are goodwill impairment “big households”

In this large amount of goodwill impairment, the theater is the largest part. According to the announcement issued by Wanda Film on January 30, 14 theaters involving impairment of goodwill were acquired from the end of 2014 to the first half of 2018. At that time, the amount of acquisition was approximately 3.59 billion yuan. The value is between 2.1 billion and 2.5 billion yuan.

In 2019, the total operating income of the 14 theaters acquired was less than 910 million yuan, a year-on-year decline of more than 10%. The loss before interest and tax is expected to reach 82.72 million yuan, and the annual performance is not up to expectations.

For the impairment of the goodwill of the 14 theaters, Wanda Films believes that the important reason comes from the industry, and the film industry has an obvious turning point in 2019. Yien data statistics show that the box office in 2019 was 64.037 billion yuan, an increase of 5.5% year-on-year, lower than in 2018Of 9.06%. In addition, the number of movie viewers in 2019 was 1.716 billion, a net decrease of 2.4 million compared with 2018.

In addition to theaters, TimeNet is another major subject of goodwill impairment. This sector includes five companies, which were successively included in Wanda Movies from 2016 to the end of 2019. During the period, the acquisition amount was about 2.34 billion yuan, and the impairment of goodwill was 1.4-1.8 billion yuan. However, some of the original business of Shiguang.com has been in a slump and has been gradually abandoned, resulting in a decline in profitability, which is the reason for the impairment of goodwill.

At the operating level, in 2019, the operating income of Time Network was approximately 357 million yuan, a year-on-year decrease of 16%, and the profit before interest and tax was 9.10 million yuan, a year-on-year decrease of more than 80%. At the business level, Time.com ’s online ticketing business has a market share of only 0.5%, which has failed in the competition between Cat Eye and Amoy Tickets. In addition, Time.com ’s film and television and advertising businesses have declined, and profitability has declined.

In addition, the two advertising companies that Wanda Films spent 1.44 billion yuan in 2015 and 2016 made a loss for the first time in 2019, with operating income down 18% year-on-year and less than 1.1 billion yuan; EBIT was negative 149 million yuan The profit in 2018 was 229 million yuan. To this end, the goodwill of the two advertising companies was impaired by RMB 1-1.2 billion.

In fact, Wanda Films at one time accrues goodwill impairment, and the one-time accrual of goodwill impairment before the new rules for asset impairment can reduce the drag on performance in subsequent years. The 2019 third quarter report shows that at that time Wanda Movies had a goodwill of 13.4 billion yuan and a total revenue of 11.6 billion yuan. In addition, as of the close of the Spring Festival, the market value of Wanda Movies was 35.94 billion yuan. If it still maintains a goodwill of over 10 billion yuan, it will obviously be too high.

But despite this financial consideration, this series of signals still shows the plight of Wanda Films in terms of business and strategy. In addition, the film and television winter continued, and the Spring Festival stalls were empty, which exacerbated the difficulties of Wanda movies.

Wanda Movies Turns Losses With Weight

In the past few years, in order to create a closed loop for the film and television industry, the Wanda Group has made large-scale mergers and acquisitions in the industry. .

In addition, Shiguang.com acquired a huge sum of money, and its business involves film reviews, video news, and online ticket sales. After being incorporated into Wanda, in accordance with the group’s tailored future vision, Wanda hopes to use the Time Network to leverage the copyright cooperation with Hollywood to expand the film derivative market, from derivative design, production to sales, to build a complete film derivative ecosystem.

And this series from the upstream film and television production investment, to the middle and lower reaches of the domestic theater line, the layout of foreign theaters, and then to the downstream derivative business linkage, was regarded as a strategy to open up the film and television ecosystem.

Today, given the high hopes of Time.com, not only has its new business development failed, its inherent business has also fallen to freezing point. However, the failure to meet expectations in all links, including Time.com, has led to a difficult landing of the film and television strategy at the group level. But in the end, this series of business subjects who have not cultivated enough tacit understanding between them was uniformly “under the control of” Wanda Films.

In May 2019, Wanda Films completed the reorganization of Wanda Films, including overseas segments such as AMC, Hoyts, and some of the main bodies of Time Network.

Wanda Cinema’s movie projection business is the main source of Wanda’s film revenue. However, under the counter-cyclical industry, Wanda Film’s projection business revenue has grown weakly. In this context, how does Wanda Film manage more business, It will be a bigger problem.

In addition, support from other sections of the group may also decrease over the next year. In theater operations, rents account for an important part of the theater’s operating costs. Most Wanda brand theaters rely on Wanda Plaza, which has been regarded as one of the core advantages of the theater business. However, at the moment Wanda Commercial Management sprints the A-share IPO, the financial support that can be given to theaters is expected to decrease.

Except for the interior, the external loop facing Wanda FilmsThe situation is also differently optimistic. In 2020, the film industry has a bad start. On January 23, 7 spring films were announced for emergency withdrawal. Among them, “Chinatown Detective 3” produced by Wanda Films has the highest pre-sale, setting the fastest-selling box office for Chinese movies. Records, the outside world predicts that the final box office could have been more than 4 billion yuan.

According to official statistics, as of 19:00 on the 31st, the number of confirmed cases of new coronary pneumonia has increased to 9,745. The 2020 Chinese New Year has not fallen behind, and under the severe new crown pneumonia epidemic, it is difficult to predict when “Tang Tan 3” will be released.

But it is certain that with the impact of the epidemic on offline entertainment, especially group indoor entertainment, it is difficult for the theater business to pick up in a short time. “Tang Tan 3” is released in other schedules, and the box office will be revalued.

No one can deny that Wanda Film is still one of the most active and efficient players in the film and television industry, but the environment and the burden within the group will make it harder for Wanda Film to recover its performance.