[News Space=Reporter seungwon lee] Coffee franchise Tous Les Jours (CEO Moon Young-joo) is being criticized by consumers as a 'greedflation' company due to frequent price increases despite posting record sales for two consecutive years.

Also, attention is focused on the background and reason for Trinity Holdings Korea, the controlling company of Twosome Place and a 100% owner, implementing a paid-in capital increase of 38 billion won. Industry experts judged it to be an early recovery of the major shareholder's investment by utilizing stable cash flow.

According to the Financial Supervisory Service's electronic disclosure system on the 13th, Twosome Place's sales in 2024 increased by about 8.3% year-on-year (KRW 480.1 billion) to KRW 520 billion. Operating profit increased by 25.2% year-on-year to KRW 32.6 billion, and the operating profit ratio increased by 0.9%p year-on-year to KRW 6.3%. Net income for the period increased by 36.4% year-on-year to KRW 24.4 billion.

This is analyzed as a result of increased sales and cost efficiency. Last year, consumer sales at Tous Les Jours increased by 11% compared to the previous year, same-store sales increased by 7%, and new product sales increased by 62%.

However, despite breaking the record for the best performance in history for two years in a row, the company raised prices in March, taking advantage of weakened government oversight, and is being criticized for being a case of greedflation that seeks only “excessive profits” rather than consumer satisfaction.

The debt ratio of Tous Les Jours improved slightly from the previous year (39.5%) to 38.2%, and the current ratio was 93.3%. Short-term borrowings were 0 won, current liabilities were 157.6 billion won, and cash assets were 45.4 billion won.

Intangible assets decreased by about 2% year-on-year to KRW 922.8 billion, which appears to have been affected by depreciation related to brands and franchises.

Selling and administrative expenses increased by approximately 14.5% year-on-year. By major item, ▲employee salaries were KRW 102 billion (13% increase), ▲commissions were approximately KRW 52.8 billion (8.7% increase), and ▲depreciation was approximately KRW 40.9 billion (2.2% increase).

The lawsuit is ongoing in one case related to a lease agreement, and the amount claimed is approximately 122 million won.

The financial transaction with special related parties was executed in the form of paid capital increase with the parent company, Trinity Holdings Korea Co., Ltd., amounting to approximately KRW 38 billion. Internally, some directly managed stores incurred impairment losses (KRW 300 million), which was due to sluggish sales and poor store performance.

No dividends were paid in 2024, and retained earnings increased by about 73% year-on-year to about KRW 56.9 billion. The salary paid to key executives was KRW 760 million, and the retirement allowance was about KRW 170 million, totaling KRW 930 million in executive compensation. This is an increase of 288% from KRW 240 million the previous year.

A corporate finance analysis expert said, "Twosome Place is maintaining sales growth, but the poor performance of some stores and the burden of lease liabilities could act as potential risks. In addition, intensifying competition and changes in consumer trends could affect future performance." He also predicted, "The withdrawal from the Chinese business in 2022 is an example of a lack of competitiveness in overseas markets and a failed localization strategy, and new business expansion and brand strengthening strategies are expected to have positive effects."

In this situation, attention is focused on the background and reason why Trinity Holdings Korea, the controlling company of Tous Les Jours, implemented a paid-in capital reduction.

The industry sees this as an extension of the capital structure reorganization following the reverse merger of Trinity Holdings Korea in 2022. It is a 4.3% reduction in capital surplus (other capital surplus) from KRW 889.8 billion to KRW 851.8 billion to reorganize excess capital. The scale of the reduction was the burning of 4,100 issued shares (par value KRW 2.05 billion) and the payment of KRW 38 billion in cash to Trinity Holdings.

This is a return of funds to major shareholders by utilizing the stable cash flow (cash equivalents of KRW 45.4 billion in 2024) of Twosome Place, in a situation where Trinity Holdings Korea holds a 100% stake. In other words, out of the KRW 61.9 billion in cash outflow from financing activities in the 2024 cash flow statement, KRW 38 billion (61.4%) occurred as a paid-in capital reduction, which can be seen as an early recovery of investment funds.

In addition, by implementing paid-in capital reduction in a situation where short-term borrowings were improved to 0 won, the debt ratio was improved to 38.2%. Considering that the proportion of intangible assets (brands, franchise contracts, etc.) is 92%, it seems that the focus was on improving capital efficiency without securing liquidity.

In addition, the decrease in the number of issued shares (95,625 → 91,525 shares) theoretically resulted in a 4.5% increase in net asset value per share (NAV).

A corporate finance analysis expert analyzed that, "It is part of a strategic capital reallocation aimed at lowering the cost of capital and improving ROE (return on equity) by returning excess capital to major shareholders," and "It should be viewed as a case of returning funds to the parent company after the completion of a specific project and reinvesting them in new investments."

In addition, it was pointed out that "since it is an unlisted company and was decided solely by Trinity Holdings, which holds a 100% stake, the mechanism for protecting minority shareholders did not work, and since the specific explanation of the paid-in capital increase was omitted in the audit report, it is regrettable that there is a need for additional verification of the appropriateness of internal transactions."