Update on Fosun's financial position

[wolvesjoe]

All the facts and quotes are drawn from the four articles/reports linked at the bottom of this post:

"Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Fosun International Limited (HKG:656) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?​

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Fosun International

What Is Fosun International's Debt?​

The image below, which you can click on for greater detail, shows that Fosun International had debt of CN¥228.7b at the end of December 2022, a reduction from CN¥243.4b over a year. However, because it has a cash reserve of CN¥157.8b, its net debt is less, at about CN¥70.9b.
SEHK:656 Debt to Equity History May 6th 2023

How Strong Is Fosun International's Balance Sheet?​

According to the last reported balance sheet, Fosun International had liabilities of CN¥372.4b due within 12 months, and liabilities of CN¥251.1b due beyond 12 months. Offsetting these obligations, it had cash of CN¥157.8b as well as receivables valued at CN¥62.5b due within 12 months. So its liabilities total CN¥403.2b more than the combination of its cash and short-term receivables.
This deficit casts a shadow over the CN¥39.0b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Fosun International would likely require a major re-capitalisation if it had to pay its creditors today."

My emphasis. So far Fosun have stayed afloat simply by selling assets, which allowed for a small reduction in overall debt, and allowed for their credit rating to be moved up to "stable" from "negative" in the three quarters preceding the last financial report in the spring of this year. Their plan is to further reduce overall debt, by paying off bond maturities through further asset sales. Both Thomas Cook, acquired only a few years ago, and Club Med are being actively touted for sale, with heavy weights Rothschild trying to find a buyer. According to the S&P report, Fosun will continue to look to sell assests and concentrate on so-called core businesses. What is core and what is peripheral in terms of Fosun's portfolio is difficult to establish, as they are a corporate entity that has spread into many diverse areas. And after all it wasnt so long ago that Jeff Shi was reassuring us that Wolves were a "legacy" project, that Fosun were wholly commited to.

Debt and a lack of easily saleable assets is not Fosun's only pressing problem, however. In the last year's financial report, Fosun's earnings before interest and tax, (EBIT) reportedly ran at a loss, which, of course, puts the debt mountain into a different perspective. A company making good annual profits is putting debt to good use in turning a profit and growing the company. But the opposite holds true.

Generally the financial press/industry view Fosun pessimistically, (what Simply Wall Street call an intense disaffinity for Fosun stock), and their share price is at a five year low. Fosun however predict a near 50% rise in earnings for the current financial year, and look to further sell assets to reduce debt.

Are Wolves one of those assets? From all the above recently revealed financial figures, such a sale certainly cannot be ruled out.

Here are the articles to have a look at:

Is Fosun International (HKG:656) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company...

simplywall.st

China Billionaire’s Fosun Gets S&P Ratings Boost After Cutting Debt By $3 Billion; Stock Rises

Shanghai-based investment company's assets include Club Med

www.forbes.com

https://news.sky.com/story/chinese-...ital-goods/hkg-656/fosun-international-shares

Fosun International (SEHK:656) - Stock Price, News & Analysis - Simply Wall St

Research Fosun International's (SEHK:656) stock price, latest news & stock analysis. Find everything from its Valuation, Future Growth, Past Performance and more.

simplywall.st

 

[wolfslair]

Thanks for all that detail!!!! So impressive!

 

[WWFC4EVA]

All the facts and quotes are drawn from the four articles/reports linked at the bottom of this post:

"Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Fosun International Limited (HKG:656) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?​

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Fosun International

What Is Fosun International's Debt?​

The image below, which you can click on for greater detail, shows that Fosun International had debt of CN¥228.7b at the end of December 2022, a reduction from CN¥243.4b over a year. However, because it has a cash reserve of CN¥157.8b, its net debt is less, at about CN¥70.9b.
SEHK:656 Debt to Equity History May 6th 2023

How Strong Is Fosun International's Balance Sheet?​

According to the last reported balance sheet, Fosun International had liabilities of CN¥372.4b due within 12 months, and liabilities of CN¥251.1b due beyond 12 months. Offsetting these obligations, it had cash of CN¥157.8b as well as receivables valued at CN¥62.5b due within 12 months. So its liabilities total CN¥403.2b more than the combination of its cash and short-term receivables.
This deficit casts a shadow over the CN¥39.0b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Fosun International would likely require a major re-capitalisation if it had to pay its creditors today."

My emphasis. So far Fosun have stayed afloat simply by selling assets, which allowed for a small reduction in overall debt, and allowed for their credit rating to be moved up to "stable" from "negative" in the three quarters preceding the last financial report in the spring of this year. Their plan is to further reduce overall debt, by paying off bond maturities through further asset sales. Both Thomas Cook, acquired only a few years ago, and Club Med are being actively touted for sale, with heavy weights Rothschild trying to find a buyer. According to the S&P report, Fosun will continue to look to sell assests and concentrate on so-called core businesses. What is core and what is peripheral in terms of Fosun's portfolio is difficult to establish, as they are a corporate entity that has spread into many diverse areas. And after all it wasnt so long ago that Jeff Shi was reassuring us that Wolves were a "legacy" project, that Fosun were wholly commited to.

Debt and a lack of easily saleable assets is not Fosun's only pressing problem, however. In the last year's financial report, Fosun's earnings before interest and tax, (EBIT) reportedly ran at a loss, which, of course, puts the debt mountain into a different perspective. A company making good annual profits is putting debt to good use in turning a profit and growing the company. But the opposite holds true.

Generally the financial press/industry view Fosun pessimistically, (what Simply Wall Street call an intense disaffinity for Fosun stock), and their share price is at a five year low. Fosun however predict a near 50% rise in earnings for the current financial year, and look to further sell assets to reduce debt.

Are Wolves one of those assets? From all the above recently revealed financial figures, such a sale certainly cannot be ruled out.

Here are the articles to have a look at:

Is Fosun International (HKG:656) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company...

simplywall.st

China Billionaire’s Fosun Gets S&P Ratings Boost After Cutting Debt By $3 Billion; Stock Rises

Shanghai-based investment company's assets include Club Med

www.forbes.com

https://news.sky.com/story/chinese-...ital-goods/hkg-656/fosun-international-shares

Fosun International (SEHK:656) - Stock Price, News & Analysis - Simply Wall St

Research Fosun International's (SEHK:656) stock price, latest news & stock analysis. Find everything from its Valuation, Future Growth, Past Performance and more.

simplywall.st

Some banging info there mate, cheers.

 

[SmiffyWolf]

Does this mean we can sign Talisca ?

 

[SingYourHeartsOut]

Thanks, so they might be looking to sell us, fingers crossed, I think it's run it's sometimes fabulous and sometimes frustrating course.

 

[StaffordWolf]

Get em ****ed off.

 

[maws]

Does this mean we can sign Talisca ?

It’s looking like he’s going to be up for sale so possibly!

 

[surreywolf]

All the facts and quotes are drawn from the four articles/reports linked at the bottom of this post:

"Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Fosun International Limited (HKG:656) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?​

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Fosun International

What Is Fosun International's Debt?​

The image below, which you can click on for greater detail, shows that Fosun International had debt of CN¥228.7b at the end of December 2022, a reduction from CN¥243.4b over a year. However, because it has a cash reserve of CN¥157.8b, its net debt is less, at about CN¥70.9b.
SEHK:656 Debt to Equity History May 6th 2023

How Strong Is Fosun International's Balance Sheet?​

According to the last reported balance sheet, Fosun International had liabilities of CN¥372.4b due within 12 months, and liabilities of CN¥251.1b due beyond 12 months. Offsetting these obligations, it had cash of CN¥157.8b as well as receivables valued at CN¥62.5b due within 12 months. So its liabilities total CN¥403.2b more than the combination of its cash and short-term receivables.
This deficit casts a shadow over the CN¥39.0b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Fosun International would likely require a major re-capitalisation if it had to pay its creditors today."

My emphasis. So far Fosun have stayed afloat simply by selling assets, which allowed for a small reduction in overall debt, and allowed for their credit rating to be moved up to "stable" from "negative" in the three quarters preceding the last financial report in the spring of this year. Their plan is to further reduce overall debt, by paying off bond maturities through further asset sales. Both Thomas Cook, acquired only a few years ago, and Club Med are being actively touted for sale, with heavy weights Rothschild trying to find a buyer. According to the S&P report, Fosun will continue to look to sell assests and concentrate on so-called core businesses. What is core and what is peripheral in terms of Fosun's portfolio is difficult to establish, as they are a corporate entity that has spread into many diverse areas. And after all it wasnt so long ago that Jeff Shi was reassuring us that Wolves were a "legacy" project, that Fosun were wholly commited to.

Debt and a lack of easily saleable assets is not Fosun's only pressing problem, however. In the last year's financial report, Fosun's earnings before interest and tax, (EBIT) reportedly ran at a loss, which, of course, puts the debt mountain into a different perspective. A company making good annual profits is putting debt to good use in turning a profit and growing the company. But the opposite holds true.

Generally the financial press/industry view Fosun pessimistically, (what Simply Wall Street call an intense disaffinity for Fosun stock), and their share price is at a five year low. Fosun however predict a near 50% rise in earnings for the current financial year, and look to further sell assets to reduce debt.

Are Wolves one of those assets? From all the above recently revealed financial figures, such a sale certainly cannot be ruled out.

Here are the articles to have a look at:

Is Fosun International (HKG:656) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company...

simplywall.st

China Billionaire’s Fosun Gets S&P Ratings Boost After Cutting Debt By $3 Billion; Stock Rises

Shanghai-based investment company's assets include Club Med

www.forbes.com

https://news.sky.com/story/chinese-...ital-goods/hkg-656/fosun-international-shares

Fosun International (SEHK:656) - Stock Price, News & Analysis - Simply Wall St

Research Fosun International's (SEHK:656) stock price, latest news & stock analysis. Find everything from its Valuation, Future Growth, Past Performance and more.

simplywall.st

I get the feeling that Guo considers us a ‘core’ project in terms of being romantic - so doesn’t want to sell compared to other businesses. Hence the tracky and cap on Sat

This is the problem for me - otherwise he’d accept knockdown price - 10p in the pound etc

 

[SingYourHeartsOut]

It’s looking like he’s going to be up for sale so possibly!

Suggestions that he might be made a free agent I think, so if he'll come and play for nothing we might be able to afford him.

 

[wolvesjoe]

I get the feeling that Guo considers us a ‘core’ project in terms of being romantic - so doesn’t want to sell compared to other businesses. Hence the tracky and cap on Sat

This is the problem for me - otherwise he’d accept knockdown price - 10p in the pound etc

Certainly a possibility, but my sense from reading as widely as I could, is that events are outstripping any such plans.

 

[surreywolf]

How It was vs How It Is now

 

[Nige]

So its like having 10 credit cards and maxing out the 10,000 limit on each one . Earning 10.000 a year but your OK cos your keeping up with the minimum payments..

 

[WWFC4EVA]

So its like having 10 credit cards and maxing out the 10,000 limit on each one . Earning 10.000 a year but your OK cos your keeping up with the minimum payments..

...until the interest rates on said credit cards rise and you're then left struggling to meet the cost of repayments because your income won't cover the outgoings.
Then you need to sell the car, the golf clubs, the missus.... the kids....!!!
The worry is, you could eventually run out of saleable assets to keep your head above water.

 

[TF2Wolf]

Certainly a possibility, but my sense from reading as widely as I could, is that events are outstripping any such plans.

If they are looking to sell are they going to be realistic on the price. My worry and question is from the info you have kindly provided is it more likely that prospective buyers are going to wait before bidding knowing that Fosun’s predicament could worsen and become more desperate to sell at a lower price?

 

[sillytuna]

If they are looking to sell are they going to be realistic on the price. My worry and question is from the info you have kindly provided is it more likely that prospective buyers are going to wait before bidding knowing that Fosun’s predicament could worsen and become more desperate to sell at a lower price?

You don't want to wait in the football world. You want a premier league club and to make that work you need to buy as early in the season as possible for clubs like ours. A relegation threatened club is way too risky.

If there is a sale in the offing it'll be quick - next few weeks - unless we get good points quickly. Unless a new owner is clueless (always possible).

 

[surreywolf]

Wonder if it’s anything to do with Man U sale stalling

 

[Timberwolf]

So its like having 10 credit cards and maxing out the 10,000 limit on each one . Earning 10.000 a year but your OK cos your keeping up with the minimum payments..

Pretty much but also the £100,000 needs paying back in 12 months, yet everything you own only comes to £40,000

 

[Oldgold Wolfcub]

Does this mean we can sign Talisca ?

Never heard of him!!!

 

[wolfgar]

It appears they are deep in the ****, and as a result of this so are we. Great

 

[wolvesjoe]

In a sense, its always hard to judge when a large company is technically bankrupt as there are huge amounts of borrowing, investment, sales and turnover going on at any moment in time. So hard to judge until it becomes obvious, that is.

In the meantime, as I am sure the financial professionals here on the mix can confirm, a large company can attempt to keep afloat by essentially cannibalising itself, selling off its saleable assets to shave off debt and meet outgoings. The markets will judge if Fosun are in this position.

 

[Wolf316]

You don't want to wait in the football world. You want a premier league club and to make that work you need to buy as early in the season as possible for clubs like ours. A relegation threatened club is way too risky.

If there is a sale in the offing it'll be quick - next few weeks - unless we get good points quickly. Unless a new owner is clueless (always possible).

Massive risk waiting around as there’s a real possibility we’re in the championship next season and that wipes off a huge amount on our value.

 

[Superted]

Unless I'm misinterpreting something, according to that balance sheet Fosun are technically insolvent. They don't have enough cash and assets to cover their liabilities.

 

[wolvesjoe]

Unless I'm misinterpreting something, according to that balance sheet Fosun are technically insolvent. They don't have enough cash and assets to cover their liabilities.

They are positing a major rise in turnover for the current financial year, which seems to be the way to avoid that conclusion.

 

[Starsky]

So what happens if Fosun starts defaulting and collapses, but we've technically got enough cash in the 'bank' to last the season? Could it be that potential buyers know what is happening and are waiting for this to happen?

 

[wolvesjoe]

So what happens if Fosun starts defaulting and collapses, but we've technically got enough cash in the 'bank' to last the season? Could it be that potential buyers know what is happening and are waiting for this to happen?

That thought has also crossed my mind. Something seems to have happened in the last week or so.

 

[surreywolf]

So what happens if Fosun starts defaulting and collapses, but we've technically got enough cash in the 'bank' to last the season? Could it be that potential buyers know what is happening and are waiting for this to happen?

I just don’t get this - surely ‘potential buyers’ don’t want a club / squad that could spend most of the season down amongst the dead men? That could quite easily see us down into League One

I think people are reading too much into it all

Yes Fosun are screwed but I think they’re just managing us badly and underestimating how bad things could get football-wise

I’m not sure they do want to sell, I think Guo wants to hang on to us and ‘ride the storm’ hence Jeff’s comments about next year

 

[Sussex Wolf]

Unless I'm misinterpreting something, according to that balance sheet Fosun are technically insolvent. They don't have enough cash and assets to cover their liabilities.

Correct. They are also not the only Chinese firm in that situation. The Chinese state doesn’t want a series of mega corporate failures as they now have a large middle class who will get hurt and be unhappy, so they will prop up firms they don’t want to fail. Of course that means what independence those firms had before is gone and they are entirely beholden to the state.

 

[Sussex Wolf]

You don't want to wait in the football world. You want a premier league club and to make that work you need to buy as early in the season as possible for clubs like ours. A relegation threatened club is way too risky.

If there is a sale in the offing it'll be quick - next few weeks - unless we get good points quickly. Unless a new owner is clueless (always possible).

I agree. I’d speculate they have a buyer(s) interested already and this summer has been about sorting the finances to get the best sale price. That’s a balance of sales while keeping a squad and coach capable of surviving until a sale completes. My guess is that a sale will be done before Christmas, including approvals and completion of the sale.itself.

 

[MattH]

Wonder if it’s anything to do with Man U sale stalling

I think this might be the key. Lop stayed around for a bit on the promise there would be a takeover (Qataris?) then slung his hook when it wasn't happening and he wouldn't have a transfer budget.

Fosun must have been banking on the sale to generate cash this summer, now it looks unlikely before close of the transfer window they're pimping out our most saleable assets to do that instead.

One anomaly with this is why we didn't sell Kilman for a decent wedge when we had the chance to.

A sliver lining might be that Fosun basically need to sell us, so you would hope the uncertainty won't last long. Sale completed over the autumn to allow for spending in January you'd hope.

 

[SmiffyWolf]

Jeff's been working behind the scenes trying to sell us to a few major companies. Woolworths and Carillon were mentioned from a few rumours I saw. What possibly could go wrong .

 

[Superted]

They are positing a major rise in turnover for the current financial year, which seems to be the way to avoid that conclusion.

That would have to be one hell of an increase in revenue, one that doesn't seem to have been realised at any point before.

 

[wolvesjoe]

That would have to be one hell of an increase in revenue, one that doesn't seem to have been realised at any point before.

Precisely.

 

[old wittonian]

Jeff's been working behind the scenes trying to sell us to a few major companies. Woolworths and Carillon were mentioned from a few rumours I saw. What possibly could go wrong .

Wilko?

 

[YouGottaRaulWithIt]

I just don’t get this - surely ‘potential buyers’ don’t want a club / squad that could spend most of the season down amongst the dead men? That could quite easily see us down into League One

I think people are reading too much into it all

Yes Fosun are screwed but I think they’re just managing us badly and underestimating how bad things could get football-wise

I’m not sure they do want to sell, I think Guo wants to hang on to us and ‘ride the storm’ hence Jeff’s comments about next year

If Guo really wants to hang on to us I think it will be for sportswashing rather than because of a deep love for the Wolves, despite him being seen in a club cap on Saturday.

 

[Perton Wolf]

Sold two of our best players in Neves and Nunes.
No replacements in sight.
Lost our European trophy winning manager and replaced him with a bloke who has just 9 months of managerial experience to his name.
Season tickets over £800 in some parts of the ground, won't be far off £1K in a few years at the same trajectory.
Molineux is a decaying mess.

The sooner FOSUN go, the better.

 

[Oh When the Wolves]

Sold two of our best players in Neves and Nunes.
No replacements in sight.
Lost our European trophy winning manager and replaced him with a bloke who has just 9 months of managerial experience to his name.
Season tickets over £800 in some parts of the ground, won't be far off £1K in a few years at the same trajectory.
Molineux is a decaying mess.

The sooner FOSUN go, the better.

Hurrah

 

[old wittonian]

If Guo really wants to hang on to us I think it will be for sportswashing rather than because of a deep love for the Wolves, despite him being seen in a club cap on Saturday.

That was just PR IMHO.

 

[wolvesjoe]

Sold two of our best players in Neves and Nunes.
No replacements in sight.
Lost our European trophy winning manager and replaced him with a bloke who has just 9 months of managerial experience to his name.
Season tickets over £800 in some parts of the ground, won't be far off £1K in a few years at the same trajectory.
Molineux is a decaying mess.

The sooner FOSUN go, the better.

Its hard to argue with that.

Ultimately the failure to develop/expand/improve the ground has been the underlying evidence that Fosun were never
in it for the long haul. Or at least since the Council made it clear they couldnt or wouldnt help out.

Everyone, self included, accepts the notion that Wolves can be made glorious again, but perhaps its just a fiction, based on a
memory. Maybe even, a new identity needs forging, whatever that might be.

 

[surreywolf]

If Guo really wants to hang on to us I think it will be for sportswashing rather than because of a deep love for the Wolves, despite him being seen in a club cap on Saturday.

I think it was the former to begin with, now it’s a bit of the latter too - which curiously is not helpful to us, if we were just another asset they’d have got shot of us by now

Also think these things are cyclical and Fosun somehow think geopolitical climate will thaw at some point. 10 years ago Britain and China were best mates and talking big trade deals

 

[Big Saft Kid]

Sold two of our best players in Neves and Nunes.
No replacements in sight.
Lost our European trophy winning manager and replaced him with a bloke who has just 9 months of managerial experience to his name.
Season tickets over £800 in some parts of the ground, won't be far off £1K in a few years at the same trajectory.
Molineux is a decaying mess.

The sooner FOSUN go, the better.

Bang on the money (or lack of it!). The club is in a truly sorry state. Unless FOSUN are very careful, their prized asset could easily end up losing over half its value, which it will do if we go down (and down). This is the first time I have felt in my bones that relegation is a real possibility. Novice manager, loss of the best players, no investment in the team or the stadium. What happened to the sunlit uplands of 2017-20?