Update on Fosun's financial position

[Sussex Wolf]

Would of thought it be in media if it was anywhere near

Not necessarily. Depends on whether those involved want it to be or not.

 

[yateleywolf]

Not necessarily. Depends on whether those involved want it to be or not.

Fair enough

 

[Sussex Wolf]

Business is all about confidence, just as money is all about confidence.
You only accept money if you believe you can use it to buy stuff.
Fosun had a pretty steep revenue and earnings per share growth being quoted to give confidence to its creditors (the debts owed) based on its balance sheet in 2022.
Fosun spent big at Wolves in January 2023. This wasn't planned.
Where are Fosun against their forecast based on continuing in business as a going concern to finance that 2022 balance sheet.
Well as of the1st of August 2023, the financial analyst(s) are saying they're on target to deliver.
To deliver Wolves has to tow the line with FFP, which also coincides with it being self sustaining.
Screen shot of where the analysts believe Fosun are at on the1st of August 2023, seven months into 2023:
View attachment 36677

Fosun’s stock price is a broad reflection of market confidence in their performance, and unfortunately, it’s consistently under performed the HK market for years.

 

[Sussex Wolf]

Fair enough

In my experience stuff often leaks out at some point, but that may depend on how long a process has been going on, and who’s involved in facilitating it. My earlier comment was really addressed to those cases where the seller needs to drum up interest, and so either formally goes public, or leaks it via the press, for that purpose. If they already have serious interested parties, then it’s more likely they’d want to keep it quiet until it’s fairly far along, as external attention can sometimes derail negotiations, unsettle staff, affect other business like transfers, etc.

 

[Madmalc]

Fosun’s stock price is a broad reflection of market confidence in their performance, and unfortunately, it’s consistently under performed the HK market for years.

When the majority shareholder Guo owns 74.4% of all the shares, it's not unusual to see a share price discounted.
Those who hold the 25.6% don't have any real say when it comes to AGMs etc.

 

[ricki herberts moustache]

How It was vs How It Is now

View attachment 36660

View attachment 36661

From old gold to yellow....

 

[Flea]

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 recon they´re skint or at a progressively higher risk of that.
There is some tough times ahead economically,and getting into that period from the Fosun starting blocks will not exactly be a walk in the park.
Would I personally want to be a Fosun shareholder at this point in time?
Hell No.
Wouldn´t surprise me if the go out of biz further down the line.
They are allready on lifesupport and the pipes is about to get shut off.
**** them-always Wolves.

 

[goldfish]

Ah yes, it'd been a month or two since there'd been a new owner rumour.

As if any new owners would allow players sales to be rammed through before a sale.

Prospective owners might rather have the money in the accounts (or off the debts) than the players, though. Especially as it'll help with FFP.

For illustration purposes only: if you're a potential owner in it for money rather than soft power, would you rather buy Wolves with Nunes and £60m debt, or Wolves with no Nunes and no debt? Probably the latter. That's £60m you could invest in the stadium, training ground, etc. Or in a selection of £10m players you reckon could become £50m players.

I genuinely don't know if I'm right on this, but it's my best guess.

 

[goldfish]

Fair enough

Don't think we heard much about Fosun in advance, did we?

 

[yateleywolf]

Don't think we heard much about Fosun in advance, did we?

True.It was a day before the Fulham A game when it came out he wanted out .I remember because I was happy he was going plus we won the game .I think Percy was one of the first to report it was sold to Fosun but I could be wrong. Haven't read anything yet so far in the media.

 

[MattH]

From BBC article on Everton investment. It sounds like our plan this summer to reduce balance sheet debt is exactly what 777 would want to invest.

 

[Sussex Wolf]

Prospective owners might rather have the money in the accounts (or off the debts) than the players, though. Especially as it'll help with FFP.

For illustration purposes only: if you're a potential owner in it for money rather than soft power, would you rather buy Wolves with Nunes and £60m debt, or Wolves with no Nunes and no debt? Probably the latter. That's £60m you could invest in the stadium, training ground, etc. Or in a selection of £10m players you reckon could become £50m players.

I genuinely don't know if I'm right on this, but it's my best guess.

If the prospective buyer and seller had an identical valuation of a player like Nunes, then I agree with your logic. However in this scenario, it’s unlikely they will, since that is a key part of the takeover negotiation. A buyer will make a conservative valuation of a player, perhaps using their book value as a starting point. A seller will seek to use their assumed market value, which might be an internal figure they used to compare to any unsolicited bids for a player. So for Nunes, the buyer might assign 30m to him when pricing a takeover, and the seller might assign 60m. If Fosun are desperate to sell the club, then the negotiated figure is likely to be closer to the buyers assessed value.

 

[Sussex Wolf]

From BBC article on Everton investment. It sounds like our plan this summer to reduce balance sheet debt is exactly what 777 would want to invest.View attachment 36685

Looks like they are about to announce they are taking over Everton. If so, it is likely good news for us as they don’t sound the greatest of owners…

Everton: Official takeover announcement now imminent - journalist

Everton are close to announcing 777 Partners as new investors in the club after talks with MSP Sports Capital collapsed, according to Sacha Tavolieri.

www.goodisonnews.com

The 777 football mystery - josimarfootball.com

Multiple club-owner 777 – a US private investors group – has a patchy record in honouring its financial commitments and is the subject of several court actions in the USA. So who are they, and where does the money come from?

josimarfootball.com

Hertha Berlin: Former owner confirms 777 Partners paid less than €15m up front for majority stake - SportsPro

Former Hertha Berlin owner Lars Windhorst revealed to a London court that he has yet to be paid in total by 777 partners for his stake.

www.sportspromedia.com

777 Partners’ Suspicious Airline Investments (Flair & Bonza)

777 Partners owns stakes in some airlines, including Canada's Flair and Australia's Bonza. Here's why these investments are concerning.

onemileatatime.com

 

[goldfish]

If the prospective buyer and seller had an identical valuation of a player like Nunes, then I agree with your logic. However in this scenario, it’s unlikely they will, since that is a key part of the takeover negotiation. A buyer will make a conservative valuation of a player, perhaps using their book value as a starting point. A seller will seek to use their assumed market value, which might be an internal figure they used to compare to any unsolicited bids for a player. So for Nunes, the buyer might assign 30m to him when pricing a takeover, and the seller might assign 60m. If Fosun are desperate to sell the club, then the negotiated figure is likely to be closer to the buyers assessed value.

Thanks. This is the kind of thing I was hoping this thread would throw up!

Maybe it's more just about reducing debt. Who knows!!?!?

 

[Sussex Wolf]

Thanks. This is the kind of thing I was hoping this thread would throw up!

Maybe it's more just about reducing debt. Who knows!!?!?

Yes I think it is, since any reduction in debt will (generally) result in a higher sale price for Fosun. For the buyer, then you’re right, it probably gives them more flexibility too, unless they are cash rich (eg Saudis) or they have access to much cheaper borrowing. But I don’t think the level of borrowing would make the latter a big benefit at Wolves.

 

[Flump]

Prospective owners might rather have the money in the accounts (or off the debts) than the players, though. Especially as it'll help with FFP.

For illustration purposes only: if you're a potential owner in it for money rather than soft power, would you rather buy Wolves with Nunes and £60m debt, or Wolves with no Nunes and no debt? Probably the latter. That's £60m you could invest in the stadium, training ground, etc. Or in a selection of £10m players you reckon could become £50m players.

I genuinely don't know if I'm right on this, but it's my best guess.

I don't think we have significant debt?

But anyway, debt is usually easy to value, as it just comes off directly from the price - in it's simplest form, when you're buying a house, you don't care if it has a mortgage or not when deciding how much to bid.

 

[old wittonian]

It’s an interesting choice. Agree with @Wolf316 comment. While Saudis will throw money at the club without worrying about a financial return, there will always be the risk that they leave at short notice when they have a better opportunity, or that there is a geopolitical storm which gets in the way. American investors come in all shapes and sizes. Some are well financed and professional, some are funded by debt, and clueless. The former may be better long term than Saudis, the latter could be far worse than Fosun, even in their financially stricken times.

Clueless. They will go down well at Wolves then.

 

[goldfish]

I don't think we have significant debt?

But anyway, debt is usually easy to value, as it just comes off directly from the price - in it's simplest form, when you're buying a house, you don't care if it has a mortgage or not when deciding how much to bid.

Thanks, that's useful. I wonder if it's more that a lot of the debt is to Fosun, with generous repayment terms. If the club is sold, the new owners might not prioritise paying Fosun back, so this helps Fosun's cashflow.

Of course it also helps Fosun's cashflow if they're not selling...

 

[goldfish]

It’s an interesting choice. Agree with @Wolf316 comment. While Saudis will throw money at the club without worrying about a financial return, there will always be the risk that they leave at short notice when they have a better opportunity, or that there is a geopolitical storm which gets in the way. American investors come in all shapes and sizes. Some are well financed and professional, some are funded by debt, and clueless. The former may be better long term than Saudis, the latter could be far worse than Fosun, even in their financially stricken times.

I think Saudi investment is more than simply soft power: they also want to open up regional markets. Newcastle and the north-east are hugely attractive places for investment capital right now (real estate, labour, infrastructure).

The other thing that makes Saudi ownership unlikely is that, as much as they and the Premier League say otherwise, it's the Saudi state investing. There aren't a whole host of private billionaires acting independently.

 

[JayStringer]

Not really. From what I have seen over the past few years, Americans buy a football club to make money and don't want to invest. Saudis buy football clubs for soft power and making money from them isn't their objective. The Saudi owners pump money into their clubs, Americans do not.

I think everyone needs to accept that whether the future lies with Fosun or new owners, Wolves need to become self-sufficient low cost operators.

 

[JayStringer]

I don't think we have significant debt?

But anyway, debt is usually easy to value, as it just comes off directly from the price - in it's simplest form, when you're buying a house, you don't care if it has a mortgage or not when deciding how much to bid.

It depends on the debt. For instance the takeover at Everton collapsed because the buyers don’t want to take on one specific debt that would have carried over.

Broadly though I agree with you in that looking at debt isn’t the best indicator of whether we’re being sold. I think of it more in terms of obligations. By and large the player sales and releases over the summer have not just reduced the clubs overall wage bill, they’ve also taken out most of our high earners (there are some exceptions, but Semedo and Nunes now being linked with sales.) Finding a settlement with JL has removed one of the highest paid coaches in the league. As far as I know the club hasn’t taken on its usual cashflow loan this year.

So to my mind its more about reducing the obligations on the books, which suggests to me a low-cost hedge fund/investment firm model.

 

[AndyY]

I think everyone needs to accept that whether the future lies with Fosun or new owners, Wolves need to become self-sufficient low cost operators.

Agreed, and thats why I would not object to US owners (as a general rule) rather that, say, Saudi. Someone said earlier in this thread that they would not want US owners because they tend to want to operate as a business, well thats exactly what I do think we need to do.
Morgan tried but didnt have the cash to invest first (particularly after he spent £18M on the North bank rather than the team), Fosun have tried but completely screwed it up with an awful transfer policy when they had the chance to succeed, so time to give a US investor the chance.

 

[MasWolf]

I think everyone needs to accept that whether the future lies with Fosun or new owners, Wolves need to become self-sufficient low cost operators.

In all likelihood, you're right. But we can still dream of mega billionaires taking over and pumping ridiculous amount of cash into the club to fire us into regular Champions League spots.

 

[Flump]

It depends on the debt. For instance the takeover at Everton collapsed because the buyers don’t want to take on one specific debt that would have carried over.

Broadly though I agree with you in that looking at debt isn’t the best indicator of whether we’re being sold. I think of it more in terms of obligations. By and large the player sales and releases over the summer have not just reduced the clubs overall wage bill, they’ve also taken out most of our high earners (there are some exceptions, but Semedo and Nunes now being linked with sales.) Finding a settlement with JL has removed one of the highest paid coaches in the league. As far as I know the club hasn’t taken on its usual cashflow loan this year.

So to my mind its more about reducing the obligations on the books, which suggests to me a low-cost hedge fund/investment firm model.

I think my main thought is that

a) Guo probably wouldn't have turned up to watch if we were actively being sold
b) Guo definitely wouldn't have worn a Wolves hat and jacket if we were actively being sold

We have these rumours about new owners every month or two - for "reasons" as diverse as "we're not spending any money, we must be being prepped for sale" to "we're spending loads of money, they're prepping us for a sale"!

I think Jeff is just finally having to actually live up to his long made promise of being self-sufficient.

 

[wolvesjoe]

I think my main thought is that

a) Guo probably wouldn't have turned up to watch if we were actively being sold
b) Guo definitely wouldn't have worn a Wolves hat and jacket if we were actively being sold

We have these rumours about new owners every month or two - for "reasons" as diverse as "we're not spending any money, we must be being prepped for sale" to "we're spending loads of money, they're prepping us for a sale"!

I think Jeff is just finally having to actually live up to his long made promise of being self-sufficient.

Wolves give Fosun profile and identity, which are good reasons to think they may be trying to hang onto the club, despite their perilous status financially. I dont discount that trajectory completely.

But their financials are very poor, they openly acknowledge the need to sell assets and Wolves would count as an asset, which is never going to make money, but could yield £300-350m if sold. That pushes me, at least, into the "they are selling" camp.

 

[Flea]

I think everyone needs to accept that whether the future lies with Fosun or new owners, Wolves need to become self-sufficient low cost operators.

Another 30 years in the Chumpionship you sayin?
It is a No Thank You from me.
We need to find an owner of the club that can match our history with ambition.
Yes,it will cost a Mill or Three..but that is the name of the game nowadays.
Another Jez Moxey scenario I do not want at all.

 

[JayStringer]

Another 30 years in the Chumpionship you sayin?
It is a No Thank You from me.
We need to find an owner of the club that can match our history with ambition.
Yes,it will cost a Mill or Three..but that is the name of the game nowadays.
Another Jez Moxey scenario I do not want at all.

Nope. Brighton are run well on a budget.

 

[Eastyorksyeltz]

In all likelihood, you're right. But we can still dream of mega billionaires taking over and pumping ridiculous amount of cash into the club to fire us into regular Champions League spots.

At least you know its a dream. There seems to be a signficant number of posters who genuinely imagine that there is a queue of altruistic billionaires, or American investment companies who are happy to make losses, just waiting for Fosun to relinquish control and let them loose to buy top players and redevelop the stadium.

 

[YouGottaRaulWithIt]

I think my main thought is that

a) Guo probably wouldn't have turned up to watch if we were actively being sold
b) Guo definitely wouldn't have worn a Wolves hat and jacket if we were actively being sold

We have these rumours about new owners every month or two - for "reasons" as diverse as "we're not spending any money, we must be being prepped for sale" to "we're spending loads of money, they're prepping us for a sale"!

I think Jeff is just finally having to actually live up to his long made promise of being self-sufficient.

Sorry, I don't get the logic. Why would Guo turning up for the first home game in a Wolves cap mean we are not for sale?

 

[St.Simon.]

This is the best thread I have read on this forum for years.

I seldom post on here because of the negativity, ignorance and insulting attitudes of many posters, added to the scapegoating and abuse directed at our own players and management/directorate.

This thread however, includes some well thought out and informative postings by a number of people, and there has been tolerance for all opinions whether or not the poster has fully understood the issues. This is really refreshing.

Well done to all contributors.

 

[Flump]

Sorry, I don't get the logic. Why would Guo turning up for the first home game in a Wolves cap mean we are not for sale?

If you were asset stripping Wolves before you sell it in a mad rush to fund your billions of £ of debt as everyone has decided... would you turn up wearing a load of Wolves merch?

 

[Eastyorksyeltz]

If you were asset stripping Wolves before you sell it in a mad rush to fund your billions of £ of debt as everyone has decided... would you turn up wearing a load of Wolves merch?

Free stuff! Asset stripping the club shop I'd guess? Excess baggage charge on the way home, bags full of key rings and phone chargers.

 

[Sussex Wolf]

I think my main thought is that

a) Guo probably wouldn't have turned up to watch if we were actively being sold
b) Guo definitely wouldn't have worn a Wolves hat and jacket if we were actively being sold

We have these rumours about new owners every month or two - for "reasons" as diverse as "we're not spending any money, we must be being prepped for sale" to "we're spending loads of money, they're prepping us for a sale"!

I think Jeff is just finally having to actually live up to his long made promise of being self-sufficient.

Sorry, I don't get the logic. Why would Guo turning up for the first home game in a Wolves cap mean we are not for sale?

Firstly, we have no idea what else Guo was up to in Europe while here for the game, so it’s entirely possible he was pressing flesh and doing the necessary dog and pony show necessary to assure potential buyers.

It also struck me at the time that appearing in Wolves gear was a PR stunt, because he looked distinctly uncomfortable. Previous times he’s been here, he’s been shown in a suit, often accompanied by Mendes. This was far less professional, and for me, arranged at relatively short notice. It was probably for the staff and fans, intended to underline the comments made in Jeff’s letter, which we already know was less than completely honest after JL’s departure.

So for me, his appearance doesn’t prove Fosun are here for the long run, and the club’s business this summer, strongly suggests work to improve the club’s finances ahead of a sale, to maximise the sale price.

 

[Flump]

Firstly, we have no idea what else Guo was up to in Europe while here for the game, so it’s entirely possible he was pressing flesh and doing the necessary dog and pony show necessary to assure potential buyers.

It also struck me at the time that appearing in Wolves gear was a PR stunt, because he looked distinctly uncomfortable. Previous times he’s been here, he’s been shown in a suit, often accompanied by Mendes. This was far less professional, and for me, arranged at relatively short notice. It was probably for the staff and fans, intended to underline the comments made in Jeff’s letter, which we already know was less than completely honest after JL’s departure.

So for me, his appearance doesn’t prove Fosun are here for the long run, and the club’s business this summer, strongly suggests work to improve the club’s finances ahead of a sale, to maximise the sale price.

Fair enough.

I agree that he was probably trying to make a show of commitment, but for me, it does go against the picture being painted of a man selling anything he can get his hands on to desperately keep his billion £ business afloat, to pop in to Molineux and raid the club shop!

Also, was anything in Jeff's letter actually untrue (as opposed to not mentioning something very important)?

 

[Darvo]

If you were asset stripping Wolves before you sell it in a mad rush to fund your billions of £ of debt as everyone has decided... would you turn up wearing a load of Wolves merch?

I’m not so sure that you’d turn up at all.

 

[Flea]

Nope. Brighton are run well on a budget.

Only a matter of time anyways.
Soton was the same at one point.
Leicester as well.
The Chumpionship is full of them.
Sooner or later that´s where Brighton will end up as well if trying to be permanent selfsustained.
A matter of time.

 

[JayStringer]

Only a matter of time anyways.
Soton was the same at one point.
Leicester as well.
The Chumpionship is full of them.
Sooner or later that´s where Brighton will end up as well if trying to be permanent selfsustained.
A matter of time.

Football is cyclical. That will never change. The boom and bust of having a rich backer also leads to the cycle. Which is the only way Leicester would belong on that list. They were not run on a budget, they were backed by a rich owner, found ffp loopholes, and then the rich owner died. Life...and the football cycle....always finds a way.

 

[WickedWolfie]

Nope. Brighton are run well on a budget.

Take a look how much the owner put in....

 

[JayStringer]

Take a look how much the owner put in....

Undoubtedly. But we could also say take a look at how much Fosun have put in. The foundations are there, the question is what do we do with them.

 

[YouGottaRaulWithIt]

Undoubtedly. But we could also say take a look at how much Fosun have put in. The foundations are there, the question is what do we do with them.

Foundations are fine, it's the rest of the ground that is crumbling away.