Letter To Shareholders

Dear distinguished shareholders,


During the Reporting Period, the Group’s operating revenue reached RMB143.0 billion, representing a 31% growth as compared to the previous year. Profit attributable to owners of the parent amounted to RMB14.8 billion, representing a 10% growth as compared to the previous year, marking the eighth consecutive year of growth and another new record high. We are grateful to have our shareholders’ long-term trust and support throughout these years. To extend our sincere gratitude to our shareholders, all Fosuners will continue to work even harder and devote ourselves to achieving better results.



In early 2020, Coronavirus Disease 2019 (“COVID-19”) broke out and spread globally. The global crisis brought great challenges to the entire world, leaving no individual and enterprise unaffected. As soon as the outbreak took place, Fosun leveraged its global resources advantage and emergently deployed protective resources to help China fight against the epidemic on the frontline. However, as the COVID-19 eventually evolved into a global pandemic affecting all countries, we have now put great emphasis on helping more countries fight against the viruses. Fosun’s action to fight the outbreak has won high recognition and great support from Chinese and foreign governments as well as all walks of life, in particular, Fosun’s capacity in deploying our global resources is highly recognized.



The virus-borne global crisis threatens everyone’s life and health and hits hard the societies, economies and livelihoods of all countries. Fosun instantly studies the potential risks and opportunities faced by all industries in the midst of the crisis. In addition to protecting ourselves from the risks through various means, we also promptly capture the opportunities available for strengthening our businesses by fully leveraging our advantages in global industrial integration and investments. Fosun has experienced numerous economic cycles in the past 28 years of operation since its establishment, we weathered every crisis we faced and grew stronger, so we are confident that we will be able to overcome the crisis again and emerge as an even more resilient global enterprise.



Grasp opportunity arising from China’s family consumption industry upgrade in the post-outbreak era



In view of the current situation, China would hopefully be the first to ride out the crisis among all major economies in the world. As a global company rooted in China, Fosun always insisted on its “glocalization” (Global + Local) strategy and has pioneered in introducing many world-class industries into China. Having experienced the outbreak, China will mainly drive economic growth by stimulating domestic demands. This approach coincides with Fosun’s aspiration of becoming an innovation-driven consumer group, therefore, Fosun will make greater efforts to promote the family consumption industries with particular emphasis placed on its products customized for “family”, “healthcare” and “online”, so as to provide better services and high-quality products to more families worldwide.



For instance, parent-child tours and family tours are always the most prominent features of FTG. Atlantis Sanya offers a series of family resort experience such as Aquaventure Waterpark, Dolphin Cay, the Lost Chambers Aquarium and C Shows, creating a new benchmark of Hainan tourism destination as an icon of upgrading v3.0. In 2019, Atlantis Sanya posted business volume of RMB1.31 billion, representing more than 74.2% growth as compared to the previous year, with occupancy rate increased to 68.5%. In 2019, the number of visitors reached around 5.2 million.



Another example is the distinctive health insurance, which Fosun has been always developing for its insurance segment, leveraging its industrial resources in the health business. Fosun United Health Insurance, which was established only three years ago, achieved a premium revenue of more than RMB1.81 billion in 2019, representing a growth of around 250% as compared to the previous year. As a new and distinctive health insurance company, Fosun United Health Insurance endeavors to create a business ecosystem with digital and smart healthcare services. The company earned premium revenue of RMB714 million in 2019 from Internet insurance, representing a growth rate of 154% as compared to the previous year and a share of 39.5% in the company’s total premium revenue.



Furthermore, Fosun has been stepping up its online marketing. For instance, Yuyuan, Fosun’s Happiness flagship which also plays an important role in drawing customer traffic, has been strengthening its online membership marketing in 2019. Its registered online members increased by 103% to 8.75 million in total, of which, the number of online buyers has increased by 136% to 1.89 million with a total member repurchase amount of RMB500 million. “Laomiao”, a brand under Yuyuan, worked with Fosun’s online platform Baihe Jiayuan, launching the hot-selling product package of the year which included Mak Ling Ling’s “Good Luck Charms for Love” pure gold accessory and Baihe Jiayuan’s matchmaking services.



Optimize asset allocation and focus on core businesses



Early this year, Fosun proposed an important keyword for its growth in 2020 – Focus. In the past decade, Fosun has made many ground breaking attempts and explorations in terms of regions, investment and industries. That stage of development has been completed and we are about to enter the new stage of optimizing our asset allocation and focusing on core industries. Our objective is to become one of the leaders in each of the core businesses we engage in. As such, we have launched the Fosun Business System (FBS) for further empowering and supporting the development of our core businesses.


First of all, we rely on meticulous management to increase operational efficiency. It is always our belief that absolute scale should not be an enterprise’s target. In fact, many enterprises which pursue scale expansion through endless leverages at the expense of profitability eventually fail to survive in times of crisis. On the contrary, meticulous management is one of the essential keys to success of many outstanding enterprises. Therefore, highest employee productivity, highest operational efficiency and maximum profitability are what we should pursue. For instance, steel output per capita and profits per capita of Nanjing Iron & Steel, ranked the second and the third respectively among steel enterprises in China. It may not be the largest steel enterprise in China, but it is surely one of the best.



Secondly, we shall increase investment in research and development (“R&D”) of technology innovation to create world-class products. Always maintaining competitiveness of products is the key factor for securing industrial leadership, and greater investment in R&D of technology innovation is essential in this regard. Taking our Health business as an example, Fosun has accumulated extensive experience and resources in the industry, and Fosun Pharma is one of the top ten pharmaceutical enterprises in China. Yet, we still continue to invest more in technology innovation of our Health business and make greater efforts in proprietary R&D. Through our global network, we have also cooperated with different leading research institutes to enhance our technology innovation capacity. As such, facing the coronavirus outbreak, Fosun Pharma’s subsidiary has cooperated with BioNTech SE to jointly develop vaccines against the COVID-19 through the world-leading mRNA platform. Meanwhile, Fosun Pharma’s self-developed COVID-19 nucleic acid test kit was granted CE certification from the European Union and received emergency approval from the National Medical Products Administration (“NMPA”) of China.



Thirdly, we shall strengthen our vertical industrial integration capability to create market entry barriers. Every industry leader must have its signature or hot-selling products, but what is more important is the capacity of integration. Fosun never ceases to look for investment opportunities that can strengthen and complement the development of our industrial businesses through our global investment capacity. In May 2019, the funds managed by the Group completed acquisition of FFT, the benchmark enterprise of German Industry 4.0. FFT is a provider of automated and flexible turn-key solutions for production systems to world-class manufacturers such as Daimler, BMW, Volkswagen, Boeing, Airbus and COMAC C919. The acquisition of FFT has further enhanced Fosun’s intelligent manufacturing capacity.



Fourthly, we shall emphasize the synergistic advantages within our ecosystem and strive to create hot-selling products through internal business development (BD). As a group which engages in various businesses, Fosun can achieve the result of 1+1>2 through its ultimate advantage in creating synergy across its different business sectors. For instance, Fosun’s IDERA platform in Japan, by utilizing its years of experience in real estate investment and asset management, not only facilitated the launch of the Tomamu Ski Resort in Hokkaido, Japan, but also completed property construction and renovation and introduced Club Med, a brand under the FTG to Japan. Through meticulous management and Fosun’s global marketing capabilities, Tomamu Ski Resort saw a 50% increase in its number of guests per year and a 300% increase in its gross operating profit compared to the time prior to the acquisition.



Emphasize the importance on the evolution of organizational structure in times of crisis


In the face of the challenge brought by the once-in-a-century global crisis, Fosun will look for opportunities and pursue innovations and breakthroughs in its businesses. We will also look squarely at the challenge which the entire organizational structure faces under the crisis. To deal with the unexpected COVID-19, Fosun has promptly formulated a wartime mechanism and deployed global resources to support the fight against the epidemic. During the course of the action, Fosun has improved its organization, gained a deeper understanding of our advantages in globalization and ecological organization, and realized the extent of strength the Group is able to unlock under the wartime mechanism. In order to further concentrate on developing each core business into one of the leading enterprises in the sector, this year, Fosun will continue to evolve our organizational structure, increase our operational efficiency and optimize our asset allocation.



Not long ago, management role adjustment took place among Fosun’s senior executives, Wang Qunbin was re-designated as Co-Chairman, and Chen Qiyu and Xu Xiaoliang were appointed as Co-Chief Executive Officers (Co-CEOs). Our business frontline senior executives Gong Ping and Pan Donghui were re-designated as the Group’s Chief Financial Officer (CFO) and Chief Human Resources Officer (CHO) respectively, and Tang Bin was appointed as the Group’s Chief Investment Officer (CIO). Such move has marked our first round of management evolution and could further enhance our top-level planning, while we could also consolidate and strengthen our existing businesses and segments, so that Fosun will become more energetic and competitive. In addition, the wartime mechanism has also forced the organization to step out of its comfort zone, as a result, helping enhance the operational efficiency of the headquarters and all businesses. Particularly, we can further intensify the talent coopetition management mechanism through the “271 management model”, so every Fosuner can give their best on the Fosun platform.



During the 28 years of operation since its establishment, Fosun has always stayed vigilant in peacetime and made stable yet bold progress for sustainable growth. In the past few years, we continued to reduce the debt-to-asset ratio. As at the end of the Reporting Period, our total debt to total asset ratio was 53.5%. We also continue to optimize and develop various financing channels. In 2019, we successfully issued our first Chinese high-yield public offering bond denominated in euros, demonstrating the implementation of our financing principles of diversification, internationalization and decentralization. Such high-yield euro bond provided our global investors an opportunity for subscribing a high-quality asset investment with long-term and stable return.



In the face of the once-in-a-century global crisis, we believe Fosun can deal with all possible issues calmly and even turn crisis into opportunity by stepping up innovation, fostering evolution and enhancing capabilities. As an enterprise with global vision, Fosun will be able to leverage its worldwide resources to identify more opportunities in this crisis. It will also actively pursue asset optimization and integration of its businesses, with a view to developing into a world-class consumer group.



Once again, I would like to extend my sincere gratitude to every shareholder and everyone who has supported and helped Fosun, thank you for your trust and support. We will continue to create greater value for all shareholders!




Guo Guangchang

31 March 2020