Wanda Chairman Wang Jianlin has presented a look back at a challenging 2017, and a look ahead to what he says will be a plan for the group to gain RMB 247.9B ($38.7B) in annual revenue in 2018.
On Saturday, the embattled Chinese conglomerate reported Wanda Group operating revenue of RMB 227.37B ($35.5B), down 10.8% from 2016. Largely that was the result of the sale of some $9.4B in hotels and tourism projects which Wang said over the weekend was a main achievement of the year.
Last week, the company agreed to sell its London One Nine Elms development and is expected to announce a further asset sale this week. “Over the past few years, Wanda has invested in several overseas projects. Now, we have decided to sell them so as to clear overseas debts,” Wang said on Saturday. “By selling only half of these assets, we can pay off all overseas debt, showing that we ultimately profit.”
In 2017, Wanda was involved in a crackdown on so-called “irrational investments,” with Chinese authorities ordering the country’s biggest banks to stop making loans to Wanda to finance foreign entertainment acquisitions.
Wanda’s film group had revenues of RMB 53.2B ($8.3B), up 35.9% year-on-year, but 1.5% short of the target. Wang noted, “It is somewhat of a shame to know that the target might have been achieved with just a little more effort.” (Wanda certainly wasn’t alone in experiencing turbulence in China in 2017, as Deadline recently reported.)
The Cultural Industry Group, which encompasses the exhibition circuit and other film holdings, was worth 28.1% of Wanda’s total revenue and is now a “pillar” industry which, Wang said, should “make more effort to push the percentage to more than 30%.”
The Film Group’s revenues increased by 35% he said. There were 199 new cinemas opened worldwide for 1,585 screens. The total now operated by Wanda is 1,551 cinemas for 15,932 screens. Online revenue accounted for more than 90%, and membership revenue accounted for nearly 90% of total film revenue.
Among the main operational targets in 2018 is for the Cultural Industry Group to hit RMB 73.3B in revenues, including RMB 58.1B from Wanda Cinemas.
Wang has made much of the development of Wanda Plazas, “the core asset, core enterprise and core advantage of the group.” In December, he had outlined a new strategy for the brick and mortar business, saying 1,000 Wanda Plaza shopping centers will be under operation within the next 10 years in China. Observers saw this as the Chairman laying the framework for the company’s future, particularly if he sells AMC. A sale, it’s suggested, would not include the Chinese cinemas which would stay with Wanda, the largest local operator.
The Chairman also spoke of “forming new pillar industries,” saying the company needs “to develop new core enterprises.” The first is the film and television industry. “We should continue to maintain a high growth-rate and make up for content shortcomings so as to achieve the medium- and long-term enterprise goals for film and television.” Also on the docket are the sports and cultural tourism industries and the Wanda Kidsplace Group, aimed at gaining revenue from IP transmission and derivative products.
“What is the gap between Wanda, Disney and Universal Studios?,” Wang mused. “The gap is that we don’t have our own entertainment theme. If it had its own story and an IP it would spread much better. The net profit of Kidsplace derivative products last year was close to RMB 100M. If in the future Kidsplace earns billions or hundreds of billions in revenue from derivative products and has 1,000 offline stores, it will only need to be popular, the stores themselves do not need to be profitable. This is the development model. I believe that Kidsplace may surpass Wanda Film, becoming another new core enterprise for Wanda Group.” Saying Wanda has “the upper hand” and seemingly reiterating a challenge he levied at Disney last year, Wang said, “We will open 800 stores by 2020. Who can compete with us?”
There are also plans to continue to reduce corporate debt, taking “all capital means to reduce its debt, including sales of non-core assets, equity trading under the premise of maintaining the controlling stake and cooperative management of others’ assets. Wanda needs to gradually settle all overseas interest-related liabilities and have a reliable scheme for raising funds for Wanda Commercial Properties so as to be listed in Shanghai. At the same time, it is planned to reduce corporate debt to the absolute safety level within two to three years. I can responsibly say here that Wanda Group will never have any credit default anywhere in the world! Wanda has not had a single credit default for 30 years – we place more importance on credit than on assets and profits.”
The company late last year downsized its loss-making Internet Technology Group and this weekend said it will establish a new tech company with a strategic partner.
Wang offered some big-picture perspective as part of its 2018 outlook:
“This year is Wanda’s 30th anniversary, and there is an ancient Chinese saying that says, ‘A man should be steadfast at the age of 30,'” the Chairman said. “There is a recognized standard in the world that enterprises operating for less than 10 years are considered to be short-life enterprises, those operating for 10-30 years medium-life, and those operating for more than 30 years long-life. Wanda is entering the point of becoming a long-life enterprise. Therefore, this year is vitally important for Wanda. Wanda is committed to becoming a century-old enterprise, and now ushers in this new starting point. This year, we will carry out a series of meaningful celebrations with frugality. I also hope that my colleagues at Wanda, especially the leaders of each division, can accomplish their goals and achieve great things. I hope that, at Wanda’s 30th Anniversary, all divisions will have achieved their targets. Let’s make concrete steps toward celebrating Wanda’s 30th Anniversary.”