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Dear Shareholders

On behalf of the board of directors (the “Board”) of Beijing Capital Grand Limited (“Capital Grand” or the “Company”, together with its subsidiaries, the “Group”), I am pleased to present the annual results of the Group for the year ended 31 December 2019.

Since 2019, amidst the complex domestic and international economic situations, China’s national economy has continued to perform within an appropriate range. With the deepening of supply-side reform and structural adjustment, the stability, coordination and sustainability of economic development have increased. The country’s gross domestic product for the year amounted to approximately RMB99.1 trillion, representing a year-on-year increase of 6.1% on the basis of comparable prices. The GDP per capita exceeded US$10,000 for the first time. Owing to the steadily expanding consumer goods market, the continuously optimizing consumption structure, the continuous progress of transformation and upgrade and the accelerated formation of a new source of consumption growth, domestic consumption continued to play a major role in economic growth. Driven by a combination of factors such as economic structural transformation, rising household income, accelerated urbanization and consumption upgrades, the domestic outlets (including the Group) have been actively innovating business operation models and promoting online-offline integrated development, which led to a ramp-up in sales.

As part of the intensive efforts on the membership economy during the period, the Group kept its focus to centering on consumers, continuously deepened the refined management mechanism, innovated the operation management model, strengthened the coordination of brand resources, optimized the category portfolio structure, promoted the digital empowerment and upgrade, and gave full play to its advantageous chain operation and scale effects to achieve solid growth in operating efficiency. During the year, the Group realized a turnover of RMB7.83 billion in outlets operation, representing a year-on-year increase of over 53%. In particular, the Group summarized past marketing activities experience and consumer preferences through in-depth research, innovated marketing models and integrated various resources to achieve unified activity time, theme and content across the 12 cities in China. Leveraging on online channels such as short videos and live broadcasts by using the new diversified marketing model of “online attraction + theme IP + new service function” to deepen consumer stickiness. Customer visits during the activities surpassed 10 million with sales exceeding RMB1.8 billion, which further bolstered the brand influence and industry recognition of the Group. During the period, Phase II of Beijing Project, Jinan Project, Xi’an Project, and Chongqing Project opened on schedule, bringing the number of operating projects to 12 and maintaining its industry championship by the number of projects acquired and in operation.

While putting full efforts in promoting lean operations management, the Group continued to iterate and upgrade the digital operation system. By the end of 2019, we have reached a strategic cooperation agreement with Alibaba Cloud. In the future, we will combine Alibaba’s strong mid-to-back office technical support with the advanced new retail business philosophy. Centering on the Group’s goal of digital upgrading, we will take these measures to lay a solid foundation in various aspects such as smart shopping malls, online-offline integration, intelligent data analysis and precise membership marketing, and continue to reshape the traditional retail value chain, leading to a consumption upgrade.

During the period under review, the Group recorded operating revenue of RMB1,864,672,000, representing an increase of 52% over the same period of last year; and net loss attributable to the parent amounted to RMB223,539,000. The Board has resolved not to declare an annual dividend for the year ended 31 December 2019.

During the period, despite the adverse effects of the increasingly tight financing channels in the industry, by virtue of the strong shareholders’ background, excellent basic assets and superb business operation capability, the Group was agile in seizing opportunities under favorable policies. In December 2019, the Group successfully issued the first phase of asset backed securitization scheme, which has unleashed the potential of existing property assets and realized capital recovery, while allowing the Company to benefit from potential asset appreciation and have the flexibility to increase its investment. It has enabled the Group to become another domestic benchmark of separation of capital and management, the combination of heavy and light assets, and industry-finance integration for the retail sector, which has set a very positive precedent in this regard. At the same time, the Group took advantage of the existing business model and strategic resources to actively promote the transformation of asset operation mode, and worked on real estate redevelopment in the core areas of first tier cities. By doing so, the Group strives to develop a market-oriented operations management team for properties that holds diverse types of business operations, and gradually realize the transformation of operation mode from “heavy” to “light”.

Looking into 2020, while residential income is steadily increasing and consumption promotion policies being implemented effectively step by step, the continuously optimizing consumption structure and the ongoing consumption upgrade, new trends and new models are developing rapidly, and thus, the consumption market is expected to maintain steady growth. However, the delayed effect of the international trade friction remains, and the novel coronavirus pneumonia will also affect the commercial and retail industry in the short term. In the middle to long term, young free spenders will become the new driver of consumption growth, and there will be increasingly trending toward consumption upgrade and differentiation. In order to maintain robust business growth and sustainable development, the key is to find out how to explore the best business operation mode from the dimensions of experience and efficiency, and to provide better quality products, more cost-effective prices and better services. The Group will steadily carry out construction of new projects and promote lean operations of existing projects. Centered on our core operational concept of regarding products as the soul, adjustment as a constant necessity, surroundings to be enticing and service as a fundamental principle, we focused on implementing strategies according to different projects and operating conditions so as to stimulate organic growth. Meanwhile, the Group will focus on services and mechanism innovation, seize the opportunity of consumption upgrade, improve customer experience and meet their personalized demands. The Group will also build the character and connotation of Capital Outlets brands and lead the industry to explore innovative business models and ecological cooperation modes, which bring about a transformation in consumer lifestyle, thus reinventing retail value.

On behalf of the Board, I would like to express our sincere gratitude to all our shareholders, partners and clients for their care and strong support to Capital Grand. We will regard digital innovation as a point for breakthrough and leverage intelligent operation to gain insights into consumer demand, offer customized products and services with low costs, higher efficiency and greater experience, and continuously create value for our shareholders, clients and partners.

Zhong Beichen
Chairman
Beijing, 6 March 2020

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