The Company is engaged in professional property development with its principal operation including property development and property services.
The Group's profit attributable to shareholders for the 9 months ended 30-09-2019 amounted to RMB 18.24 billion, an increase of 30.4% compared with previous corresponding period. Basic earnings per share was RMB 1.63. No dividend was declared. Turnover amounted to RMB 223.91 billion, an increase of 28.4% over the same period last year, gross profit margin up 1.3% to 35.5%. (Announcement Date: 24 Oct 2019)
Business Review - For the six months ended June 30, 2019
During the Reporting Period, macroeconomic environment remained complicated with intensifying regulations of the property industry and broadened variation in markets of different regions. Facing the challenges arising from the changing external and internal operating environments, the Group insisted on “converging focus, consolidating and improving its fundamentals” under its strategic positioning of a “city and town developer and service provider”. The Group continued to enhance operation quality and maintained orderly development of all of its businesses.
During the period from January to June 2019, the Group realized a revenue of RMB139.32 billion and a net profit attributable to equity shareholders of the Company of RMB11.84 billion, representing year-on-year increases of 32.9% and 29.8% respectively. During the first half of the year, the Group achieved a sales amount of RMB334 billion from property development business, representing a year-on-year growth of 9.6%. As at the end of the Reporting Period, the Group’s financial and capital positions remained sound, with cash and cash equivalents amounting to RMB143.87 billion. The net gearing ratio (interest-bearing liabilities less cash and cash equivalents divided by net assets) was 35.04%.
The Group successfully issued a total amount of 262,991,000 H shares in April, 2019, in accordance with the general mandate to issue H shares approved by 2017 Annual General Meeting. The placing has raised the proportion of H shares from 11.91% to 13.96% in the total share capital of the Company, which has improved the liquidity of H shares of the Company.
In July 2019, the Group had been ranked 254th on the 2019 Fortune Global 500 list of published by the Fortune magazine.
During the Reporting Period, austerity measures on the industry continued in accordance with the principle of “houses are for accommodation, not for speculation”. Local governments had set their regulatory objectives with an aim to stabilize land premium, housing price and expectation, and introduced policies aligning with local conditions to facilitate stable market development.
The sales area of commodity housing in China declined slightly year-on-year. According to the National Bureau of Statistics of China, the sales area of commodity housing in China from January to June 2019 amounted to 758 million sq m, representing a 1.8% year-on-year decrease, with a sales amount of RMB7.07 trillion, up by 5.6% year-on-year.
Increase in sales area in major cities. For the 14 cities1 under the Company’s ongoing and focused observation, the area of commodity housing approved for pre-sale increased by 11.7%, and area of commodity housing sold increased by 10.3% year-on-year. As at the end of the Reporting Period, the digestion cycle of the inventory of new housing available for sale (area with sales permits but had yet to be sold) in the above-mentioned cities was about 9.4 months.
1 Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin, Shenyang, Hangzhou, Nanjing, Chengdu, Wuhan, Dongguan, Foshan, Wuxi, Suzhou.
Property development investment sustained relatively rapid growth, but growth rate in new construction area had declined. In the first half of the year, the total investment in property development in China increased by 10.9% year-on-year, which was 1.2 percentage points higher than the growth rate in the same period of 2018. The area of new housing construction in the country increased by 10.1% year-on-year, which was 0.7 percentage point lower than the growth rate in the same period of 2018.
Area supply and sold in the land market increased slightly. According to the statistics from China Index Academy, during the first half of 2019, in 300 cities throughout the nation, the planned gross floor area of land supply for residential development and area sold increased by 6.5% and 6.9% yearon- year respectively.
Continuous tightening of financing environment in the property market. According to statistics from the Central Bank, at the end of the second quarter of 2019, the balance of property development loans amounted to RMB11.04 trillion, up by 14.6% year-on-year, which was 9.6 percentage points lower than the growth rate in the same period of 2018.
The Group has strategically positioned itself as a city and town developer and service provider. Its principal businesses include property development and property services. The Group is also actively involved in developing other businesses related to services for daily life.
During the first half of 2019, the Group achieved a revenue of RMB139.32 billion, representing a year-on-year increase of 32.9%, and net profit attributable to equity shareholders of the Company of RMB11.84 billion, representing a year-on-year increase of 29.8%. Basic earnings per share amounted to RMB1.06, representing a year-on-year increase of 28.8%. Fully diluted return on equity was 7.35%, representing an increase of 0.59 percentage point as compared to that of the corresponding period in 2018.
Business Outlook - For the six months ended June 30, 2019
The overall economy continues to face various risks and challenges in the second half of the year. At the end of July, the meeting of Political Bureau of the Central Committee of the CPC emphasized the policy direction of “Housing is for living in not for speculation”, and implementation the longterm mechanism for the regulation of the property industry. Continuity and stability of the austerity measures on the industry are expected to be maintained. In terms of financing, against the backdrop of continuous tightening of financial supervision, property developers will face financing pressure to certain extent.
In light of extreme uncertainty, the Group will firmly grasp the “fundamentals” of operations. Based on our work in the first half of the year, we will continue to consolidate and deepen the established business mentality.
As for the strategy, the Group will stick to its main course and consolidate and improve its fundamentals.
As for the market, the Group will persist with proactive sales approach and proactive sales proceeds recovery, and the accelerate destocking of aging inventory; improve the performance of operating business and the efficiency in capital application; and implement asset and capital verification.
As for customers, the Group will strictly abide by the safety and quality bottom line and produce good products and services which could meet the budget and needs of customers.
As for the employee partnership mechanism, the Group will continue to promote the implementation of organizational restructuring and correspondence of responsible persons to related activities.
Source: China Vanke (02202) Interim Results Announcement