Announcement of 2016 Interim Results HIGHLIGHTS - PDF

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities, nor is it calculated to invite any such offer or invitation. In particular, this announcement does not constitute and is not an offer to sell or a solicitation of any offer to buy securities in Hong Kong, the United States or elsewhere. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of Any public offering of securities to be made in the United States will only be made by means of a prospectus that may be obtained from the issuer or selling security holder and that contains detailed information regarding the issuer and management as well as financial information. There is no intention to make a public offering of the securities referred to in this announcement in the United States. Announcement of 2016 Interim Results HIGHLIGHTS The Group recorded robust property sales during the first half ended 30 June 2016 ( 1H 2016 ). Contracted property sales including contributions from its Dalian associates and other assets disposal, increased by 410% to RMB16,642 million compared to RMB3,263 million in the first half of 2015 ( 1H 2015 ). A total gross floor area ( GFA ) of 740,200 square metres ( sq.m. ) was sold and presold at an Average Selling Price ( ASP ) of RMB22,500 per sq.m.. As of 30 June 2016, total lockedin sales was RMB21,325 million (including disposal of commercial properties and contributions from its Dalian associates), amounting a total GFA of 717,000 sq.m.. These properties will be ready for delivery in the second half of 2016 ( 2H 2016 ) and beyond. During the period, the Group achieved solid operating performance as shown by higher gross and operating profits. Gross profit increased 32% yearonyear to RMB761 million, while operating profit increased 89% yearonyear. Compared with 1H 2015, gross profit margin increased 16 percentage points to 45% in 1H Turnover in 1H 2016 was RMB1,681 million, compared to RMB2,027 million in 1H The decline was mainly due to a lower recognised residential sales contribution in 1H Rental and related income increased by 3% to RMB759 million from RMB736 million in 1H In addition to the property sales recognised as turnover, the Group also completed RMB7,791 million of recognised property sales and other assets disposal, including the disposal of 3 Corporate Avenue in Shanghai Taipingqiao, Foshan Lingnan Tiandi Lot 4, and other sales. Profit for the period was RMB1,128 million in 1H 2016, compared to RMB1,535 million in 1H Profit attributable to shareholders was RMB768 million in 1H The lower profit was mainly due to i) the decrease in fair value gain of investment properties by approximately 81% to RMB519 million in 1H 2016 as compared to RMB2,797 million in 1H The higher fair value gain reported in 1H 2015 was driven by realisation of the disposal value of 1 & 2 Corporate Avenue; ii) exchange loss (both realised and unrealised) of RMB350 million as a result of the depreciation of RMB. The Group s core earnings was RMB1,321 million in 1H 2016 backed by a substantial contribution arising from the disposal of 3 Corporate Avenue in Shanghai. As of 30 June 2016, the Group s total assets were RMB118,914 million. The Group s total cash and bank deposits were RMB11,316 million and the net gearing ratio was 75%, a decrease of 6% over 31 December 2015 and a decrease of 12% over 30 June Website: BUSINESS REVIEW Executive Summary Robust sales activities: The Group recorded robust property sales during the first half ended 30 June 2016 ( 1H 2016 ). Total contracted property sales including residential and commercial property sales and other assets disposal, increased by 410% to RMB16,642 million, compared to RMB3,263 million in the first half of 2015 ( 1H 2015 ), in which residential property sales accounted for 62% of the total sales. Average Selling Price ( ASP ) increased by 38% to RMB22,500 per square metres ( sq.m. ), compared to RMB16,300 per sq.m. in 1H As of 30 June 2016, total lockedin sales (including disposal of commercial properties and contributions from its Dalian associates) was RMB21,325 million, with a total gross floor area ( GFA ) of 717,000 sq.m.. These properties are scheduled for delivery in the second half of 2016 ( 2H 2016 ) and beyond. In addition, as of 30 June 2016, a total GFA of 52,400 sq.m., amounting to a total value of RMB2,938 million was subscribed but not yet contracted. Major transactions completed in accordance with our asset light strategy: The Group also completed RMB7,791 million of recognised property sales and other assets disposal, including the disposal of 3 Corporate Avenue in Shanghai Taipingqiao, Foshan Lingnan Tiandi Lot 4, and other sales. Going forward, the Group will continue to dispose of its assets at appropriate timings to unlock the value of the Group s property portfolio as well as to increase asset turnover and capital recycling. Solid operating performance: For 1H 2016, the Group recorded turnover of RMB1,681 million, with property sales accounting for RMB728 million or 43% of the total, and rental and related income (including income from hotel operations) of RMB795 million representing 47% of total turnover. RMB158 million was contributed by the construction business and other businesses. The decline in turnover was mainly due to less residential completion during the period. That said, the Group s operating performance is solid as shown by higher gross and operating profits. Gross profit increased 32% yearonyear to RMB761 million, while operating profit increased 89% yearonyear. Compared with 1H 2015, gross profit margin increased 16 percentage points to 45% in 1H In 1H 2016, the Group recorded a net increase in fair value of its remaining investment property portfolio, totalling RMB519 million. Shanghai Rui Hong Xin Cheng ( RHXC ) accounted for a total of RMB420 million or 81% of the total increase, which was mainly contributed by the fair value gain of Hall of the Moon (Ruihong Tiandi Lot 3). A total leasable and saleable GFA of 1,631,000 sq.m. of investment properties held by the Group was carried at valuation, accounting for 26% of the total landbank of the Group (excluding landbank of Dalian associates). Net profit declined mainly due to lower fair value gain, and exchange loss: Profit for the period was RMB1,128 million in 1H 2016 compared to RMB1,535 million in 1H Profit attributable to shareholders was RMB768 million in 1H 2016, compared to RMB1,195 million in 1H The lower profit was mainly due to i) the decrease in fair value gain of investment properties by approximately 81% to RMB519 million in 1H 2016, as compared to RMB2,797 million in 1H The higher fair value gain in 1H 2015 was driven by realisation of the disposal value of 1 & 2 Corporate Avenue; ii) exchange loss (both realised and unrealised) of RMB350 million as a result of the depreciation of RMB. The Group s core earnings was RMB1,321 million in 1H 2016 backed by the substantial contribution from the disposal of 3 Corporate Avenue in Shanghai. To unlock the value of its portfolio, the Group will continue to explore opportunities to dispose of its commercial properties. Strengthening balance sheet: The Group s total assets as of 30 June 2016 were RMB118,914 million, with total cash and bank deposits were RMB11,316 million and the net gearing ratio of 75%, a decrease of 6% over 31 December 2015 and 12% decline over 30 June Page 2 Property Sales Recognised Property Sales and Other Assets Disposal The table below summarises by project the recognised sales (stated after the deduction of business/valueadded tax and other surcharges/taxes, if applicable) for 1H 2016 and 1H 2015: Project Sales revenue RMB million 1H H 2015 GFA Sales sold ASP 1 revenue sq.m. RMB per sq.m. RMB million GFA sold ASP 1 sq.m. RMB per sq.m. Shanghai Taipingqiao 3 Corporate Avenue 5,700 87,300 65,300 THE HUB Hotel ,000 21,400 Shanghai RHXC Residential , ,000 53,500 Retail 47 1,000 49,800 Shanghai KIC Small Office ,800 Residential ,400 KIC Corporate Avenue Office 43 1,500 30,400 Wuhan Tiandi Site B Retail ,900 Chongqing Tiandi Residential ,500 11, ,200 12,100 Office & Retail 56 1,900 31, ,500 22,900 Foshan Lingnan Tiandi Townhouses 26 1,300 20, ,800 26,100 Low/mid/highrises ,000 12, ,900 14,200 Retail 36 1,100 34, ,400 Other Assets Disposal (Lot 4) 1, ,500 7,300 Subtotal 8, ,700 21,600 1, ,000 18,300 Carparks and others Dalian Tiandi 3 Mid/highrises ,700 7, ,400 9,400 Villas 10 1,100 10, ,300 13,100 Total 8, ,500 20,300 2, ,700 18,700 ========== =========== ========== ========== Recognised as: property sales in turnover of the Group ,200 13, ,000 19,000 disposal of investment properties ,700 36, ,000 21,200 disposal of hotel properties ,000 21,400 disposal of equity in subsidiaries holding commercial properties 5,700 87,300 65,300 other assets disposal 1, ,500 7,300 turnover of associates ,800 7, ,700 9,700 Total 8, ,500 20,300 2, ,700 18,700 ========== =========== ========== ========== The calculation of ASP per sq.m. is based on gross sales revenue before the deduction of business/valueadded tax and other surcharges/taxes. ASP of Chongqing residential sales is based on net floor area, a common market practice in the region. Dalian Tiandi is a project developed by associates of the Group. Sales of commercial properties are recognised as turnover if the properties concerned are designated for sale prior to the commencement of development. Sales of commercial properties previously designated as held for capital appreciation or rental income are recognised as disposal of investment properties. Page 3 For 1H 2016, total recognised property sales, including property sales recognised as turnover, disposal of investment properties, disposal of equity in subsidiaries holding commercial properties, other assets disposal and turnover of associates, was RMB8,519 million (after deduction of business/valueadded tax and other surcharges/taxes, if applicable), representing an increase of 317% for a total GFA of 423,500 sq.m.. ASP increased by 9 % to RMB20,300 per sq.m. compared to 1H The changes were mainly due to contribution from the disposal of 3 Corporate Avenue in Shanghai. Property sales recognised as turnover (after deduction of business/valueadded tax and other surcharges/taxes, if applicable) decreased by 23% to RMB728 million, on a total GFA sold of 57,200 sq.m.. ASP decreased by 29% to RMB13,500 per sq.m. The decrease in ASP was mainly due to changes in the composition of recognised properties sales from different projects. Property sales recognised as disposal of investment properties was RMB58 million, with a total GFA of 1,700 sq.m.. Property sales recognised as disposal of equity in subsidiaries holding commercial properties amounting to RMB5,700 million were contributed by the enbloc sales of 3 Corporate Avenue in Shanghai Taipingqiao with a total GFA of 87,300 sq.m.. Property sales recognised as other assets disposal amounted to RMB1,693 million in Foshan Lingnan Tiandi for a total GFA of 231,500 sq.m. Recognised property sales for Dalian Tiandi stood at RMB340 million, and its related profit or loss was reflected in the share of losses of associates and joint ventures, to the extent of the Group s interest in the project. Page 4 Contracted Property Sales and Other Assets Disposal The table below provides an analysis by project of contracted sales (stated before the deduction of business/ valueadded tax and other surcharges/taxes) for 1H 2016 and 1H 2015: Project Contracted amount RMB million 1H H 2015 GFA Contracted GFA sold ASP amount sold RMB RMB sq.m. per sq.m. million sq.m. ASP RMB per sq.m. Residential property sales: Shanghai Taipingqiao Lakeville Luxe (Lot 116) 2,107 15, ,500 Shanghai RHXC 5,363 64,700 82, ,100 Wuhan Tiandi Site B Residential 1,451 45,600 31, ,900 32,600 Chongqing Tiandi Residential ,400 11, ,700 11,100 Foshan Lingnan Tiandi Townhouses 55 2,300 23,900 Low/mid/highrises ,600 12, ,000 12,000 Dalian Tiandi 2 Mid/highrises ,400 8, ,900 8,800 Villas 17 1,500 11, ,500 12,000 Carparks and others Subtotal for residential property sales 10, ,100 38,300 2, ,370 15,000 Commercial property sales: Shanghai KIC 12 KIC Corporate Avenue (enbloc) ,800 26,400 Office ,600 Wuhan Tiandi 3 Corporate Avenue (Lot A3 Office) 1,134 55,100 20,600 Lot A1 (Office) 3, ,100 19,000 Site B Retail ,300 Chongqing Tiandi Office 58 4,600 12,600 Retail , ,700 28,200 Foshan Lingnan Tiandi Retail 36 1,300 27,700 Kindergarten 41 5,800 7,100 Carparks and others 12 Subtotal for commercial property sales 4, ,600 19, ,350 23,200 Other assets disposal: Foshan Lingnan Tiandi (Lot 4) 1, ,500 7,300 Grand total 16, ,200 22,500 3, ,720 16,300 ========== ========= ========== ========= 1 2 ASP of Chongqing residential sales is based on net floor area, a common market practice in the region. Dalian Tiandi is a project developed by associates of the Group. Page 5 The Group s contracted property sales and other assets disposal of the Group jumped 410% to RMB16,642 million in 1H 2016, compared to RMB3,263 million in 1H Residential property sales accounted for 62%, commercial property sales accounted for 28% and the remaining 10% was contributed by other assets disposal. ASP increased by 38% to RMB22,500 per sq.m. in 1H 2016, compared to RMB16,300 per sq.m. in 1H Contracted property sales from residential properties and carparks (including those from Dalian associates) was RMB10,334 million, an increase of 308% over RMB2,535 million in 1H The increase was mainly due to increased contributions by residential properties sales from the Shanghai projects, which amounted to RMB7,470 million in 1H 2016, compared to RMB4 million in 1H This included the successful new launches of the second batch of The Upper (Lot 9) and the first batch of The Gallery (Lot 2) at Shanghai RHXC as well as the second and third batches of Lakeville Luxe at Shanghai Taipingqiao (Lot 116). Sales performance of Wuhan and Dalian also picked up, riding on the stimulus policies announced by the Central Government of China, including the relaxation of Home Purchase Restriction Policies and interest rate cuts since mid2015. Contracted residential property sales in Wuhan and Dalian in 1H 2016 increased by 49% and 43% respectively, compared to 1H ASP of Shanghai RHXC in 1H 2016 reached RMB82,900 per sq.m., an increase of 45% compared to 1H ASP of Wuhan Tiandi residential apartments remained stable. Units of Wuhan Tiandi residential apartments sold in 1H 2016 comprised mainly non riverfacing apartments, while the units sold in 1H 2015 were mainly riverfacing apartments. The ASPs of Foshan and Chongqing pickedup in 1H 2016, an improvement from 1H 2015 levels. In 1H 2016, contracted commercial property sales comprising a total GFA of 238,600 sq.m. amounted to RMB4,615 million, an increase of 534% compared to RMB728 million in 1H This included two office buildings located at Lots A1 and A3 at Wuhan Tiandi with an estimated saleable GFA of 232,200 sq.m. for office use, which were disposed for RMB4,499 million. In addition to the contracted property sales and other assets disposal outlined above, as of 30 June 2016, a total GFA of 52,400 sq.m., amounting to a total value of RMB2,938 million, was subscribed but not yet contracted. They were mainly contributed by the two Shanghai projects, namely RHXC The Upper and The Gallery, which accounted for RMB1,681 million, and Shanghai Taipingqiao Lakeville Luxe, which accounted for RMB831 million of subscribed sales. Page 6 Residential GFA Available for Sale and Presale in 2H 2016 The Group has approximately 362,600 sq.m. of residential GFA spanning six projects, available for sale and presale during 2H 2016, as summarised below: Available for sale Project and presale in 2H 2016 GFA in sq.m. Shanghai Taipingqiao Lakeville Luxe (Lot 116) (Highrises) 68,700 Shanghai RHXC Highrises 87,400 Wuhan Tiandi Highrises 4,300 Chongqing Tiandi Highrises 89,300 Foshan Lingnan Tiandi Townhouses and Low/highrises 14,200 Dalian Tiandi Villas, Mid/highrises and Service Apartments 98,700 Total 362,600 ========= By way of a cautionary note, the actual market launch dates depend on and will be affected by factors such as construction progress, changes in market environments, and changes in government regulations. Page 7 Property Development Progress Property Completed in 1H 2016 and Development Plans for 2H 2016 and 2017 The table below summarises the projects with construction completed in 1H 2016 and construction work that is planned for completion in 2H 2016 and 2017: Clubhouse, carpark and other Project Residential Office Retail Hotel/ serviced apartments Subtotal facilities Total sq.m. sq.m. sq.m. sq.m. sq.m. sq.m. sq.m. Actual delivery in 1H 2016 Foshan Lingnan Tiandi 2,000 2,000 2,000 Dalian Tiandi 1 47,000 47,000 47,000 Total 47,000 2,000 49,000 49,000 =========== ============ =========== =========== =========== =========== ============ Planned for delivery in 2H 2016 Shanghai Taipingqiao 45,000 45,000 45,000 Shanghai RHXC 189,000 3, ,000 76, ,000 Shanghai KIC 22,000 22,000 22,000 Wuhan Tiandi 89,000 55, , , , ,000 Chongqing Tiandi 133,000 14,000 15, ,000 81, ,000 Dalian Tiandi 1 31,000 13,000 44,000 30,000 74,000 Total 487,000 69, ,000 22, , ,000 1,059,000 ============ =========== ============ =========== =========== =========== =========== Planned for delivery in 2017 Shanghai Taipingqiao 43,000 43,000 43,000 Wuhan Tiandi 41,000 71, ,000 78, ,000 Chongqing Tiandi 111,000 14, ,000 53, ,000 Dalian Tiandi 1 26,000 29,000 1,000 13,000 69,000 51, ,000 Total 221,000 29,000 86,000 13, , , ,000 ============ =========== ============ =========== =========== =========== =========== 1 Dalian Tiandi is a project developed by associates of the Group. By way of a cautionary note, the actual completion date depends on and will be affected by construction progress, changes in the market environments, changes in government regulations and other factors. Page 8 The following section provides further details of the development progress and completion of each of the projects located in Shanghai, Wuhan, Chongqing, Foshan and Dalian Shanghai Taipingqiao Construction work on Lakeville Luxe (Lot 116) with a total GFA of 88,000 sq.m. commenced in the second half of 2014 ( 2H 2014 ). The first batch of presales launched in December 2015 and the second and third batches were successfully launched in 1H The development is planned for progressive completion from late 2016 to Shanghai RHXC The Upper (Lot 9), with a total GFA of 85,000 sq.m. of residential apartments and 2,000 sq.m. of ancillary retail, commenced construction in 2H 2014 and the first batch of units were launched for presale in October 2015 at an ASP of RMB71,000 per sq.m. while the remaining units were launched for presales in February 2016 at an ASP of RMB80,000 per sq.m.. The development is scheduled for completion and delivery from 2H 2016 to The Gallery (Lot 2), with a total GFA of 104,000 sq.m. of residential apartments and 1,000 sq.m. of ancillary retail, the first batch was launched for presales in June 2016 at an ASP of RMB94,000 per sq.m. and is scheduled for completion in late 2016 and delivery from Hall of the Moon (Ruihong Tiandi Lot 3) with a total GFA of 64,000 sq.m. was completed in December Its opening is planned for late Shanghai KIC A hotel building located at Lot 311 with a total GFA of 22,000 sq.m. is under construction and is scheduled for completion in 2H Wuhan Tiandi Construc
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