Excellent Interim Results to Imply Successful Strategic Transformation in Landsea
Landsea Group (HKEx Stock Code: 00106), a leading green development operator and life service provider in China, recently announced its business performance for the 6 months as of June 30, 2018.
2018 is the 4th year since Landsea pushed for full implementation of "differentiated products, light assets and market internationalization". Landsea has made great progress in strategic transformation by effectively coping with market upgrading and taking opportunities and forging ahead in the change of industrial patterns. During the period, Landsea further optimized its revenue structure, continued to improve its overall profitability, and showed excellent performance. In the first half of 2018, its net profits increased by 184.5% year on year to RMB 368.6 million (RMB, the same below), with the net profit rate of 18%. It included RMB 326.8 million core net profits, representing a year-on-year growth of 60% and a core net profitability of 16%, RMB 281.8 million profits to the shareholders, a year-on-year growth of 304.4%, and RMB 0.07 primary earnings per share, a year-on-year growth of 366.7%. All profit indicators have grown resulting from increased and gradually-delivered joint-venture projects and associated projects, increased corporate profits attributable to joint-venture and associated enterprises and increased revenue from development and management services mainly due to the implement of the development strategy of light assets by the Group. During the period, Landsea actively expanded green property projects, and achieved good results in development and sales. In the first half of 2018, Landsea achieved some RMB 16.36 billion signed sales, representing a year-on-year increase of about 47.7%.
In early 2018, Landsea was officially renamed Landsea Group, further clarifying its goal as a leader in green life. Landsea now has five divisions: Real Estate, USA Real Estate, Long-Term Leasing Apartment, Elderly Care Services and Green Finance in a Group-Division management model and with efforts to build vertical, diversified professional capacity.
Differentiated products have always been an important feature of Landsea Group that distinguishes it from other developers. In the first half of 2018, the Group released its first self-developed green-technology residential product, Landsea Yuefu. According to the principle of "building first, equipping later", it integrates Landseas intelligent and efficient haze-free, fresh air system and counter flow refrigeration system on the basis of passive housing to provide customers with healthier, more comfortable, more energy-saving and more environmentally friendly residential products, in a way to further highlight Landseas leading advantages in design concept and technology R & D. The Beijing Yanqing Passive Housing Project developed by Landsea won PHI Plus certification, another first in China created by Landsea following Bruck Passive House.
Light assets are another core competitive strategy of Landsea. The Group takes advantage of the core technology of green building, good brand premiums and rich project management experience to expand light assets business dominated by non-controlling operations. During the period, the Group achieved signed contracts for project development and management services with independent third parties or partners, amounting to some RMB 358.5 million. The recognized revenue from development and management services increased by 70.6% year on year to some RMB 377.8 million; the profits for project development and management services including income tax were RMB 144.5 million, representing a growth of 44.2% from the same period last year.
In terms of real estate development, Landsea maintains its cautious and pragmatic style. In the first half of 2018, the Group fully analyzed policy changes and future market demands and achieved decent project development results in an unfavorable market environment. During the period, it obtained nine projects to cover 790,434 sm. more property for sales with some RMB 9.67 billion estimated sales. Eighty percent of these projects were acquired through acquisition, entrusted development and equity participation, to the extent to effectively avoid high-priced plots.
Landsea has made effective international business layout. In the first half of 2018, the Group continued to develop in portal cities such as New York, Los Angeles and San Francisco and constantly expanded its market influence through localized business models. As of June 30, 2018, the Group had obtained 14 projects in the USA. During the period, the Group won three new projects in Danville and Santa Clara, San Francisco, and Chandler, Arizona, to further strengthen its deep layout in the U.S. market. Among them was Avora high-end green residential project in New York, which had been honored with the Gold Award for Best Community of the Year in the USA, fully demonstrating Landseas excellent market performance and user review. As of June 30, 2018, U.S. projects had totaled some RMB 2.07 billion contract sales from 46,201 sm. sale area; some RMB 788.8 million property sales revenue was achieved in the period, an increase of about 50.4% over the same period last year.
With the advancement of long-term mechanisms for Chinas real estate market, multiple ministries and commissions have introduced policies to support the development of long-term leasing apartments. In this context, Landsea has taken this new industry opportunity to create a distinctive long-term leasing apartment brand, Landsea Apartment. It aims to create a natural, comfortable, humanistic, lively stay for users by relying on its accumulation and advantages in green houses and fully exploring its own resource endowments. As of June 30, 2018, Landsea Apartment had acquired 75 projects in 13 cities to cover 22,708 apartment resources, ranking among top 5 in terms of scale and quality, to the extent to continuously improve its operational efficiency and customer satisfaction.
Landsea Group has an elderly care service platform, Landsea Ivy, which upholds the business concept of "providing for the aged nearby", offers one-stop full-age elderly care services that integrate living, communities and institutions, and provides the elder with quality life through specialized products and services. As of the end of the first half of 2018, Landsea Ivy had obtained 38 projects in Beijing, Shanghai, Nanjing, Suzhou and Hangzhou to cover 3,263 beds.
In terms of green finance, "Green Fir Investment" is a professional investment and financing management platform of Landsea that focuses on green industrial chain. During the period, Green Fir Investment had cooperated with CITIC Capital, CINDA Asset Management, Ping An Real Estate and Zhongrong International Trust to establish funds and joint investment platforms with different themes, which target stock property in tier-1 and strong tier-2 cities and distressed assets acquisition projects to create comprehensive capacity for fund-raising, acquisition, transformation, asset management and exit, explore and practice the investment, finance, management and exit-integrated business model, integrate projects and financial resources, and consolidate fund management, asset management and capital operations. As of June 30, 2018, Green Fir Investment had managed nearly RMB 8 billion assets.
In the context of financial deleveraging and strong supervision, Landsea Group takes its own advantages to optimize the debt structure, expand financing channels and innovate on financing methods. In the first half of 2018, the Group issued USD 200 million green bond overseas at a favorable market window, a bond certified by S&P with a green rating. At the same time, thanks to sound financial strategies and effective debt control, the Groups net debts accounted for 47.2% of equity capital, as of the end of the first half of the year, maintaining a healthy level. With a continuously optimized debt structure, its short-term debts fell to 17%, with cash to cover 4 times of debts, providing a basic guarantee for the Group to respond to changes in the external environment and increase risk resilience.
Looking forward to the second half of the year, Mr. Tian Ming, Chairman of Landsea Group, said: "Sino-US trade war, exchange depreciation pressure, directional de-leveraging and other internal and external uncertainties will continue to affect the trend of macroeconomic and industrial development, while Chinas real estate industry regulation will not be relaxed. In this environment, based on its forward-looking vision for policies, market and customers, the Group will continue to advance the established strategic upgrading plan, maintain its prudent and sound business strategy and allow for a flexible capital structure to seize the market opportunities that may arise at any time. In the future, the Groups five major business divisions will continue to strengthen internal strategic coordination and positive development, so as to help Landsea become a distinctive, green development operator and life service provider that features cross-Pacific layout, and sales and leasing-balanced development."