Landsea Announces 2016 Interim Results with Revenue Surges by 1.1 Times in 1H2016
Remarkable Achievements of the Asset-light Strategy Help Accumulate Momentum for Future Development
Hong Kong, August 16, 2016 - Landsea Green Properties Co., Ltd., (“Landsea Green Properties” or the “Company” and its subsidiaries collectively the“Group”, stock code:00106), China’s leading integrated property development services company with greentechnology, is pleased to announce its interim results for the six months ended 30 June2016 (“the Period”).
During the Period under review, the Group continued to further implement the transformation and upgraded strategy of “product-differentiation, asset-light and market-globalization” in 2016 to proactively develop various property development projects, and achieved satisfactory results in development and sales. The Group’s revenue rose by 1.1 times (restated) to RMB795 million, of which, income from provision of property development and management services was approximately RMB234 million,and income from provision of property development and management services received from independent third parties and cooperative partners was approximately RMB169 million.
During the Period, the Group’s contracted sales of “Products of Landsea” (which refers to the comprehensive development and operation of projects performed by Landsea) was approximately RMB10.94 billion, with contracted gross floor areas of approximately 747,000 square meters, largely increased by 3.4 times as compared with same period last year. Contracted sales amount of approximately RMB4.98 billion with contracted gross floor areas of approximately 371,000 square meters was derived from the entrusted development and management services by Landsea Group Co. Ltd. (“Landsea Group”) and independent third parties. The significant growth in revenue and contracted sales not only demonstrated that the Group achieved rapid development through its unique core competence under the current strategy, but also showed the market’s recognition of Landsea’s product quality.
During the Period, the net profit of the Group was approximately RMB131 million,representing a decrease of approximately 23.4% (restated) as compared with same period last year. The main reason for the decrease was due to the development of the projects which the Group provides property development and management services to Landsea Group pursuant to a property development and management services agreement entered into between the Group and Landsea Group in 2014 was nearly completed after two years, resulting in a decrease in related property development and management service fee income in the first half of 2016. The Group has been actively accumulating core experience in property development and management services over the recent two years, and the property development and management services income received from independent third parties by the Group has increased rapidly during the Period. This proved that the Group has seen preliminary results in the optimization of the organization structure, the accumulation of experience in comprehensive property development and the enhancement in the capacity of operations and development services since it gained access to Hong Kong’s capital markets, resulting in less reliance on Landsea Group and developing independent third-party business actively with its own core competitiveness.
In the first half of the year, the Group seized market opportunities resulting in a rapid increase in the number of its projects and further expansion of its business footprint. The Group obtained 15 projects situated in Nanjing, Tianjin, Shanghai, Suzhou, Hangzhou,Wuhan, Chengdu and the US, representing an increase of approximately 1,685,333 square meters in total gross floor area and an increase of approximately 593,115 square meters in total gross floor area attributable to the Group. As at 30 June 2016, the Group had total land reserves with gross floor area of approximately 4,674,296 square meters and total gross floor area of approximately 2,104,159 square meters attributable to the Group. In addition, the Group established a real estate company in Beijing at the end of last year, and acquired two projects with aggregated gross floor areas of 287,289 square meters in Tianjin in January 2016. The real estate company in Beijing was engaged in the expansion and operation in cities in Northern China such as Beijing, Tianjin, Hebei and Shanxi. This move signals Landsea’s penetration into the markets of Northern China after having strategically focused on key markets in cities along the Yangtze River, which is essential to Landsea’s layout arrangement across China.
During the Period, Landsea has strategically consolidated its ancillary businesses related to green properties, aiming at developing a listed platform with vertically-integrated business capabilities focusing on green property development and green services, and further implementing the transformation and upgrading strategy of “product- differentiation, asset-light and market-globalization”. It laid a solid foundation for the Group’s operation and created great momentum for the growth of the Group’s sales revenue.
Advantages in product differentiation has long been the core competence that makes Landsea stand out from other developers, and will be the starting point of Landsea’s new strategy. The Group participated in the old building rehabilitation project for the first time last year, and secured New Mansion project in Hongqiao District, Shanghai and an old building rehabilitation project in Putuo District, Shanghai in March 2016 with an aggregated gross floor area of 34,193 square meters. It is expected that the New Mansion project will be launched for sale in the second half of 2016. The Group aims to enhance the overall quality through reproducing environment-friendly products by applying Landsea’s differentiated production technologies so as to call for higher selling prices.Building rehabilitation projects have prosperous market opportunities in the first-tier cities, which was applicable to not only residential properties, but also public properties such as office buildings, hospitals and schools, showing strong market demand. Through the application of differentiated technologies together with solid capital resources, the Group will actively develop a business model for building rehabilitation and quickly tap into such a promising market.
On the basis of Landsea’s competitive advantage in product-differentiation, the Group has actively implemented an asset-light transformation strategy. The Group did not compete in the truculent land transaction market in top tier cities during the Period, but secured a number of projects through acquisition of stocked land, acquisition of equity interests, as well as equity participation in project companies in the non-public market.Those new projects secured can be categorized into entrusted property development and management projects, projects with minority interests, as well as joint venture and acquisition projects.
Moreover, contracted amount of entrusted property development management with independent third parties realized a significant growth. Since 2016, Landsea expects to maintain average equity in projects at around 30%, which is more or less the same as that of U.S. developers in general. Landsea is dedicated to learn from other real estate developers in developed economies, aiming to become an integrator of high-end resources in the real estate industry, as well as a vertically integrated real estate development service provider that combines investment, corporate finance,development, operation and sustainable development.
As a critical move in the implementation of its development strategy of market globalization, the Group acquired the U.S. operations of Landsea Group, considering the U.S. market as an important market in addition to China for long-term development. The injection of the U.S. business sector into the Group was completed during the Period, the assets of the U.S. business accounted for approximately 20% of the Group’s total assets.Currently, there are 7 projects under the Group’s development pipeline, comprising high-end high-rise apartments and suburban villas with a total area of approximately 293,489square meters. For the six months ended 30 June 2016, the total contracted sales of the U.S. projects amounted to approximately RMB358,413,000 with sales areas of 6,541 square meters. The Group recognized property sales revenue of approximately RMB88,352,000 with total sales areas of approximately 3,209 square meters during the Period. The strategic layout arrangement for an international market has showed preliminary results. To establish itself as one of the mainstream developers based in the U.S., the Group will continue to develop the U.S. market and make joint investments with its partners, capitalizing on the expertise and advantages of each other.
Apart from the U.S. market, the Group is also actively exploring suitable projects in HongKong and providing opportunities for more customers to experience the products of Landsea.
Mr. Tian Ming, Chairman of the Board of Landsea Green Properties, concluded, “Looking ahead, the Group will adopt the strategy of ‘putting the mainstream aside and taking up the alternative’. As for project development, we will withdraw from the traditional mainstream channel of land auctions in the public market, and instead vigorously develop asset-light alternatives that are more flexible, lightweight and technical, such as joint development, projects with minority interests, entrusted development and mergers and acquisitions.”
Mr. Tian added, “The Group expects two major changes in 2016. Firstly, with regards to Landsea’s products, the contracted sales amount attributable to the Group will be less than that attributable to parties other than Landsea for the first time. Secondly, the proportion of revenue from Landsea’s conventional investment and development in the Group’s accounting profit for the whole year will be smaller than that of revenue from light-asset services for the first time. These two changes are not only the requirements for Landsea’s transformation strategy, but also the set operation goals for the Group to achieve in 2016. The Board is confident in the Group’s outlook as it has accumulated a strong development momentum on the basis of its clear strategic direction, rational market layout and existing portfolio and expects it to deliver strong results in its future development.”
About Landsea Green Properties Co., Ltd
Landsea Green Properties Co., Ltd. (Company website: www.landsea.hk) is the only listed platform under the Landsea Group (Group website: www.landsea.cn), which is engaged in green residential property development. Its businesses include property investment, development and management in China and the U.S.
With green building technologies and its advancing capabilities in effecting vertical integration of property development, Landsea Green Properties has resolutely executed the strategy of “Product-differentiation, Asset-light and Market-globalization”,transforming from a traditional developer to an asset-light company and a green business focusing on providing property development services. As at 30 June 2016, the Company’s attributable interest comprised GFA of approximately 2.1042 million square meters, with 15 wholly-owned projects, 19 projects which were joint ventures or projects with minority interests, and 10 projects comprising entrusted developments projects.
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