On behalf of China New City Commercial Development Limited (“China New City” or the “Company”) and its subsidiaries (collectively referred to as, the “Group”), I am pleased to present the interim results of the Group for the six months ended 30 June 2019 (the “period under review”).
REVIEW OF RESULTS
For the period under review, the revenue and gross profit of the Group were approximately RMB663 million and RMB290 million, respectively, representing an increase of approximately 28% and 299% respectively as compared to the corresponding period in 2018. The gross profit margin rose sharply to 44% from 14% in the same period in 2018. The comprehensive income attributable to equity holders of the Company was approximately RMB21 million, total comprehensive income recorded an increase of about RMB119 million as compared to the same period of 2018.
For the period under review, the contracted sales area of the Group was approximately 24,061 sq. m. and the contracted sales revenue was approximately RMB479 million, continuing to lock up revenue for the Company’s revenue of property sales next year. In order to meet the Group’s development needs, the board of directors (the “Board”) of the Company does not recommend the distribution of interim dividend for 2019.
MARKET AND BUSINESS REVIEW
In the first half of 2019, the growth of real estate market basically remained steady since last year, under the key tone of the policy of “houses for habitation not for speculation”. The central government will further implement the long-term mechanism for the implementation of different urban policies for different cities and the principal responsibility of cities, and local governments will review the situation timely and follow up to ensure the smooth operation of the market.
In view of the current market environment and industrial development, the Group adheres to the consistent principle of prudent investment and sound operation. On the one hand, the Group seeks to strengthen its main real estate business and improve its diversified industries, and on the other hand, the Group integrates various business platforms to create synergy through the coordinated development among industries. Driven by China’s market policy, the Group will continue to serve the needs of human beings for a better life and promote new breakthroughs in the Group’s performance in order to achieve better performance.
1. Property Sales
IOC. Jiarun Mansion Project (“Jiarun Mansion”), as a 900,000 sq. m top-level urban complex of Qianjiang Century City under the Group, has a forefront river view of Qiantang River, and is adjacent to Hangzhou International Convention Center, Hangzhou Olympic Sports Stadium and Asian Games Village; with convenient traffic and superior geographical location, it is favored by the market.
During the period under review, Lot A3 of Jiarun Mansion launched a fine-decorated and new Chinese style model apartment with a good sale record. The Group believes that Jiarun Mansion will continue to bring a stable revenue of property sales and higher profitability to the Group.
In addition, Xixi New City Project and Xixi Manhattan Project, which are in close proximity to Xixi Wetland and Hangzhou Future Science and Technology City, have been delivered successively, which has become the main driving force for the growth of the Group’s property sales revenue during the period under review.
2. Property Leasing
At present, the Group’s revenue from the property leasing remains stable compared with the same period of last year, mainly from Highlong Plaza in Xiaoshan, Hangzhou, and Zhong An Times Square in Yuyao. The occupancy rate of Highlong Plaza reached over 97%. The Group has also increased the differentiation and experience elements and the commercial elements with the theme “Happy Time” in the plaza to cater for children’s food and beverages, living and services, which effectively increased the people flow and promoted the spending in the plaza in the middle of 2016. The occupancy rate of Intime City in Zhong An Times Square in Yuyao is nearly 90%. Since the opening of Zone B of Zhong An Times Square on 1 October 2018, it has attracted many tenants, and its occupancy rate is nearly 80%. With sound operation, it will continue to contribute income to the Group’s property leasing in the future.
3. Hotel Operations
In terms of hotel operation, during the period under review, the Group’s Zhong An Holiday Inn hotel in Xiaoshan, Hangzhou, Qiandao Lake Bright Resort Hotel and Huaibei Vancouver Bright Hotel operated well, with revenue increased by nearly 26% year on year. The occupancy has gradually climbed to 55% from 48% in the same period of 2018.
The Somerset Hangzhou International Office Center Service Apartment (“Somerset IOC”) jointly operated by the Group and CapitaLand of Singapore was opened on 26 April 2019. Somerset IOC was awarded the 2018 Architecture MasterPrize™. As of 30 June 2019, an aggregate of 190 elegant rooms have been opened for business. In addition, the Group expects the Ningbo Bright Hotel to open on 1 October 2019, with 360 rooms and more than 2,800 seats in its restaurant, which is expected to bring considerable revenue to the Group.
4. Emerging Business
In terms of commercial real estate operation, based on the traditional business model, the Group further adjusted its business strategy, optimized its business structure and launched a new business operation with children as the theme. Focusing on serving urban children and integrating children’s health, education, entertainment and sports, we will work together to create an all-round, intelligent and scene-based complex, which will inject new impetus into the development of children’s field.
During the period under review, the Group announced further acquired 31.56% of the issued share capital of Maggie & Rose Limited (“Maggie & Rose”). Maggie & Rose has been launched in the United Kingdom for the past 13 years and it becomes a major brand-name for family children education. It currently has 7 clubs operating in London, Hong Kong and Singapore. The Group is expecting to launch about 18 clubs within the Greater China Region, mainly of direct operation within the next five years. Other forms of alliance operation would also be considered.
For operation, in late 2018, the first Maggie & Rose parent-child family club (「Club」) in Mainland China with the largest scale in the world, was grandly opened in Highlong Square in Xiaoshan, Hangzhou City, attracting numerous families to join the Club as members and becoming the city hotspot. The number of the Highlong Club members and the families visiting the Club continued to grow. Visit number exceeded 600 families and 2,200 people every week within the period under review.
At the same time, the Group also actively expanded emerging industries, such as health care.
In terms of health care, Hangzhou Qiushi Eye Hospital held a grand opening ceremony in March 2019. The Group will team up first-class ophthalmologists and management teams from the different provinces to provide prevention, diagnosis and treatment, rehabilitation and other services for patients with ocular diseases through an information-based intelligent platform, striving to build a first-class health industry brand.
PENTERPRISE SUSTAINABLE DEVELOPMENT
The Group actively participated in social welfare activities and established Zhongan Charity Foundation (“Zhongan Charity”) to focus on charitable activities. During the period under review, Zhongan Charity and Zhejiang Provincial United Charity Federation set up a special project which provides cataract patients with public welfare assistance through the professional medical service provided by the designated medical rescue institution, Hangzhou Qiushi Eye Hospital.
PROSPECTS AND OUTLOOK AND DEVELOPMENT STRATEGIES
Looking into the second half of 2019, maintaining the “stability” of China’s real estate market will still remain as the top priority, specifically, maintaining the continuity and stability of policy to prevent drastic fluctuations of real estate market, which in turn is conducive to achieve the long-term control objectives of stabilizing land and housing prices, and maintaining market expectations. At specific implementation level, the central government has authorized local governments more policy autonomy and demanded to strengthen the main body responsibility of city governments, so as to ensure the stable and healthy development of the real estate market.
The Yangtze River Delta City Group is an important intersection of the “One Belt, One Road” Initiative and the Yangtze River Economic Belt. Hangzhou Bay is expected to be built into a greater bay area for the global market and chinese market. The Group focuses on the urbanization development of the Yangtze River Delta region and has accumulated rich experience in project development of comprehensive real estate in the region. The Group is engaged in commercial properties development with other asset-light commercial services as supplementary to establish excellent brands in cities of the Yangtze River Delta region.
Adhering to the corporate mission of “creating new urban life” and the strategic guiding principle of “focusing on the demand of the public”, the Group further developed its cultural education, health care, film and entertainment, and cultural leisure tourism segments based on its existing business and sophisticated development and investment concepts, and extended their presence to the whole Yangtze River Delta region.
Among numerous developing projects, the International Office Center (the “IOC”) project is still a major development project of the Group. The IOC project is adjacent to the Hangzhou Olympic Centre where international major sports events such as the 2022 Asian Games will be held in the future, which will in turn stimulate to release the project value. Benefiting from a series of favorable policies, Qianjiang Century City where the IOC is located is under fast construction and development. The completed Jiarun Mansion in Lot A3 continuously generates record-breaking sales for the Group. It is expected that the IOC project will continue to be a major driven force in the growth of the Group’s revenue from property sales. In addition, the development of the IOC (Lot A2) has been commenced at the end of 2018 and the pile foundation have been successfully completed on schedule during the period under review which has created a working base for the subsequent construction and laid a solid foundation for the completion of the annual construction progress index, thus to assure the steady growth in the Group’s revenue from property sales in the future.
On behalf of the Board, I would like to express my sincere gratitude to the continuing support and trust of shareholders of the Company and business partners as well as the dedicated efforts of all the staff of the Group.
Hong Kong, 23 August 2019