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Review Of Performance
3Q 2017 vs. 3Q 2016
In-line with the Group's delivery schedule, the GFA delivered to customers in 3Q 2017 declined by 53.3%. In tandem with the decline, revenue of the Group reported a decrease of 31.6% or RMB1.741 billion to RMB3.764 billion in 3Q 2017 as compared to RMB5.505 billion in 3Q 2016 partly offset by the increase in ASP per sqm and increase in revenue from sales of car parks in 3Q 2017 over the same period last year. The Group continued to deliver new project in 3Q 2017 namely, Oasis New Island Gardens (Phase 2) (绿洲新岛花园二期) in Nanjing which accounted for 58.7% to the Group's 3Q 2017 gross revenue on sales of properties. Revenue generated from existing projects was mainly contributed by Yanlord Western Gardens (仁恒西郊雅苑) in Shanghai, which represented 28.6% of the Group's gross revenue from sales of properties in 3Q 2017.
Despite the lower revenue reported, gross profit of the Group increased to RMB1.572 billion in 3Q 2017 as compared to RMB1.499 billion in 3Q 2016 which represented an increase of 4.9% or RMB73 million. The improved gross profit was mainly due to the increase in delivery of car park units in current reporting period over the same period last year. Hence, gross profit margin in 3Q 2017 experienced a 14.6 percentage point growth to 41.8% in 3Q 2017 from 27.2% in 3Q 2016.
Led by the increase in gross profit and gross profit margin reported in 3Q 2017, profit before income tax increased by 14.5% or RMB188 million to RMB1.482 billion in 3Q 2017 from RMB1.294 billion in 3Q 2016; profit before income tax margin grew by 15.9 percentage points to 39.4% in 3Q 2017 from 23.5% in 3Q 2016. Consequently, the Group's profit for the period increased by 9.5% or RMB66 million to RMB759 million in 3Q 2017 from RMB693 million in 3Q 2016, while profit for the period margin reported a 7.6 percentage point growth to 20.2% in 3Q 2017 as compared with 12.6% in 3Q 2016.
9M 2017 vs. 9M 2016
In-line with the Group's delivery schedule, lower GFA was delivered to customers in 9M 2017. As such, the Group's revenue decreased to RMB14.362 billion in 9M 2017 from RMB15.762 billion in 9M 2016. The revenue stream was mainly generated from the delivery of Yanlord Western Gardens (仁恒西郊雅苑) in Shanghai, Yanlord Yangtze Riverbay Town (Phase 4) (仁恒江湾城四期) and Oasis New Island Gardens (Phase 2) (绿洲新岛花园二期) in Nanjing and Tang Yue Bay Gardens (棠悦湾花园) in Suzhou, which accounted for 22.2%, 20.8%, 15.3% and 14.1% respectively to the Group's gross revenue from the sales of properties in 9M 2017.
Underscored by a change in composition of product mix which included a larger percentage of higher-gross-profit margin residential projects in 9M 2017, gross profit margin surged 21.2 percentage points to 45.4% in 9M 2017 from 24.2% in 9M 2016. Consequently, gross profit grew 70.8% or RMB2.701 billion to RMB6.515 billion in 9M 2017 as compared to RMB3.814 billion in 9M 2016.
As such, profit before income tax grew considerably by 89.1% or RMB2.825 billion to RMB5.997 billion in 9M 2017 from RMB3.172 billion in 9M 2016, and profit before income tax margin increased by 21.7 percentage points to 41.8% in 9M 2017 from 20.1% in 9M 2016.
Profit for the period also reported a significant growth of 80.4% or RMB1.281 billion to RMB2.875 billion in 9M 2017 as compared to RMB1.594 billion in 9M 2016, while profit for the period margin reported a considerable increase of 9.9 percentage points to 20.0% in 9M 2017 from 10.1% in 9M 2016.
STATEMENTS OF FINANCIAL POSITION
Investments in joint ventures
Investments in joint ventures increased by 379.0% or RMB4.549 billion to RMB5.749 billion as at 30 September 2017 from RMB1.200 billion as at 31 December 2016. The increase was mainly due to the investments in Yanlord Perennial Investment (Singapore) Pte. Ltd., Yanlord Eco Island Investments Pte. Ltd., Hangzhou Kesheng Property Development Co., Ltd. and Hangzhou Keyi Property Development Co., Ltd..
Non-trade amount due from joint ventures
Non-trade amount due from joint ventures increased to RMB2.332 billion as at 30 September 2017 from RMB1.203 billion as at 31 December 2016 mainly due to the increase in interest-bearing long-term shareholder loans to the joint venture projects.
Available-for-sale investment of RMB3 million represented investment in Wuhan Metropolis Project (武汉大都会项目).
Non-trade amount due from joint ventures
Non-trade amount due from joint ventures increased by RMB1.945 billion to RMB2.153 billion as at 30 September 2017 from RMB208 million as at 31 December 2016 mainly due to the increase in interest-bearing short-term shareholder loans to the joint venture projects.
Senior notes of RMB2.956 billion as at 30 September 2017 represented US$450 million senior notes due in January 2022 issued by the Group in January 2017.
Other payables, which mainly included advances received from customers, increased by 10.3% or RMB2.470 billion to RMB26.559 billion as at 30 September 2017 from RMB24.089 billion as at 31 December 2016 mainly due to an increase in pre-sales proceeds received from customers.
STATEMENTS OF CASH FLOWS
Net cash (used in) from operating activities
The Group recorded net cash used in operating activities of RMB3.734 billion in 3Q 2017 and RMB13.815 billion in 9M 2017 as compared to net cash from operating activities of RMB2.151 billion in 3Q 2016 and RMB4.586 billion in 9M 2016 respectively. The net cash outflows in current reporting periods were mainly due to increase in landbank and resettlement payments partly offset by an increase in advances received from customers in 3Q 2017 and profit for the period in 9M 2017 respectively over the same periods in last year. In 1Q 2017, the Group made a payment for Nanjing No. 2016G84 Land (南京 No. 2016G84 地块), while in 2Q and 3Q 2017 the Group incurred resettlement payment for an old district redevelopment project namely, Shanghai Yangpu District Redevelopment Project (上海杨浦区 81、83 街坊旧区改造项目).
Net drawdown from bank and other borrowings
Net drawdown from bank and other borrowings increased to RMB7.037 billion in 3Q 2017 from RMB442 million in 3Q 2016 and to RMB18.055 billion in 9M 2017 from RMB4.529 billion in 9M 2016, in-line with the Group's funding requirements for project investments and developments in current reporting periods as well as redemption of senior notes due in May 2017.
The People's Republic of China ("PRC") real estate sector grew steadily in 9M 2017 with total investment in real estate in 9M 2017 rising 8.1% to RMB8.064 trillion based on data compiled by the National Bureau of Statistics ("NBS") on 19 October 2017. Buoyed by demand for residential properties, prices for primary commodity housing within the top 70 cities rose approximately 6.4% in 9M 2017 based on the data released by NBS on 23 October 2017. In-line with the Chinese regulatory policies, average selling price growth in first tier cities such as Shanghai were flat year on year while second tier cities such as Nanjing and Tianjin continued to rise steadily posting gains of approximately 1.4% and 1.8% respectively compared to prices a year earlier based on the data released by NBS on 23 October 2017.
The Group continues to witness steadfast buyer demand for its high-quality residential developments. As at 30 September 2017, the Group has received advances for pre-sale properties (recorded as “Other payables” in the statements of financial position), amounting to RMB24.680 billion, with an accumulated pre-sale amount of RMB27.840 billion.
The Group will continue to deliver projects in accordance with its delivery schedule. This would include launching a new project and new batches of existing projects in 4Q 2017 namely, Oasis New Island Gardens (Phase 3) (绿洲新岛花园三期) in Nanjing, Yanlord on the Park (仁恒世纪公寓) in Shanghai and Riverbay Gardens (江湾雅园) in Suzhou.
The recent acquisition of shares in United Engineering Limited allows the Group to extend its property business to Singapore and is a timely and strategic opportunity for the deployment of the Group's financial resources. It adds to the Group's core business in the People's Republic of China.
Volatilities in the global financial markets coupled with policy headwinds arising from austerity measures introduced by the PRC central government may serve to slow the rapid growth of new land tender prices and help to maintain a stable and sustainable development of the property sector over the longer term. Capitalising on the stable economic development of the PRC, which saw GDP rising 6.9% in 9M 2017 based on the data released by NBS on 20 October 2017, Yanlord, with its high quality landbank and strong brand recognition, is well poised to tap the rising demand for quality residential developments in the PRC.
Barring any further significant deterioration in the global economy and any other unforeseen circumstances, the Board of Directors is confident of the Group's performance relative to the industry trend for the next reporting period and the next 12 months based on the number of pre-sale units to-date, expected delivery schedules and on-schedule construction works in progress.