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Review Of Performance
4Q 2017 vs. 4Q 2016
Revenue of the Group increased by RMB1.374 billion to RMB11.276 billion in 4Q 2017 as compared to RMB9.902 billion in 4Q 2016 mainly attributable to the increase in ASP per sqm, partly offset by the decrease in GFA delivered to customers over the same period last year. The Group continued to deliver new project in 4Q 2017 namely, Yanlord on the Park (仁恒世纪公寓) in Shanghai which accounted for 54.0% to the Group’s 4Q 2017 gross revenue on sales of properties. Revenue generated from existing projects was mainly contributed by Yanlord Eastern Gardens (仁恒东邑雅苑) in Shanghai, which represented 30.7% of the Group's gross revenue from sales of properties in 4Q 2017.
In-line with higher revenue in 4Q 2017, gross profit of the Group grew by 31.5% or RMB1.323 billion to RMB5.529 billion in 4Q 2017 as compared to RMB4.206 billion in 4Q 2016. The gross profit margin in 4Q 2017 increased by 6.5 percentage points to 49.0% in 4Q 2017 from 42.5% in 4Q 2016.
Led by the increase in gross profit and gross profit margin reported in 4Q 2017, profit before income tax increased by 24.8% or RMB1.065 billion to RMB5.365 billion in 4Q 2017 from RMB4.300 billion in 4Q 2016; profit before income tax margin grew by 4.2 percentage points to 47.6% in 4Q 2017 from 43.4% in 4Q 2016. Consequently, the Group's profit for the period increased by 15.2% or RMB362 million to RMB2.746 billion in 4Q 2017 from RMB2.384 billion in 4Q 2016, while profit for the period margin increased by 0.2 percentage point to 24.3% in 4Q 2017 as compared with 24.1% in 4Q 2016.
Excluding the fair value gain on investment properties, fair value gain from put liability to acquire non-controlling interests and the net foreign exchange effect as mentioned above under item 1(a), profit attributable to owners of the Company decreased by RMB178 million or 14.4% against the same quarter last year to RMB1.061 billion in 4Q 2017.
FY 2017 vs. FY 2016
The Group’s revenue slightly decreased by RMB26 million to RMB25.638 billion in FY 2017 from RMB25.664 billion in FY 2016, primarily due to lower GFA delivered in FY 2017, partly offset by the increase in ASP per sqm in FY 2017 as compared to corresponding period last year. The revenue stream was mainly generated from the delivery of Yanlord on the Park (仁恒世纪公寓), Yanlord Western Gardens (仁恒西郊雅苑) and Yanlord Eastern Gardens (仁恒东邑雅苑) in Shanghai and Yanlord Yangtze Riverbay Town (Phase 4) (仁恒江湾城四期) in Nanjing, which accounted for 23.9%, 15.6%, 14.5% and 11.6% respectively to the Group’s gross revenue from the sales of properties in FY 2017. Underscored by changes in composition of product mix which included a larger percentage of higher-gross-profit margin residential projects in FY 2017, gross profit margin surged 15.8 percentage points to 47.0% in FY 2017 from 31.2% in FY 2016. Consequently, gross profit grew 50.2% or RMB4.024 billion to RMB12.044 billion in FY 2017 as compared to RMB8.020 billion in FY 2016.
As such, profit before income tax grew considerably by 52.1% or RMB3.890 billion to RMB11.362 billion in FY 2017 from RMB7.472 billion in FY 2016, and profit before income tax margin increased by 15.2 percentage points to 44.3% in FY 2017 from 29.1% in FY 2016.
Profit for the year also reported a significant growth of 41.3% or RMB1.643 billion to RMB5.620 billion in FY 2017 as compared to RMB3.977 billion in FY 2016, while profit for the year margin reported a considerable increase of 6.4 percentage points to 21.9% in FY 2017 from 15.5% in FY 2016.
Excluding the fair value gain on investment properties, fair value gain from put liability to acquire non-controlling interests and the net foreign exchange effect, profit attributable to owners of the Company for FY 2017 leapt RMB914 million or 39.9% to RMB3.206 billion compared with RMB2.292 billion in FY 2016.
STATEMENTS OF FINANCIAL POSITION
Investments in joint ventures
Investments in joint ventures increased by 278.4% or RMB3.342 billion to RMB4.542 billion as at 31 December 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..
Other receivables increased by RMB1.529 billion to RMB2.402 billion as at 31 December 2017 from RMB873 million as at 31 December 2016 mainly due to the increase in loans to joint venture partners and deposit for new potential projects.
Non-trade amounts due from joint ventures
Non-trade amounts due from joint ventures increased to RMB2.697 billion as at 31 December 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 amounts due from joint ventures
Non-trade amounts due from joint ventures increased by RMB2.642 billion to RMB2.850 billion as at 31 December 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 RMB2.912 billion as at 31 December 2017 represented US$450 million senior notes due in January 2022 issued by the Group in January 2017.
Non-trade amounts due to non-controlling shareholders of subsidiaries
Non-trade amounts due to non-controlling shareholders of subsidiaries increased by RMB928 million to RMB1.266 billion as at 31 December 2017 mainly due to the increase in interest-bearing long-term loans from non-controlling shareholders.
Deferred income of RMB138 million as at 31 December 2017 represented the elimination of downstream transactions to joint ventures in excess of their carrying amounts.
Other payables, which mainly included advances received from customers, decreased by 8.5% or RMB2.037 billion to RMB22.052 billion as at 31 December 2017 from RMB24.089 billion as at 31 December 2016 mainly due to a decrease in pre-sales proceeds received from customers.
STATEMENTS OF CASH FLOWS
Net cash from (used in) operating activities
The Group recorded net cash from operating activities of RMB3.168 billion in 4Q 2017 and net cash outflow of RMB10.647 billion in FY 2017 as compared to net cash from operating activities of RMB5.703 billion and RMB10.289 billion in 4Q 2016 and FY 2016 respectively. The net cash outflows in FY 2017 were mainly due to increase in landbank and resettlement payments partly offset by profit for the year in FY 2017 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 (repayment of) drawdown from bank and other borrowings
The Group reported net repayment of bank and other borrowings of RMB1.871 billion in 4Q 2017 as compared to net drawdown of RMB1.483 billion in 4Q 2016. Net drawdown from bank and other borrowings increased to RMB16.184 billion in FY 2017 from RMB6.012 billion in FY 2016. The net cash drawdown in FY 2017 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 FY 2017 with total investment in residential development rising 9.4% to RMB7.515 trillion based on data compiled by the National Bureau of Statistics ("NBS") on 18 January 2018. Buoyed by healthy demand for residential properties, prices for primary commodity housing within the top 70 cities rose approximately 5.6% in December 2017.
The Group continues to witness steadfast buyer demand for its high-quality residential developments. As at 31 December 2017, the Group has received advances for pre-sale properties (recorded as “Other payables” in the statements of financial position), amounting to RMB20.696 billion, with an accumulated pre-sale amount of RMB23.262 billion.
The Group will continue to deliver projects in accordance with its delivery schedule. This would include launching new project in 1Q 2018 namely, Yanlord Majestive Mansion (仁恒海和院) in Tianjin.
Given the volatilities in the global economy and the bearing of austerity measures introduced by the PRC government, the Group will continue to maintain its strong cash position and prudent financial policies to ensure the sustainable growth and development of the Group. Capitalising on the stable economic development of the PRC, which saw GDP rising 6.9% in FY 2017 based on the data released by NBS on 19 January 2018, 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 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.