March 31, 2022. HONG KONG.
Satisfactory Results in Core Real Estate Business, Innovative Businesses Accumulating Transformation Momentum.
2021 Annual Result Highlights
• The Group realized annual contracted sales of approximately RMB19.1 billion, representing an increase of 32% over last year and exceeding the contract sales target of 2021.
• The Group realized revenue of HK$32,050 million, representing an increase of 70% over last year.
• The profitability continued to outperform the market, and consolidated gross profit margin was 39%.
• The expansion of land resources was fruitful, with a newly acquired building areas of land reserve of 3.22 million square meters, and the total land reserve increased by 55% year-on-year.
• The core profit was HK$3.89 billion. • Finance cost was 3.0%; all indicators of the “Three Red Lines” fell into the green level.
• The Board recommends the payment of a final dividend of HK8.00 cents per share. Together with the interim dividend of HK7.00 cents per share already paid, the total dividend for the whole year amounts to HK15.00 cents per share.
- Shenzhen Investment Limited (“Shenzhen Investment” or the “Group”, SEHK stock code: 604.HK) is pleased to announce the audited annual results of the Group for the year ended 31 December 2021 (“2021” or the “Year”.)
In 2021, due to the tightened regulation of the real estate industry and liquidity concerns in some real estate enterprises, the differentiation of real estate enterprises intensified and the concentration of the industry further increased. Affected by fluctuations of the industry, the fair value of financial assets held by the Group incurred a significant non-cash loss. In face of external challenges, the Group forged ahead with courage and fortitude by adhering to the development concept of prudent growth. It reached recent-year new highs in both resource expansion and property sales. With the accelerated development of its strategically innovative businesses and the satisfactory performance of all its principal business sectors, the Group has taken a solid new step in the opening year of the “14th Five-year Plan”
Satisfactory Results in Core Real Estate Business
In 2021, the Group seized the market opportunities to strengthen marketing innovation and promotion of key projects. It realized annual contracted sales of approximately RMB19.1 billion, representing an increase of 32% over last year and exceeding the contract sales target of 2021.
During the year, the construction of the Group’s key projects were promoted steadily and income recognized from real estate development of approximately HK$26.66 billion, representing a significant increase of 89% over last year. Gross profit margin of real estate development maintained at a high level at approximately 40% and brought considerable returns to shareholders.
The Group made efforts to promote the transformation and upgrading of vacant leasehold properties, and business optimization and iteration, which boosted occupancy and average rental income. The Group’s annual rental income amounted to HK$1.5 billion, representing an increase of 22% over last year.
A Record High in Land Resources Expansion
In 2021, the Group relied on its capital advantages to take opportunities from the land market for land resources expansion. By means of open market auction, industrial land application, urban renewal and asset injection, the Group acquired 16 pieces of land during the year, newly acquired capacity building areas of land reserve of approximately 3.22 million square 3 meters. 90% of newly acquired land located in first-tier and second-tier cities and 67% of which in the Greater Bay Area, which are expected to bring high returns.
The Group made a breakthrough in industrial land application and has successfully expanded into Jiading District, Shanghai, thus establishing its presence in Shanghai for the first time. Furthermore, by acquiring property projects in Ma’anshan and Jiangyin successively, the Group started the establishment of an industrial park in the Yangtze River Delta. During the year, the Group has expanded resources to a new record high, laying a solid foundation for its sustainable and high-quality development in the “14th Five-Year Plan” period.
Comprehensive Urban Operations Integration Showing Effect
During the year, Upon completion of the integration of its property management service, intelligent park operation, commercial operation, hotel management and property management city business as well as optimization and enhancement of the management, the Group has been fully upgraded to an urban comprehensive operation service company with “a diversified business mix, an extensive customer base and a wide range of services”, significantly improving its business scale, brand influence and comprehensive competitive edge. The Company has 37 years of rich experience in property services, with its businesses covering various property types such as residences, office buildings, public facilities, etc. The Company has strong external expansion strength, and its comprehensive strength ranks among the top 50 in the country in terms of property services.
In terms of brilliant commercial operation, the first Galeries Lafayette in South China settled in UpperHills, the Shenzhen Design Week was held, the City Cloud Meeting Hall was put into use, and the first Mandarin Oriental Hotel in Shenzhen opened, which were extensively recognized by the governments and merchants, and enhanced the brand image of “Shum Yip”. In terms of leading city services, since the successful landing of Shenzhen’s first “property city” pilot project in 2019, the Company has successively provided all-round property city services relating to 6 streets in Shenzhen, Currently, the Company is operating most of the property city projects in Shenzhen. As a setter of the first standard for property management city of China , the Company, as the pilot, has been persistently promoting the development of the industry.
Innovative Businesses Accumulating Transformation Momentum
The Group’s innovative businesses such as industry and city, well-being and technology have been accelerated, accumulating momentum for further transformation and optimization. 4 In terms of industry-city integration, the Group has built core industrial capabilities, formed an attractive, replicable and exportable industrial brand. A number of industrial park projects have been implemented in Shanghai, Chengdu, Ma’anshan, etc., demonstrating the further improvement of the Group’s capacity of industry and city innovation.
In terms of people’s well-being, the Group’s subsidiary Agricultural Science Company actively developed high-tech agriculture to promote rural revitalization. Its Breeding Ecological Industrial Park was rated as a vegetable basket base in Shenzhen. Being concerned about food security, the company built Shenzhen Seed Group. Focusing on urban agriculture, the sales of high-end agricultural products increased sharply.
In terms of technology, its subsidiary Shenzhen Jinghua Displays Electronics Co., Ltd., a scarce high-end manufacturing enterprise under State-owned Assets Supervision and Administration Commission of People’s Government of Shenzhen Municipality, which is dedicated to the field of human-machine interface display, has developed after accumulation and precipitation to a national high-tech enterprise.
Excellent Enterprise management
To meet the strategic development needs of the “14th Five-Year Plan”, in 2021, the Group promoted the reform of organizational management and digitalized planning and construction to secure its sustainable high-quality development from the perspectives of organization, mechanism and system.
Financial management remained stable and efficient, all indicators of the “Three Red Lines” remained green; the cost advantage is significant, and the average borrowing cost is 3.0%. In addition, the group further broadened its financing channels and completed the issuance of two CMBS, with a total issuance scale of RMB 3.8 billion and a cost at the lowest interest rate of responding category of the asset type at the time of issuance.
The Group adheres to a high standard in advancing its commitment to corporate social responsibilities and sustainable development, in 2021, during the ESG ratings assessment by MSCI, the Group again received a rating of “A”, the highest among domestic real estate enterprises for two consecutive years.
During the year, fair value of financial assets held by the Group decreased significantly due to the impact of the liquidity crisis of Hengda Real Estate, resulting in a fair value impairment of approximately HK$6.37billion. Although the fair value loss was a non-cash impairment and did not affect the Company’s cash flow and daily operations, it had a significant adverse impact on the Group’s profitability, resulting in an impairment in the current year’s results. After this fair value change adjustment, the fair value of Hengda Real Estate’s equity interest was HK$461 million at the end of 2021 and its uncertainty will essentially no longer have a significant adverse impact on the Group.
Target and Outlook for 2022
The Group defines 2022 as the “year of management improvement” and will comprehensively improve its management efficiency. It will remain committed to “prudent growth” and further leverage its fundraising and cost advantages to actively promote operation.
From the perspective of resource expansion, the Group will give full play to its advantages to select the best from the best, and steadily expand high-quality resources in the Greater Bay Area and regional high-energy cities. In the aspect of real estate development, the annual saleable value exceed RMB40 billion, and the contracted sales target is RMB20 billion. In terms of property investment, the Group will continue to improve the unit efficiency of existing properties and businesses and maintain stable growth in rental income.
In respect of comprehensive urban operation, the Group will rely on its advantage in third-party expansion to step up effort in the expansion of non-housing properties, and accelerate the establishment of its presence in the city service segment, aiming to release value in the capital market as appropriate. In terms of innovative business, Jinghua Displays will accelerate capacity expansion and efficiency improvement, and seek capital market opportunities to accelerate development. Nongke Company will explore M&A and cooperation opportunities to build an agricultural industry chain ecosystem.
The Group will promote its business transformation and development, with focus on the strategic vision of “innovation-builder of the city and industry, and operator of people’s well-being”, and comprehensively improve management for continuous transformation, optimization and improvement. Shenzhen Investment will make persistent efforts to seize development opportunities to improve its sustainable development and value creation 6 capability, and realize enterprise transformation thus making greater contributions to social, economic and urban development, and creating more satisfactory returns for shareholders.
About Shenzhen Investment
Listed on the Hong Kong Stock Exchange in 1997, Shenzhen Investment Limited ("Shenzhen Investment", SEHK stock code: 604.HK) is the largest listed property developer under the Shenzhen SASAC (State-owned Assets Supervision and Administration Commission). Shenzhen Investment primarily engages in the development of residential property, commercial property (including industrial property), and property complexes, as well as property investment and management. By intensifying its development in Shenzhen, focusing on the Greater Bay Area and planning for its development in other core cities in China, the Company will position itself as an “Innovative Constructor of Industrial Cities, Wealthy Livelihood Operator” and work towards to becoming a technology-based industry company focusing on the development of urban complexes and investments in the technology industry.
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