• Projects (including joint ventures) with GFA of about 12.57 million sq m were completed;
• Revenue amounted to HK$143.69 billion, comprising sales value amounting to HK$114.29 billion from projects completed in 2015 and HK$29.40 billion from projects completed in previous years;
• A total of 12.60 million sq m of property (including joint ventures and associates) was sold, raising HK$180.63 billion;
• At the end of the year, the unrecognised contracted sales (including joint ventures) amounted to HK$86.20 billion;
• Gross profit margin for property development projects remained at a satisfactory level; operating profit was increased by 2.6% to HK$37.22 billion;
• Increased effort towards collecting sales proceeds resulted in the collection of HK$148.66 billion from buyers (including joint ventures) during the year. As at the end of 2015, pre-sales deposits received (including joint ventures) amounted to HK$52.70 billion.
In spite of the slowdown in mainland China’s economic growth in recent years, domestic demand for property has remained robust as a result of rising income levels and ongoing urbanisation. As such, the Group remains confident of the long-term development of mainland China’s property market. Overall sentiment in the property market has improved as the incumbent government has gradually eased its tightening policies as a substitute for policy stimulation, representing a more market-oriented approach to its regulation of the property market, thereby ensuring its long-term and healthy development. On the other hand, after more than a decade of rapid growth, it is unsurprising that the domestic property market is growing at a slower pace while the Chinese economy as a whole is slowing. Following this market consolidation, property developers with outstanding operational and financial capability will be in a strong position to build market share. During the first half of the year, the policy of monetary easing continued as mainland China’s economy slowed further, while the Central Government rolled out a series of measures to improve liquidity, including reductions in the required reserve ratio and interest rates. Various supportive measures targeting the property industry, including the simultaneous relaxation of home purchase requirements and mortgage policies, were implemented, resulting in the stabilisation of property prices and an increase in transaction volumes. The situation further improved during the second half of the year. In particular, the collection of sales amounts saw a significant pick-up, alleviating property developers’ cash flow pressures.
During the period, property markets in Hong Kong and Macau remained steady in general, albeit facing higher downward pressure in the fourth quarter.
As an industry leader with annual sales that have exceeded HK$100 billion every year since 2012, the Group was able to maintain a relatively balanced monthly sales performance despite varying market conditions (except that sales in February dropped to below HK$10 billion due to the Lunar New Year). Amid a somewhat lacklustre market in the first half of the year, which saw certain property developers slashing prices to cash out, the Group appropriately moderated its sales arrangements and managed to complete half of its annual sales target. Market sentiment continued to improve during the second half of the year with the value of contracted sales reaching a record high of HK$28.6 billion in November, contributing to annual contracted property sales (including sales of projects with joint ventures and associates) of HK$180.63 billion, surpassing by a small margin of the annual target of HK$180.0 billion, as adjusted in August. Properties with aggregate GFA of 12.60 million sq m were sold. For the year as a whole, the Group reported record-high sales with satisfactory pricing, attributable to the management’s accurate judgment of the latest market developments as well as flexible marketing strategies. The “China Overseas Property” brand also made a significant contribution to boosting sales and alleviating the downward pressure on property prices.
In response to market changes, the Group accelerated construction of its property projects in mainland China, completing a total GFA (including joint ventures) of about 12.57 million sq m. The value of sales recognised as the Group’s revenue in 2015 was HK$114.29 billion. Furthermore, the level of sales for property completed by the Group as at the end of 2014 increased significantly, with about 1.44 million sq m sold for approximately HK$29.40 billion. Hence, revenue from property development increased by 7.2% to HK$143.69 billion. Operating profit reached HK$37.22 billion.
Looking forward, in order to pursue of greater operating scale while carefully controlling its risks, the Group must accelerate the pace of its development and sales in all its projects. This will result in improved cash inflow, asset turnover and return on shareholders’ funds, but the gross profit margin of projects will inevitably be squeezed. The management will continue to endeavor to maintain gross profit margins for the Group’s projects at an industry-leading level.
At the end of the year, completed properties held by the Group decreased by 7% to approximately 2.51 million sq m, with book cost of approximately HK$37.66 billion. Sales of completed properties are expected to increase substantially next year and will help to increase the amount of sales recognised as revenue in 2016. In line with the Group’s emphasis on the collection of sales proceeds, cash inflow from sales for the Group and the joint ventures reached HK$148.66 billion. Presales deposits decreased by 12.9% to HK$52.70 billion as at the end of the year.
The Group strives to expedite its development through joint venture cooperation and mergers and acquisitions. Nevertheless, with the growth in its financial strength, the Group has been engaged in fewer joint venture projects in recent years. As at the end of December 2015, the Group’s interest in 18 joint ventures plus amounts due from and deducted amounts due to joint ventures decreased to HK$14.52 billion. Profit contributions from joint ventures for the full year of 2015 increased slightly, to approximately HK$630 million. In 2015, sales from joint ventures reached HK$10 billion, and revenue amounting to HK$11 billion was recognised. All the joint ventures were financially sound. As at the end of the year, two projects in aggregate owed outstanding loans of approximately HK$2.56 billion, while cash held by the joint ventures totalled HK$5.85 billion. Cash inflow from sales for the year amounted to approximately HK$10.14 billion while pre-sales deposits amounted to HK$5.21 billion at the year end. Furthermore, COGO, the Company’s major associate, recorded a net profit of approximately HK$920 million. The Group recorded a net profit contribution of approximately HK$320 million from COGO.
After 21 months of diligent work, on 7 May 2015 the Company completed the acquisition of the Acquired Group (consisting of companies holding the China property portfolio and the three investment properties in London) from the controlling shareholder, CSCECL. Meanwhile, the issue of Company’s shares to COHL was completed on 18 May 2015. This exercise reinforces the Company’s position as the primary listed platform of CSCECL for its property development business, resolves the competition with the Company in the China, Hong Kong, Macau and London property business in an effective way, enlarges the scale of operation of the Group, and strengthens the capital base and the financial position of the Company. All these factors reinforce the Company’s leading status in the China property market. Please refer to the announcements made by the Company on 24 March 2015 and 18 May 2015 for details of the Assets Acquisition and the Shares Issue.
In 2016, the property market in mainland China is expected to remain generally stable while market consolidation will further accelerate and merger and acquisition opportunities will rise. For most property developers, 2016 will remain a highly challenging year. Yet the Group is in a relatively favourable position thanks to its operational and financial strength, coupled with a strong brand image.
As property markets in Hong Kong and Macau are expected to remain steady, the Group will strengthen marketing efforts for its existing projects in these markets, and will continue to seize opportunities to expand its Hong Kong and Macau business in an appropriate manner.
The Board is confident that the Citic Property Merger & Acquisition exercise announced by the Company on 14 March 2016 will be completed smoothly. The Group is fully confident in its performance in 2016, and considers it a good time to increase its market share, acquire prime land resources and consolidate its position as market leader.