On August 13, Country Garden Services released its performance forecast for the first half of 2024, showing a slight increase in revenue compared to the same period last year, but a decrease of over thirty percent in net profit attributable to the company’s shareholders.
In the “Insider News Profit Warning” issued by Country Garden Services Holdings Limited, it was stated that as of June 30, 2024, the company’s revenue ranged between 20.9 billion to 21.2 billion yuan, a slight increase compared to the previous year; while net profit attributable to the company’s shareholders ranged from 1.36 billion to 1.55 billion yuan, a decrease of over thirty percent. In the first half of 2023, Country Garden Services achieved operating income of 20.7 billion and a net profit of 2.35 billion yuan.
The data indicates that the phenomenon of “increased revenue but decreased profit” in Country Garden Services continues. In 2022, the company achieved revenue of 41.367 billion yuan, a 43.4% year-on-year increase, while net profit attributable to shareholders decreased by 51.8% to 1.943 billion yuan. In 2023, the company’s revenue reached 42.612 billion yuan, a 3% increase year-on-year, but net profit attributable to shareholders plummeted by 85% to 0.292 billion yuan.
Country Garden Services explained the reason for the profit decline, citing that the company only recognizes related consideration as income after actually receiving payments from customers; in addition, the company increased the provision for impairment of accounts receivable from independent third parties, and factors such as adverse external conditions, corporate management factors, different profit margins in various business segments, and changes in their proportions of total revenue have led to a decrease in the company’s profit margin, resulting in reduced net profit.
On August 13, shares of Country Garden Services closed at 4.47 Hong Kong dollars per share, a decrease of 4.69%.
In its analysis on August 13, Caixin.com stated that the continued downturn in the property market is posing challenges for the property management industry, and the performance of leading companies is not optimistic. Since the second half of 2021, the entire real estate industry entered a downturn, significantly impacting the property management industry. 2022 became a watershed for Country Garden Services’ performance, with a continuous sharp decline in net profit thereafter.
In China, listed property management companies often spin off from related real estate companies, leading to a significant portion of property management contracts coming from real estate companies. Huang Lichong, Co-founder of Hong Kong’s Axis Strategy Management Group, told Caixin.com that related real estate companies have a huge impact on property management companies: “If related real estate companies encounter difficulties, they may default on payments to property management companies, which may not be recoverable.”
The semi-annual announcement data released by Country Garden shows that in the first half of this year, the contracted sales amount dropped by 80% to 25.95 billion yuan, and the sales area decreased by 86% to 2.647 million square meters.
On the evening of August 5, Country Garden released unaudited operational data showing that in July, the monthly contract sales amount attributable to the company’s shareholders amounted to approximately 3.41 billion yuan, a 72% decrease year-on-year; and the sales area attributable to the company’s shareholders dropped by 76% to about 380,000 square meters.
In October of last year, Country Garden defaulted on a US dollar bond. Heng Xin Holdings Limited, a Hong Kong-listed company under Jian Tao Holdings, applied for liquidation in February of this year, citing Country Garden’s default on a $205 million loan. The hearing for the liquidation application has been postponed until January 20 next year.
Established in 1992, Country Garden Services was originally the property sector under the leading real estate developer Country Garden. It was spun off and listed in June 2018, becoming the largest property management company in terms of managed area in China. Currently, Country Garden and Country Garden Services do not own stakes in each other, but they belong to the same group of companies.