Although the acquisition of Xiangsheng Industry has been terminated, China Resources Vientiane Life will not give up the strategy of mergers and acquisitions in the future.
view network On March 28, China Resources Vientiane Life announced its 2022 annual results and held a performance meeting. Chairman Li Xin, President Yu Linkang, Vice President Wang Haimin, Vice President Wei Xiaohua and Chief Financial Officer Yang Hongxia attended the meeting and answered questions.
Against the backdrop of a general downturn in the performance of the entire industry, the report card of China Resources Vientiane Life has many remarkable points.
The annual report shows that for the whole year of 2022, China Resources Vientiane Life achieved operating income of 12.016 billion yuan, a year-on-year increase of 35.4%; net profit attributable to the parent company was 2.206 billion yuan, a year-on-year increase of 27.9%, and the gross profit margin fell by 1 percentage point to 30.1%.
In terms of scale, by the end of 2022, the managed area of China Resources Vientiane Life Property Management has increased by 87.3% year-on-year to 291 million square meters, and the turnover of operating shopping centers has increased by 6.3% year-on-year to 126.4 billion yuan. The number of operating projects has further increased to 86.
Performance dismantling
China Resources Vientiane Life adopts a dual-wing strategy of property management + business management. In terms of breakdown, the revenue realized by the property management business is about 7.802 billion yuan, a year-on-year increase of 46.9%.
In terms of value-added services, the community value-added services of most property companies will shrink in 2022, while the value-added services of China Resources Vientiane Life Community will achieve growth, with revenue increasing by 73.3% year-on-year to 1.256 billion yuan, accounting for the proportion of revenue in the property management sector It also increased from 13.6% to 16.1%, of which the rental and sales and Mercure businesses are the main contributors.
In addition, in 2022, the city service business of China Resources Vientiane Life has newly acquired projects such as Nanhu Street and Sungang Street in Shenzhen.
However, commercial management business is the characteristic and core competitiveness. In terms of commercial operation, by the end of 2022, the number of shopping mall projects in operation by China Resources Vientiane will reach 86, with a total area of 9.2 million square meters, and 3 new luxury shopping malls will be opened within the year. In terms of third-party external expansion, China Resources Vientiane Life will sign 13 new projects in 2022, including 11 TOD projects.
2022. The macroeconomic pressure and repeated epidemics have obviously affected the commercial management business more seriously than the residential business. The turnover of China Resources Vientiane life operating shopping centers increased by 6.3% year-on-year to 126.4 billion yuan, and its own commercial operation service income of shopping centers was 2.48 billion yuan, a year-on-year increase of 16.5%, which was significantly slower than the residential part.
However, the commercial operation business has a very high profit margin level. The gross profit margin of China Resources Vientiane Life’s shopping mall operation business in 2022 will be 62.4%, which is much higher than the 14.0% of basic residential property management in the same period.
Looking at the performance of listed property companies in 2022, most of them are troubled by payment collection. While the receivables have increased significantly, the turnover rate has also dropped significantly, and even a large amount of bad debts have been withdrawn to erode overall profits.
In terms of receivables, China Resources Vientiane Life also recorded a large increase. By the end of 2022, the balance of trade receivables had reached 1.558 billion yuan (of which 718 million from related parties), an increase of 49.5% year-on-year, significantly higher than the same period The increase in revenue, which also has the impact of some acquisitions.
Despite this, China Resources Vientiane Life has strictly controlled receivables. 93.6% of receivables are aged within one year. In 2022, the turnover days of accounts receivable will be 40 days, an increase of 2 days compared with 2021. The cash flow situation is also relatively safe.
Thanks to better liquidity management, China Resources Vientiane Life did not confirm too many bad debts for receivables. The balance of receivables at the end of 2022 was 1.573 billion. In 2022, only 6.9 million yuan of bad debt impairment losses were newly accrued. The impact on profits is not large, which is also an important reason why China Resources Vientiane Life can achieve better performance in 2022.
On the whole, China Resources Vientiane Life will record steady growth in all indicators in 2022, and its finances and payment collection will also remain stable; the residential property management business has stable cash flow and strong resistance to cycles, while the commercial management business has a high moat and With high profitability characteristics, the two work together to achieve good results in terms of operation and finance in 2022, which is full of difficulties.
Mergers and acquisitions
Mergers and acquisitions have been an important means for material companies to expand their scale in the past few years, but China Resources Vientiane Life has been late in the field of mergers and acquisitions.
In the first half of 2022, when the environment is declining and the mergers and acquisitions market is cooling down, China Resources Vientiane Life has taken up the banner of mergers and acquisitions in the property management industry, and acquired 3 property companies, Yuzhou Property, Zhongnan Service and Jiuzhou Property. After the project, the actual cash consideration paid was about 1.433 billion yuan.
Mergers and acquisitions have provided a fairly high growth momentum for the performance of China Resources Vientiane Life in 2022. In 2022, the area of new third-party contracts will be about 143 million square meters, an increase of 297.4% year-on-year, of which mergers and acquisitions, bidding, and joint ventures and cooperation accounted for 75.9% and 75.9% respectively. 20.7% and 3.4%.
At present, Yuzhou Property and Zhongnan Services have also achieved consolidation. The consolidated income and net profit provided by the two to China Resources Vientiane Life in 2022 will be 1.44 billion yuan and 104 million yuan respectively.
Although the merger has been completed, the post-investment integration of acquired companies is still advancing. “A quarter of Yuzhou has been integrated into the original governance system of China Resources Vientiane Life. With Yuzhou’s experience, Zhongnan’s work will be more efficient. It is estimated that before the end of June this year, we will fully integrate the two companies into the operation system of Vientiane services.” Wang Haimin said.
Large-scale mergers and acquisitions have provided a lot of impetus for growth, but it is worth noting that due to several large-scale mergers and acquisitions initiated in 2022, China Resources Vientiane Life also generated a lot of goodwill, which will change from 0 to 1.805 billion yuan by the end of 2022. And no impairment was made in the 2022 annual report. Under the current market environment, there may still be risks of impairment in the future.
In addition, together with the 2022 results, an announcement was made on the termination of the acquisition of Xiangsheng Property; China Resources Vientiane Life made several large-scale acquisitions last year, among which the acquisition of Yuzhou Property and Zhongnan Services has been consolidated. On March 28, it was announced that the proposed 1.037 billion yuan acquisition of Xiangsheng Industry was terminated. The management of China Resources Vientiane Life did not disclose the specific reasons for the termination of the acquisition in the performance meeting. Disputes over the consideration and underlying assets or strategic changes caused by environmental changes Layout changes are possible.
Although the acquisition of Xiangsheng Industry has been terminated, China Resources Vientiane Life will not give up the strategy of mergers and acquisitions in the future. At the performance meeting, Yu Linkang said: “The company has always adhered to the principle of quality and scale growth. We will actively strive for projects and targets, and expand the scale through mergers and acquisitions, especially for mergers and acquisitions that can play a role in strengthening the company’s capabilities and improving the system. “
The following is the Q&A record (excerpt) of the 2022 annual performance conference of China Resources Vientiane Life:
On-site question: China Resources Vientiane currently has three major products. What is the follow-up plan for the opening of the product line? Will China Resources Vientiane Life continue to expand its business management product line in the future, for example, is there any possibility of cooperation with Outlets?
Wei Xiaohua:Mixc World is one of the three main forces of our strategic layout. Products and positioning are a big trend of integration. We will choose high-energy urban core areas with relatively high requirements, and the positioning will be more closely integrated with the local humanistic spirit.
In the second half of last year, we have opened two MIXC Worlds, one in Nanjing and the other in Shanghai. These two projects are based on the commercial form of block + joint venture + ancient building, combining ancient buildings and commerce. In order to combine, when promoting, we also pay attention to tonality and so on.
After the opening of these two projects, they have indeed achieved a good reputation in the market. Next, there are plans for the layout of Mixc World in Shanghai, Chengdu, Hangzhou and Shenzhen.
As far as the current product lines are concerned, we will still focus on the three core product lines of MIXC, MIXC, and MIXC World.
For Outlets, our positioning is an opportunistic product. If there are good projects and cooperation opportunities, we can actively try them. Of course, we have an open and win-win attitude towards cooperation with large groups.
On-site question: China Resources Vientiane Life has acquired some companies last year. How is the integration of these enterprises with China Resources Vientiane Life? Will there be any mergers and acquisitions in 2023?
Wang Haimin:At present, the integration plan of the two projects we have acquired, Zhongnan and Yuzhou, is being implemented, and the results have also met expectations. There is potential for improvement, which is in line with the previous plan.
Now the comprehensive integration of the two companies has begun and is expected to be completed in June 2023.
The M&A projects are operating in good condition, and the performance has been fully achieved, which is in line with the company’s expectations. Yuzhou and Zhongnan will contribute more than 1.4 billion yuan in consolidated income and more than 100 million yuan in consolidated profit in 2022, achieving 23% and 19% respectively. Gross profit margin, collection rate over 85%.
With the implementation of comprehensive integration in the future, whether it is basic property services or value-added services, it will further release greater value and exert a greater scale effect.
Regarding mergers and acquisitions, the company has always adhered to the principle of quality scale growth. If there are projects and targets that meet the company’s principles in 2023, we will actively strive for them.
To expand the scale through mergers and acquisitions, especially upstream and downstream businesses, we will consider projects that can play a role in strengthening the company’s capabilities, increasing qualifications, and improving the system.
On-site question: What role has the digitalization of life in China Resources Vientiane played?
Yu Linkang:First of all, technological empowerment is one of the five core strategies of China Resources Vientiane Life’s “14th Five-Year Plan” strategic plan, and the company also attaches great importance to it. Since its listing, the investment in this area has been increasing every year. Especially since last year, we have had a new company organization change, from a lot of external procurement in the past to a digital self-research team of nearly 300 people. A lot of digital talents have been recruited and a team has been formed.
In terms of commercial digitization, the application is updated and iterated, digitally empowered operations are strengthened, members’ refined operation efficiency is improved, and customer service experience is upgraded, mainly focusing on upgrading digital capabilities around the three major scenarios of shopping mall space operations, member transactions, and management and operation decisions.
Enabling light asset management to improve quality and efficiency, and further consolidate management and service capabilities for the digitalization of properties. The focus is on the two digital systems of Huanxin Property, which comprehensively improves the efficiency and experience of property services.
We have released a brand new property management system, focusing on improving the service efficiency of front-line employees and the service experience of owners, building a property charging system, basic property fees and value-added service fees for owners, fully automated from payment, account entry to billing, and improving the efficiency of financial operations , Reduce property management costs.
The property digitalization of China Resources Vientiane Life already has a relatively good infrastructure. Next, it will deeply integrate with the daily operation and management of the property, reshape the operation and service process, and combine the Internet of Things technology to effectively reduce the cost of property management. Single-engine and other technologies standardize and platformize property management, increase the marginal effect of management and ensure service quality in the process of scale expansion.
At the same time, we continue to strengthen customer trust, which is the basis for the company to develop value-added services. We will also continue to improve the owner’s basic service experience such as online payment and repair, improve customer satisfaction, and combine big data capabilities and artificial intelligence algorithms to strengthen understanding of customer needs. , to provide product-based value-added service capabilities, and to improve our commercialization level while better satisfying users.
All in all, this year we still need to focus on production technology, use technology to improve efficiency and quality, and ensure service consistency and high quality.
On-site question: There is a general downward trend in the gross profit margin of property management companies. Does the management think this trend will continue in the future? What measures are there to further increase profitability, and what is the ideal gross profit margin for the industry?
Yang Hongxia:We do see that based on the overall impact of industry regulation and industry competition, the basic gross profit margin of the property management industry has obvious downward pressure. From the perspective of the logic of the basic property management service itself, it is difficult to increase the price of the property fee itself, but the increase in labor and price levels will inevitably bring pressure on the growth of the gross profit margin of the basic property.
However, judging from our own life in Vientiane, the gross profit margin of basic property services has rapidly increased from 8.2% in 2019 to 15.3% in 2022, which is a very good level compared with peer companies with similar backgrounds to us.
The work we have done is mainly in the following dimensions: First, improve efficiency through continuous management, including property changes, the scale effect brought about by continuous scale expansion, the improvement of internal lean management, and continuous cost reduction and quality improvement. Efficiency to improve management efficiency and service experience, thereby increasing the gross profit margin of our basic services.
On the other hand, regarding technology empowerment, this is also a key investment sector. By deepening the capabilities of technology services, we can increase the gross profit margin of our basic property services.
The gross profit margin of the overall property management, in addition to the basic property services, is based on the unique, “2+1” business model, which enables China Resources Vientiane Life Property Services to have stronger operational service capabilities. Through property management services Strengthen commercial operation service capabilities and value-added service capabilities to provide owners with more scenarios and more services, thereby increasing the proportion of operational services and value-added services in revenue.
Therefore, under the premise of continuous scale expansion and quality assurance, based on our business model, we will continue to improve the income structure. On the one hand, we can maintain the gross profit margin of basic property services at a relatively good level in the industry, and at the same time increase the value-added services through continuous superposition operations. Gross profit and gross margin in the segment.
We expect the overall gross profit margin of China Resources Vientiane Life will be stable at the level of 17-20%.
