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2008 first quarterly report

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2008 first quarterly report Powered By Docstoc
					2008 First Quarterly Report
§1 Important Notice

1.1 The Board, the Supervisory Committee, Directors, members of the Supervisory Committee and senior management of the Company warrant that in respect of the information contained in this Quarter Report, there are no misrepresentations or misleading statements, or material omission, and individually and collectively accept full responsibility for the authenticity, accuracy and completeness of the information contained in this Quarter Report. 1.2 None of the Director, member of the Supervisory Committee and senior management fails to assure or dispute with the authenticity, accuracy and completeness of the contents of this Quarterly Report. 1.3 Deputy Chairman Song Lin, Director Wang Yin and Director Jiang Wei were not able to attend the board meeting in person due to their business engagements and had authorised Director Yu Liang to represent them and vote on behalf of them at the board meeting. Independent Director Charles Li was not able to attend the board meeting in person due to their business engagements and had authorized Independent Director David Li Ka Fai to represent them and vote on behalf of them at the board meeting. 1.4 This quarterly financial and accounting reports of the Company have not been audited. 1.5 The Company’s Chairman Wang Shi, Director and President Yu Liang, and Executive Vice President and Supervisor of Finance Wang Wenjin, declare that the financial report contained in this Quarter Report is warranted to be true and complete.

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§2 Corporate Information

2.1 Major accounting information and financial indicators (Unit: RMB)
As at the end of the Reporting Period Total assets Shareholders’ equity Net assets per share Reporting Period Profit attributable to equity shareholders of the Company Net cash used in operating activities Net cash used in operating activities per share Basic earnings per share Diluted earnings per share Return on equity Return on equity after extraordinary gains/(losses) 2.43% 4.01% 1.58 percentage points lower (0.21) 0.105 (0.74) 0.093 71.62% 12.90% 718,133,262 (1,419,962,635) 612,349,282 (3,237,626,139) 17.28% 56.14% 107,798,356,321 30,203,732,419 4.40 As at the end of the previous year 101,137,627,958 29,278,647,601 4.26 Corresponding period of previous year Changes (%) 6.59% 3.16% 3.29% Changes (%)

0.105
2.41%

0.093
4.01%

12.90%
1.60 percentage points lower

(Unit: RMB)
Extraordinary gains/(losses) Amount from the beginning of the year to the end of the Reporting Period

Non-operating income Non-operating expenses Effect of the above-mentioned items on income tax Total

6,422,988 (11,738,834) 1,328,335 (3,987,511)

2.2 Total number of shareholders and shareholding of the top 10 shareholders of tradable shares without trade restriction
As at the end of 31 March 2008, the Company’s total number of shareholders was 879,047 (including 844,444 holders of A shares, 34,603 holders of B shares)
Total number of shareholders as at the end of the Reporting Period Shareholdings of the top 10 shareholders of tradable shares without trade restriction Name of shareholders (Full) China Resources Co., Ltd. China Southern Quality Growth Equity Securities Investment Fund Liu Yuansheng Total number of shares held as at the end of the Reporting Period 840,684,247 83,538,136 82,510,697 Type A shares A shares 879,047

A shares

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Shanghai Nandu Weifeng Investment Management Co., Ltd. TOYO SECURITIES ASIA LIMITED-A/C CLIENT. Guangfa Jufeng Equity Securities Investment Fund China Life Insurance Company Limited - Traditional - General Insurance Products Bank of Communications Schroders Blue Chips Equity Securities Investment Fund Naito Securities Company Limited China AMC Core Balanced Bluechips Securities Investment Fund(LOF)

67,500,000 64,743,589 60,462,102 46,570,058

A shares B shares A shares A shares

45,973,777 45,201,265 42,400,562

A shares

B shares A shares

As at the end of 31 March 2008, the Company’s total number of shares was 6,872,006,387 shares, including 6,050,159,219 A shares and 821,847,168 B shares.
§3 Management Discussion and Analysis

During the Reporting Period, the residential property market continued to undergo rational adjustment started since the fourth quarter of last year. In addition January and February are in traditionally low season. Thus the market transaction volume in the first two months of the year was significantly lower than those in the third and fourth quarter of 2007. With more new projects launched in March, the transaction volume began to show a relatively strong pick up. Since the second half of last year, China Vanke has repeatedly stated that the industry has to return to rational development, following an earlier euphoric period. Therefore, we have to and are capable to conduct rational observation and analysis when the adjustment arrives. Based on the recent changes in market statistics, there is a noticeable trend that following fading of euphoric sentiment, property buyers are becoming more rational, first-time buyers and demand from end-users who are looking for improvement in their living standards have become the main stream of the market. During the Reporting Period, the proportion demand from end-users and medium to small-size units had been growing significantly. Among the Company’s properties sold in March, 90% was directed to end-users , and the number of properties less than 90 sq m accounted for over 50%. China Vanke believes that the crucial element in the process of market adjustment is the change in market mentality. With an increasing proportion of demand from end-users, the disappearance of panic buying attitude, the decline in purchase for investment, as well as adjustment in residential projects developers’ over-optimistic sentiment towards the market’s projects, the market sentiment is gradually returning to an appropriate level. Therefore, we have to realise that the recent market performance is derived from a temporary adjustment, and the results generated under an environment with widespread cautious buyer sentiment can truly reflect the solid foundation for market demand ,that is, demand from end-user. In the short-run, it is unavoidable to cause certain market participants’ suspicion and hesitation
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during course of adjustment, and the market needs time to reach a common consensus. There is possibility of short-term over-adjustment, however, as long as the underlining factors that determine the industry’s fundamentals remains positive, the adjustment should be a temporary phenomenon and should not change the development trend of the industry. In the long-run, as repeatedly stated by China Vanke before, there has not been any change in the fundamentals determining the prospects of the residential property market. Thus, we have full confidence in the prospects of the Chinese residential property market. Furthermore, the market’s adjustment from an overheat expansion to a rational development will enable the industry to have a more healthy environment for its development. Those enterprises capable of riding on the tide will be able to accelerate their expansion. During the Reporting Period, China Vanke had been persistent with its operation strategy of “main-stream focus, rational response” to emphasize on solid demand, and proactively raised the proportion of ordinary commodity housing for end-users and medium to small-size resident properties, and actively responded to market changes, in order to obtain satisfactory results. In the first quarter, the Company realized a sales floor area of 1.145 million sq m and a sales amount of RMB10.1 billion, representing increases of 82.9% and 119.1% when compared to those of the corresponding period in the previous year respectively. From January to March, the Company’s sales area increased by 11.7%, 51.9% and 147.1% respectively with sales amount increased by 11.7%, 70.7% and 227.5% respectively from those of the corresponding period of last year. During the Reporting Period, the Company has launched certain new projects for sale, including Golden Liyuan Guangzhou and Golden City Hangzhou. Sales of Golden Liyuan, Guangzhou, The Dream Town Shenzhen, Charming Garden Shanghai and The Paradiso, Chengdu, had been satisfactory during the period. In terms of performance by regions, the Group’s Pearl River Delta region realized a sales area of 0.34 million sq m generating a sales amount of RMB3.34 billion; the Yangtze River region realized a sales area of 0.351 million sq m and sales amount of RMB3.84 billion; the Bohai-Rim region realized a sales area of 0.24 million sq m and a sales amount of RMB1.69 billion. Other markets realized a sales area of 0.214 million sq m and a sales amount of RMB1.23 billion. During the Reporting Period, the Company’s booked area and booked revenue amounted to 0.803 million sq m and RMB5.976 billion respectively. In the first quarter, the Company realized a total revenue of RMB6.057 billion and a net profit of RMB718 million, representing increases of 59.16 per cent and 17.28 per cent respectively from those of the same period of the previous year. The percentage growth in net profit from that of the same period of previous year was respectively lower, due to high-profit margin projects were sold at book close of the corresponding period last year, while projects booked during the Reporting Period were mainly on lower-profit margin projects such as the commodity housing of Huacao 213 Shanghai. This project’s booked area and amount accounted for 23.7% and 12.7% of the Company’s total respectively. At the end of the Reporting Period, the Company had an area of 3.19 million sq m sold but not booked as the area had yet to be completed, with a total contract value of approximately RMB26.58 billion.

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China Vanke has expressed in the previous reports that capital is the major factor influencing the supply of residential property and the industry’s development. Meanwhile, the industry’s rational adjustment has posted higher requirement for the developers’ financial strength. In accordance with its prudent approach in operation, the Company has always on financial viability and stability in development. At the end of the Reporting Period, the Company had RMB15.63 billion of cash with a net debt equity ratio of 30.9%. High liquidity and a reasonable financial structure enable the Company to actively respond to market changes. Newly added Projects During the Reporting Period, the Company has added new projects with a total planned GFA of approximately 1,173,000 sq m,. And the total planned GFA as determined in accordance with the proportion to China Vanke’s equity interest was 651,000 sq m.
Current planned GFA to Vanke’s equity (sq m) 319,550 259,986 Pre-construction Pre-construction Progress

City Wuhan Chengdu

Project Hejiadun Project Chengdu Hairongchang Project Binhai New District Project Fashion Square Project Dongguan Hongtu Road Project Total

Location Jianghan Wuhou Development District Development District Nancheng

Equity Interests 52% 49%

Site Area (sq m) 65,900 54,969

Tianjin Tianjin Dongguan

100% 100% 51.7%

32,000 6,500 189,928 349,297

60,000 45,000 488,113 1,172,649

Pre-construction Pre-construction Pre-construction

§4 Significant Events

4.1 Significant changes and reasons for such changes in major items of the accounting statements and financial indicators of the Company √Applicable □Not applicable

Financial indicators Interest in jointly controlled entities Interest in associates Current taxation

3/31/2008 (RMB’000) 1,044,770 673,961 1,142,455

12/31/2007 (RMB’000) 2,031,523 326,433 3,380,176

Change

Reasons for Changes Consolidation of Dijie, a former

-48.57% 106.46% -66.20%

joint-venture company into the Company’s statements Four principal associates added Land appreciation tax and other taxes paid
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Financial indicators Revenue Cost of sales Distribution costs Administrative expenses Profit attributable to equity shareholders of the Company

Jan-Mar 2008 (RMB’000) 6,056,755 3,925,913 278,414 387,101 718,133

Jan-Mar 2007 (RMB’000) 3,805,529 2,254,389 184,100 295,252 612,349

Change 59.16% 74.15% 51.23% 31.11% 17.28%

Reasons for Changes Growth in sales from property development Expansion in operation of property business Normal growth along with expanding operation scale Expansion in operations and amortization of share award funds Growth in profits from property business

4.2 Progress of significant events and analysis of their impact and solutions □Applicable √Not applicable 4.3 Fulfillment of the undertakings given by the Company or shareholders or beneficial controllers √Applicable □Not applicable 1. CRNC – the parent company of CRC, being the Company’s original single largest shareholder and the present single largest shareholder, gave a significant undertaking to the Company in 2001: CRNC would provide as much support to the Company as it did in the past, as long as such support was beneficial to the Company’s development, and that it would remain impartial in the event of any competition between the investment projects of the Company and that of CRNC and its subsidiaries, and in the event of any disagreements or disputes arising from horizontal competition. CRNC has fulfilled its undertaking. For the private placing of A shares in 2006, CRC undertook to be subject to a lock-up period of 36 months for the subscribed shares of its own accord; other investors undertook to be subject to a lock-up period of 12 months for the subscribed shares of its own accord. The related undertakings had been strictly fulfilled.

2.

4.4 Warning of and explanation for probable forecast accumulated net loss from the beginning of the year to the end of the next reporting period or significantly changes in accumulated net profit from that of the corresponding period of the previous year □Applicable √Not applicable 4.5 Other substantial events 4.5.1 Investment of securities □Applicable √Not applicable 4.5.2 Equity interests held in other listed companies √Applicable □Not applicable
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(Unit: RMB)
Booked
Stock code

Stock abbreviation

Initial investment amount

Percentage to the company’s equity

value as at the end of the period under review

Gains/(losses) during the period under review

Changes of shareholders’ equity during the period under review

000001

Shenzhen Development Bank Co., Ltd. –A 9,667,147.80 0.10% 62,536,320.00 (23,063,040.00)

600697

Chang Chun Eurasia Group Co., Ltd. 5,070,000.00 1.18% 35,775,131.84 (12,062,833.32)

600680

Shanghai Potevio Co., Ltd. 8,841,200.00 1.41% 57,439,449.60 3,568,468.80

600751

SST-Tianjin Marine Shipping Co., Ltd. 143,600.00 0.04% 143,600.00 -

600329

*ST-Tianjin Zhongxin Pharmaceutical Group Corporation Limited 306,000.00 0.02% 890,032.29 (139,953.69)

Total

24,027,947.80

156,784,533.73

-

(31,697,358.21)

Note : All abovementioned shares are legal person shares acquired by the Company in its early stage. For the moment, 600751 has not completed the Non-tradable Shares Reform; 000001 and 600697 are both in the lock-up period due to trading restriction 4.5.3 Investor relations activities such as meetings, communications and handling of inquiries during the period under review ISSUES DISCUSSED AND INFORMATION PROVIDED
United Securities meeting 2008.1 Xiamen Face to face meeting Securities companies and funds investors (I) Major issues discussed: (1) The Company’s

Type OF TIME MEETING LOCATION APPROACH NAME OF VISITORS

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CLSA meeting Deutsche Bank meeting

2008.1

Hong Kong

Face to face meeting Face to face

Securities companies and funds investors Securities companies and funds investors

Daily operations; (2)The Company’s development strategies; (3)The Company’s opinion on the

2008.1

Beijing meeting Face to face

UBS meeting

2008.1

Shanghai meeting

Securities companies and funds investors

changes in the industry. (II)Major information

CITIC Face to face Securities meeting CLSA meeting Annual results presentation 2008.3 2008.3 Hong Kong Hong Kong, Shenzhen, Shanghai, Beijing Face to face meeting Securities companies, funds and individual investors, etc. Visit Securities companies and funds investors 2008.1 Dongguan meeting Securities companies and funds investors

provided: Including the Company’s reports. regular

Note: The above-mentioned meetings were either one-on-one meetings, or small group meetings or large group presentation. The Company always met with over 50 different investors. ICBC Asia、Haitong Securities, Shenzhen, Dongguan, Wuhan, Zhangsha Guangzhou, During Securities Companies the Reporting Period Tianjin, Shanghai, Xiaman, Beijing, Nanjing, Chengdu, Zhuhai, Shenyang, Changchun, Dalian, etc Small group or one-on-one Goldman Sachs, Chengjiang Securities, CCIC, Everbright Securities, CITIC Securities, China Merchants Securities, Shenyin Wanguo, GF Securities, United Securities, China Jianyin Investment Securities, Ping An Securities, Guotai Junan, Bohai Securities, Essence Securities, Taiwan Securities, Guosen

Securities, BOC International, CLSA,UBS, Citigroup, Morgan Stanley, BNP, JPmorgan, Credit Suisse, Goldman Sachs, Daiwa Securities, Macquarie、DB, etc

Fund and other investment companies and

During the Reporting

Shenzhen, Dongguan, Wuhan, Zhangsha Guangzhou, Small group or one-on-one

Power of Corporation of Canada, Hua An Fund, RongTong Fund, China Southern, Bosera, Da Cheng, Invesco Harvest, Amassriche, China

Changcheng,

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individual investors

Period

Tianjin, Shanghai, Xiaman, Beijing, Nanjing, Chengdu, Zhuhai, Shenyang, Changchun, Dalian, etc

AMC, ICBC Credit Suisse, ABN Amro Teda Fund, E Fund, Kaihua Investment, First State Cinda Fund, China Merchants Fund, Bank of Communications Schroders Fund, China Universal Asset Management, China Life, Singular Asset

Management, Egerton Capital Ltd, Brookside Capital, Barring Asset Management, UBS Global Asset Management, Boyer Allan Investment Management, Mirae Asset Partners Management, Asset Value

Management,

Ward Ferry Asset Management, Prime Capital Asset

Management, Capital Research Global, HBK Investments Hong Kong, Doric Capital, Presima Inc, Mondrian Investment, Aetos,

Pyrenees

Investment,

Prudential Asset Mgmt. (HK), AT Asset, PMA Global, Lone Pine Capital, Boyer Allan

Investment Management LLP, Tiger Asia, Walter Scott & Partners, TY Advisors,

Duquesne Capital Management, Oaktree Capital Management, Pacific Alliance, BDT

Investment Management Ltd., Genesis Investment

Management, Owl Creek, Sansar Capital, Advisors, Blackstone Avenue Asia Capital

Group, JF Asset Mgmt, Baillie Gifford & Co, Credit Suisse Asset Mgmt, etc

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Consolidated income statement for the period ended 31 March 2008 (Expressed in Renminbi Yuan)
Jan.-Mar.2008 Revenue Cost of sales Gross profit Other income Distribution costs Administrative expenses Other expenses Results from operating activities Financial income Financial expenses Net finance costs Share of profits less losses of associates Share of profits less losses of jointly controlled entities Profit before taxation Income tax Profit for the period Attributable to: Equity shareholders of the Company Minority interests Profit for the period Earnings per share Basic Diluted 0.105 0.105 0.093 0.093 718,133,262 23,596,534 741,729,796 612,349,282 3,759,630 616,108,912 6,056,755,249 (3,925,912,602) 2,130,842,647 6,422,988 (278,414,498) (387,100,843) (27,060,809) 1,444,689,485 152,437,906 (277,272,645) (124,834,739) 665,692 6,307,467 Jan.-Mar.2007 3,805,529,186 (2,254,388,510) 1,551,140,676 22,832,771 (184,099,938) (295,251,971) (16,660,239) 1,077,961,299 30,767,664 (56,694,521) (25,926,857) (43,199) (2,889,204)

1,326,827,905 (585,098,109) 741,729,796

1,049,102,039 (432,993,127) 616,108,912

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Consolidated balance sheet at 31 March 2008 (Expressed in Renminbi Yuan)
31 Mar.2008 Non-current assets Property, plant and equipment Investment properties Construction in progress Interest in associates Interest in jointly controlled entities Other financial assets Deferred tax assets Total non-current assets Current assets Inventories Properties held for development Properties under development Completed properties for sale Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS 87,998,370 27,304,358,328 40,731,746,958 4,735,886,569 15,148,463,320 15,626,087,320 103,634,540,865 107,798,356,321 63,748,758 27,877,597,737 34,338,168,018 4,654,628,030 12,495,032,111 17,046,504,584 96,475,679,238 101,137,627,958 596,809,112 280,976,489 304,969,405 673,960,649 1,044,769,588 539,207,900 723,122,313 4,163,815,456 582,077,206 277,090,575 271,270,240 326,433,224 2,031,523,200 569,496,856 604,057,419 4,661,948,720 31 Dec.2007

CAPITAL AND RESERVES Share capital Reserves Awarded Shares purchased for the Employees’ Share Award Scheme Total equity attributable to equity shareholders of the Company Minority interests TOTAL EQUITY 5,276,123,866 35,479,856,285 4,640,875,428 33,919,523,029 (466,541,546) 30,203,732,419 (466,541,546) 29,278,647,601 6,872,006,387 23,798,267,578 6,872,006,387 22,873,182,760

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Consolidated balance sheet at 31 March 2008 (continued) (Expressed in Renminbi Yuan)
31 Mar.2008 Non-current liabilities Interest-bearing borrowings Deferred tax liabilities Other long term liabilities Total non-current liabilities 16,485,984,471 1,441,367,723 15,270,758 17,942,622,952 16,362,079,840 1,567,060,453 9,913,831 17,939,054,124 31 Dec.2007

Current liabilities Interest-bearing borrowings Financial derivatives Trade and other payables Current taxation Provisions Total current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 10,096,850,716 20,957,112 43,076,029,838 1,142,455,192 39,584,226 54,375,877,084 72,318,500,036 107,798,356,321 8,593,526,904 20,957,112 37,246,428,026 3,380,175,810 37,962,953 49,279,050,805 67,218,104,929 101,137,627,958

) ) ) Directors ) )

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Consolidated cash flow statement for the period ended 31 March 2008 (Expressed in Renminbi Yuan)
Jan-Mar 2008
Cash received from sales of products Other cash received from business operating activities Cash generated from operating activities Cash paid for puechasing of merchandise and services Cash paid to employees or paid for employees Tax paid for tax Other cash paid for business operating activities Cash used in operating activities Net cash used in operating activites Proceeds from disposal of interest in other long term investments Proceeds from diposal fixed assets Other cash received relating to investing activities Cash generated from investing activities Acquisition of fixed asstes Cash paid for acquisition of investments Cash paid for acquisition of subsidiaries Cash used in investing activities Net cash used in investing activites Capital injection from minority interests of subsidiaries Proceeds from loans and borrowings Cash generated from financing activities Repayment of loans and borrowings Dividend paid to equity shareholders of the Company and Interest paid Cash used in financing activities Net cash generated from financing activities Effect of foreign exchange rates Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 March 8,987,690,884 1,311,820,013 10,299,510,897 8,048,702,606 627,672,979 1,937,898,706 1,105,199,241 11,719,473,532 (1,419,962,635) 99,184 44,591,784 44,690,968 36,772,073 550,484,973 1,081,999,763 1,669,256,809 (1,624,565,841) 336,507,408 3,480,171,049 3,816,678,457 1,743,718,049 442,167,673 2,185,885,722 1,630,792,735 (6,681,523) (1,420,417,264) 17,046,504,584 15,626,087,320

Jan-Mar 2007
4,716,002,554 511,675,176 5,227,677,730 5,790,031,154 324,109,375 850,335,167 1,500,828,174 8,465,303,870 (3,237,626,140) 25,480,434 5,026 23,362,556 48,848,016 8,166,190 96,115,033 750,015,580 854,296,803 (805,448,787) 115,189,650 4,527,535,312 4,642,724,962 1,889,900,000 236,572,110 2,126,472,110 2,516,252,852 6,879,509 (1,519,942,566) 10,743,695,198 9,223,752,632

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Description: 2008 first quarterly report