Annual Results and Operational Highlights
-- The aggregated contracted sales of the Group, together with its joint ventures and associated companies, for the year ended 31 December 2021 was RMB145.6 billion, representing a year-on-year increase of 2.6%.
-- During the year, the Group acquired 29 parcels of land with an aggregated estimated GFA of 4.3 million sq.m. As at 31 December 2021, the Group had a total land bank with GFA of 25.95 million sq.m.
-- For the year ended 31 December 2021, revenue increased 2.4% year-on-year to RMB36,992.4 million. Profit was RMB1,195.5 million and core profit1 was RMB2,284.1 million.
-- Contract liabilities (which is advanced sales proceed) as at 31 December 2021 was RMB90,987.1 million, representing a year-on-year increase of 49.5%.
-- Cash and bank balances as at 31 December 2021 was RMB39,120.5 million, more or less the same as compared to last year.
Sales Target Basically Achieved
In 2021, the Group, together with its joint ventures and associated companies, recorded an aggregate contracted sales of RMB145.6 billion in 2021, representing a year-on-year increase of 2.6%, and achieving 97.1% of the annual sales target, which was better than the average of the Group's industry peers.
Deep Penetration of First- and Second-Tier Regions and Solid Fundamentals
In 2021, the Group acquired 29 parcels of land with a total estimated GFA of approximately 4.3 million sq.m. in 14 cities. Pursuing to the strategy of "regional penetration", the Group expanded its business in the core metropolises. In terms of the tiers of cities, 90% of the newly acquired land bank was located in first- and second-tier cities with solid fundamentals. As at 31 December 2021, the Group had a land bank with an aggregate GFA of 25.95 million sq.m. in 34 cities in the PRC, which is equivalent of the salable value of approximately RMB430 billion and is sufficient to support sales in 2022. 82% of the land bank was located in first- and second-tier cities, which has good sell-through.
Tough Environment for Financing and Tightening Cash Policies
During the first three quarters of 2021, the Group successfully seized several opportunities of financing under the policy pressure, and issued green senior notes with an aggregate amount equivalent to approximately US$1.75 billion and corporate bond of RMB1.32 billion. At the same time, the Group repaid and redeemed senior notes with an aggregate amount equivalent to approximately US$1.51 billion and corporate bond of RMB1.10 billion. Against the backdrop of the increasingly tightening financing in the second half of 2021, Zhenro Properties has taken active measures including accelerating sales and cash collection, reducing land expenditure and streamlining corporate organization. However, the Group encountered difficulties in refinancing its indebtedness in the capital markets since the fourth quarter of 2021 and the proportion of restricted cash has further increased, imposing pressure on the Company's cash flow. As at 31 December 2021, the Group's net debt-to-total equity ratio was 85.5% (end of 2020: 64.7%), its cash-to-short term debt ratio was approximately 1.1 times (end of 2020: 2.2 times) and its liabilities to asset ratio (excluding advanced sales proceeds) was 74.9% (end of 2020: 76.6%).
Promoting Green Development and Exploration of ESG Practice
As a pioneer in implementing environmental, social, and governance ("ESG") philosophy in the real estate industry, the Group has incorporated ESG objectives into its strategic plan for long-term development and invested more resources in enhancing ESG work and relevant information disclosure. As at 31 December 2021, a total of 22 projects of Zhenro Properties were granted China 2- or 3-star green building certificates, with a total GFA of 2.4 million sq.m. In terms of green financing, the Group issued green senior notes with an aggregated amount of US$1.75 billion to support the refinancing of its green projects during the year.
During the year, MSCI upgraded the ESG rating of Zhenro Properties from "BB" to "BBB", which is the second time for MSCI to upgrade its ESG rating since December 2020. Moreover, China Chengxin Lvjin (Beijing) Co., Ltd.* granted a BBB ESG rating to the Group, which was the highest rating given among the real estate enterprises assessed in the year. In addition, during the year, the Post-issuance Stage Certificate from Hong Kong Quality Assurance Agency and a green evaluation score of E1/86 (where E1 was the highest rating) from Standard and Poor's were granted for two green senior notes issued in September and November 2020, respectively, which showed the significant environmental benefits reaped from the green projects of the Group.
Mr. Huang Xianzhi, Chairman of the Board concluded, "In 2022, we anticipate that the market condition in the real estate sector remains under pressure and financing channels of real estate companies have limited room for relaxation in the foreseeable future. In this new stage of industry development, the high-growth model arising from high leverage and high inventory of the real estate sector is bound to be unsustainable. We believe the real estate development model will gradually shift into a 'prioritize quality and enhance efficiency' period of stable development driven by high quality, while core competitiveness of real estate companies will further originate from their own strengths.
Mr. Huang Xianzhi added, "Year 2022 marks the ground-breaking year of the Group's new three-year high-quality development and growth period. The Company will adhere to the business philosophy of 'stability first' and try its best to ensure the stability of cash flow and to generate sufficient cash flow to meet its operation and financial commitments, including to explore the possibility to dispose certain assets and suspend land acquisitions. Based on the product philosophy of 'Home Upgrade Master and Ingenious Zhenro', the Group will continue to strive to operate and manage its business well amid the current crisis. The company currently focuses on two top priorities including orderly production and operation and cash collection, establishing five core strategic goals of 'ensuring delivery, supply and quality while promoting sales and cash collection". Furthermore, Zhenro Properties will consolidate the risk prevention and control system, manage the compliance risks in various respects amid the ever-changing market, identify opportunities in challenges, break new grounds despite changes, thereby achieving a stable and sustainable operation and development, and creating the maximum values for its shareholders and investors."
About Zhenro Properties Group Limited
Zhenro Properties Group Limited is a leading property developer in the PRC with nationwide business presence in six key economic regions. The Group achieved contracted sales of RMB145.6 billion in 2021 and was ranked the top 20 in the Best 200 China Property Developers by Comprehensive Strength in 2021. Upholding its brand position of "Home Upgrade Master", the Group focuses on bringing quality residences to first-time home buyers and home upgraders. Zhenro Properties was listed on the Main Board of the Hong Kong Stock Exchange in 2018. It is a constituent stock in the Hang Seng Composite LargeCap/MidCap Index, Hang Seng Large-Mid Cap (Investable) Index and the MSCI China Index and is included in the list of eligible stocks for southbound trading of the Shenzhen/ Shanghai - Hong Kong Stock Connect.
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