Country Garden "asks for salary"! It’s time!
2024.08.23

The number of words in this article is 2372, and the reading time is about 4 minutes.
Author |First Financial Zheng Na
Xu Binhuai, the new president of Country Garden Service, probably didn’t perform very well in the first semi-annual report. At the same time, the cash flow dropped sharply.
According to the data disclosed by the company, in the first half of 2024, the total service revenue of Country Garden was about 21.046 billion yuan, a year-on-year increase of about 1.5%. This growth rate is significantly lower than the same period in 2021 -2022, and also lower than the 3.4% increase in the same period in 2023.
Specifically, the income from property management services, as the basic business, reached 12.75 billion yuan, up 4.6% year-on-year, accounting for about 60.6% of the total income; The income from community value-added services was about 1.998 billion yuan, and the income from "three supplies and one heat" business was 3.345 billion yuan, both of which increased year-on-year.
The income of the other three major businesses declined. Among them, non-owner service income was about 356 million yuan, down 63.4% year-on-year, and urban service business income was 2.17 billion yuan, down 9.4% year-on-year; The revenue from commercial operation service business was 332 million yuan, down 37.9% year-on-year.
Although the overall income has increased, the increase in various service costs and sales costs has led to thegross profitAnd gross profit margin were dragged down. By the end of June, the gross profit of Country Garden services was 5.553 billion yuan, down 13.7% year-on-year, and the overall gross profit margin was about 21.2%, down 3.7 percentage points year-on-year.
Regarding the decline in gross profit margin, Country Garden Service said that, on the one hand, due to the principle of prudence, after providing services to a number of customers whose credit risks have increased significantly since August 2023, the received consideration will be recognized as income when the performance obligations have been fulfilled and the customer’s consideration has been received; On the other hand, due to external unfavorable factors, enterprise management factors, different gross profit margins of various businesses, changes in their proportion in total revenue and active improvement of service quality, the gross profit margins of other businesses except property management and other related services in the "three-supply-one-industry" business segment decreased.
Huang Peng, CEO and CFO of Country Garden Services, further explained at the performance meeting that the company took the initiative to reduce the pressure on some businesses, which lowered the gross profit and gross profit margin. For example, in commercial operation services, in order to cooperate with risk merchants for debt processing,property; assetsThe need for disposal, the two sides negotiated to cancel the contract to dispose of some business, resulting in the company’s loss of more than 1 billion yuan in business management operating income and nearly 100 million.net profit.
Under the multiple influences, the profit performance of Country Garden service also declined by over 30%. As of the end of the reporting period, the company achieved a net profit of 1.546 billion yuan, a year-on-year decrease of 37.9%; The profit attributable to shareholders of the company was about 1.44 billion yuan, a year-on-year decrease of 38.7%; The core net profit attributable to shareholders of the company was 1.84 billion yuan, down 31.7% year-on-year.
The sharp drop in net profit has further affected the cash flow performance of Country Garden services. By the end of June, the company’s net cash from operating activities was about 270 million yuan, a sharp drop of 87.7% compared with 2.192 billion yuan in the same period of last year.
Country Garden Service explained that, on the one hand, it was affected by the year-on-year decline in net profit, and on the other hand, because the business of venture merchants and small business owners did not grow as fast as the scale, the comprehensive charging rate decreased year-on-year, which led to an increase in accounts receivable; Affected by unfavorable factors such as the external environment, the pre-existing property fee decreased; The third is the periodic fund fluctuation caused by daily business activities.
Among them, accounts receivable increased significantly. According to the disclosure, as of the end of June, the trade receivables of Country Garden services were 21.958 billion yuan, an increase of about 2.4 billion yuan compared with the end of 2023. Specifically, accounts receivable aged over one year totaled 8.7 billion yuan, an increase of about 33% compared with the beginning of the year. Among them, the accounts for one to two years were about 6.077 billion yuan, an increase of 11.28% over the beginning of the year; 2.022 billion yuan in two to three years, an increase of 202.24% over the beginning of the year; Those with more than three years have about 601 million yuan, an increase of about 59% compared with the beginning of the year.
In order to cope with the rising accounts receivable, Huang Peng said that at present, a debt recovery committee has been set up, which is composed of company executives, to assign tasks and comprehensively promote various debt recovery through the implementation of strong organizational guarantee.
Xu Binhuai added that among the above three factors, the impact of the decline in operating net profit on cash flow is expected. "Due to the decline of non-owner value-added services and other reasons, when we made the business plan at the beginning of the year, the net profit target in 2024 was lower than that in 2023, and we think the current decline is relatively controllable. If the established net profit target can be achieved at the end of the year, then the cash flow target will have a new foundation. "
In addition, the phased increase in funds generated by daily business activities also has an impact on cash flow. For example, Xu Binhuai said, for example, in the first half of the year, he participated in the competition of more market expansion projects, which resulted in a relatively large investment in margin. He stressed that this is not the reason why cash flow is unhealthy. In the second half of the year, while strengthening expenditure management, more attention should still be paid to capital inflows, that is, collection and prepayment.
Xu Binhuai said that in advance payment, it will increase the attractiveness of pre-storage of property fees in the second half of the year, such as organically combining integrated marketing business with pre-storage of property fees and promoting pre-storage of property fees through more activities.
Country Garden Service gives more countermeasures. Xu Binhuai said that in terms of small business owners, it is necessary to compact the responsibility, identify the precise reasons, use specific methods, and give greater inclination in management measures and incentives to ensure that small business owners return to a healthy level. "Judging from the operating results over the years, the collection of property fees always has a better performance at the end of the year than in the middle of the year, so at the end of the year, we hope to make up for the decline in the collection rate in the middle of the year, which is still relatively confident."
In terms of risk merchants, Country Garden Service has set up a special committee to recover arrears, which has given sufficient support from the board of directors to the highest level of management. Country Garden revealed that it has taken active measures to collect overdue accounts receivable, including but not limited to paying debts with assets, promoting litigation or arbitration, and achieved initial results.
Even so, Xu Binhuai still said, "Frankly speaking, it is still difficult for venture merchants to get cash back at present. We still lock their due rights and interests in various ways, which will gradually turn into cash flow in the second half of the year and in the future." He said that the realization of assets still needs a process.
In particular, he explained that in the first half of the year, Country Garden Service had made a lot of achievements in the management of risky customers, such as paying debts with assets, and a considerable number of assets had been paid off, but some processes were in the process of promotion, so they were not fully reflected in the cash flow statement.
Xu Binhuai also set a "military order" for the cash flow performance in the second half of the year. "We still have to make a beautiful turnaround at the end of the third quarter through powerful measures, thus forming a strong guarantee for the annual collection and recovery and achieving strong support for cash flow."
As for the annual report of Country Garden Services, Nomura Securities reported that the decline of the company’s performance was in line with expectations, but its weak cash flow was worrying. The net cash from the company’s operating activities dropped by over 80%, only 270 million yuan, accounting for about 1% of the interim income and 15% of the adjusted net profit, mainly because it was more difficult to collect property management fees. Nomura believes that the widening gap between cash flow and income/profit indicates that the risk of impairment loss is high, which is a factor affecting the company’s profit. Based on this, Nomura lowered the service target price of Country Garden by 25.9%, from HK$ 5.4 to HK$ 4, with a "neutral" rating.Wechat editor| Lamb
Ideal, sudden!


