Vanke's Net Profit Rises 16% To RMB21.02 Billion Sales Amounts In 14 Cities Exceed RMB10 Billion in 14 Cities, Actively Explores New Businesses

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China Vanke Co., Ltd. (“Vanke” or the “Company”, together with its subsidiaries “the Group”, stock code: 2202) announced that its revenue for the year ended 31 December 2016 (the “Year”) amounted to RMB228.92 billion, representing a year-on-year increase of 24.2 per cent; with profit attributable to equity shareholders of the Company rose by 16.0 per cent year-on-year to RMB21.02 billion. Basic earnings per share were RMB1.9, representing a 16.0 per cent year-on-year growth. Fully diluted return on equity maintained at a relatively high level of 18.5 per cent, up by 0.4 percentage point as compared to that in 2015. The board of directors recommended a final dividend of RMB0.79 per share for 2016 (2015: RMB0.72 per share).

In 2016, the Group realized a sales area and sales amount of 27.65 million sq m and RMB364.77 billion, representing year-on-year increases of 33.8 per cent and 39.5 per cent respectively. The sales proceeds recovery rate was over 95%, maintaining a leading edge in the industry. Basing on the sales amount of commodity housing in the country of RMB11,762.7 billion, the Group’s market share in China in 2016 was 3.1 per cent, representing a year-on-year increase of 0.1 percentage point.

As of the end of 2016, the Group had an area of 22.8 million sq m sold but not yet booked as construction had yet to be completed and the aggregate contract amount was approximately RMB278.2 billion, representing an increase of 29.4 per cent as compared to that at the end of 2015. The aforementioned area will be booked over the next few years, laying a solid foundation for the Group’s future operating results.

The main products of the Group’s property development business were commodity housing and commercial ancillary facilities. Among the products sold in 2016, housing, commercial and office properties and other ancillary facilities accounted for 84.7 per cent, 11.9 per cent and 3.4 per cent respectively. The Group’s residential properties focused on end-user demand of mainstream customers, with small and medium-sized units under 144 sq m accounting for 95 per cent of the total. As of the end of 2016, the Group had presence in 65 cities in Mainland China. In 2016, the Group recorded sales amounts of over RMB10 billion in 14 cities, namely Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Wuhan, Suzhou, Dongguan, Foshan, Nanjing, Xi’an, Ningbo, Shenyang and Tianjin, and ranked top three in terms of market sales in 40 cities.

By geographical region, the Group realised a sales area of 6.47 million sq m and a sales amount of RMB102.42 billion in the Guangshen Region surrounding the Pearl River Delta; a sales area of 7.58 million sq m and a sales amount of RMB118.90 billion in the Shanghai Region surrounding the Yangtze River Delta; a sales area of 6.71 million sq m and a sales amount of RMB79.9 billion in the Beijing Region surrounding the Bohai-Rim Region; a sales area of 6.85 million sq m and a sales amount of RMB60.23 billion in the Central and Western Region, which comprised core cities in central and western China.

Internationalization is a long-term development strategy of the Group. As of the end of 2016, the Group had already entered six overseas cities, namely San Francisco, Hong Kong, Singapore, New York, London and Seattle. In 2016, the sales area and sales income attributable to overseas projects amounted to about 36,000 sq m and RMB3.30 billion respectively. Investment in overseas projects allowed the Group to import excellent overseas products and service philosophy and enhance its brand influence in overseas markets.

In 2016, the Group had 173 new development projects. The GFA attributable to the Company’s equity holding amounted to approximately 18.92 million sq m, while the aggregate GFA amounted to approximately 31.57 million sq m, with 88.3 per cent of the new projects located in first- and second-tier cities. Given the intensified competition in the land market, the Group constantly explored a diversified land acquisition model and obtained land resources at reasonable cost, through cooperation, equity acquisition and development project management. In 2016, approximately 59.5 per cent of the Group’s new projects were obtained through cooperation. With respect to project investment, the Group adhered to the principle of cautiously planning its expenditure by taking into consideration of its cash inflow. In 2016, the Group achieved net cash inflow from operations of RMB39.57 billion. With relatively sufficient capital, the Group was able to respond to market fluctuation in a versatile manner and actively seized potential development opportunities.

The Group is engaged in property services through Vanke Service Co., Ltd. In 2016, the revenue of the Group’s property services business amounted to RMB 4.06 billion, representing a year-on-year increase of 44.9 per cent.

In recent years, the Group has strategically positioned itself as an “integrated urban services provider”, upholding the vision of “building quality housing for ordinary people and developing premises for accommodation”. Through consolidating the edges of its core business, the Group’s development of a new business portfolio, comprising commercial, logistics properties, skiing resort, long-lease apartment, education and elderly services, has begun to take shape. These new businesses are being developed around the Group’s positioning as an integrated urban services provider.

On the front of the commercial property, the Group acquired the equity interests in SCPG Holdings Co., Limited (“SCPG”) in 2016, through a joint acquisition platform established with certain partners. The Group adhered to the strategy of “focusing on major customers and key cities, and emphasizing high-standard warehouse products” for logistics properties to maintain stable and healthy expansion. As of the end of 2016, the Group had obtained 18 logistics property projects, with an aggregate GFA of approximately 1.47 million sq m.

As of the end of 2016, the Group operated and managed three skiing resort projects, namely Jilin Vanke Songhua Lake Project, Qiaoshan Beidahu Project and Beijing Shi Jinglong Project, and established the skiing brand image of Vanke, ranking the first in the country in terms of piste area, snow-making system servicing area and number of ropeways. As at the end of 2016, Vanke Songhua Lake Resort was officially promoted to a national AAAA-rated tourist attraction. In addition, the Group actively explored the long-lease apartment market. The Group has established a uniform external operating brand – “BoYu” - for its long-lease apartments.

”The shareholding issue that began in July 2015 created unprecedented uncertainties to the Company’s operation and management in the short term. The share price of the Company fluctuated substantially and the issue also resulted in uncertainty among certain customers, suppliers, partners, financial institutions and investors. In the face of challenges in internal and external environments, the Group adhered to the principle of “workforce stabilizing, risk control and sustainable development”, leveraged the vital role of business partnership in maintaining stability and pushed forward stable development of the Company’s various businesses,” said Mr Yu Liang, the President of Vanke.

Looking ahead, Mr Yu noted: “In 2017, we will continue to persist with the principle of “building quality housing for ordinary people and developing premises for accommodation” and the business concept of “creating true value with an emphasis on cash flows, with customers as the core”. It will fully realise its strategic positioning of being an “integrated urban services provider” and push forward the commencement of various major works in 2017. ”

In 2017, the Group is expected to realize a floor area of new construction started of 29.24 million sq m of existing projects, representing a decrease of 6.8 per cent as compared with the floor area of actual new construction started in 2016; it is expected to realize a completed floor area of 24.48 million sq m, representing an increase of 9.4 per cent as compared with the actual completed volume in 2016.

In January 2017, Shenzhen Metro Group Co., Ltd. (“SZMC”) acquired a 15.31 per cent shareholding in the Company, by way of transfer agreement, from China Resources Co., Limited and became a substantial shareholder of the Company. Vanke and SZMC will strive to implement the model of “Railway + Property” together, expediting Vanke’s transformation into an integrated urban services provider.

Mr Yu noted: “The fact that SZMC becomes a shareholder of Vanke will create more effective strategic synergies while enabling the two parties to leverage their respective competitive edges. SZMC will support Vanke’s management team to operate and manage the Group according to their established strategic objectives.”

In March 2017, SZMC entered into a strategic cooperation framework agreement with China Evergrande Group (“China Evergrande”). China Evergrande’s subsidiaries will entrust to SZMC the voting rights, proposal rights and rights to attend general meetings (together, the “Specific Shareholder Rights”) of Vanke shares held by them within one year from the effective date of the strategic cooperation framework agreement (the “Valid Period”). Pursuant to the agreement, SZMC will be entitled to exercise a total of 29.38 per cent of the Specific Shareholder Rights of Vanke shares during the Valid Period.

About Vanke

Vanke is one of the largest property developers listed in the PRC. The Company is principally engaged in the property investment in economic centres and cities such as Guangshen Region surrounding the Pearl River Delta, Shanghai Region surrounding the Yangtze River Delta, Beijing Region surrounding the Bohai-Rim Region, and Chengdu Region, which comprises core cities of central and western China. At present, Vanke has penetrated more than 60 cities in the PRC. The Company's A shares became listed on the Shenzhen Stock Exchange since January 1991. Following the Company's B-to-H share conversion, the Company’s H shares have become listed on the Main Board of The Stock Exchange of Hong Kong Limited since 25 June 2014.

(Attached is Vanke’s audited consolidated statement of profit or loss for the year ended 31 December 2016)


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