Country Garden's service net profit fell by two percent, and related income accounted for only 2.9%, and the daily income of value-added service charging piles exceeded 100,000

Since its spin-off and listing in 2018, Country Garden Services has experienced very rapid development and was once the "M&A king" of the property management market, but from 2023, it hopes to transform from epitaxial growth to endogenous growth, and precipitate the experience and lessons of the past through post-investment management to transform to high-quality development.

This is the keynote of Country Garden's performance development in 2023 and the guidance for business development in the next few years, Country Garden Service Management said at the results meeting held on March 27.

The senior executives present were Xu Binhuai, Executive Director and President, Huang Peng, Executive President and Chief Financial Officer, Guo Zhanjun, Vice President, in charge of human resources management and market management, Zhang Yanzhi, Vice President and General Manager of the Operation Management Center, and Li Disheng, Vice President and in charge of some community value-added businesses.

They summarized the development of Country Garden Services in 2023 into three key words: one is steady growth, the second is healthy cash flow, and the third is independent development.

According to the financial report, Country Garden Services will achieve revenue of 42.61 billion yuan in 2023, a year-on-year increase of 3%, and the proportion of revenue from third parties will increase to 96.9%, reaching a new high. As of the end of 2023, its total bank deposits and cash amounted to approximately RMB12.939 billion, representing a year-on-year increase of approximately 13.7%.

In terms of spin-off, the revenue of property management services was 24.7 billion yuan, continuing to play a cornerstone role, with a year-on-year increase of about 8.1%, accounting for 58% of the total revenue, while the proportion of non-owner value-added service income decreased to 3.6%, community value-added services accounted for 8.8%, urban services accounted for 11.5%, and "three supplies and one industry" accounted for 15.3%.

Last year, 1,556 new brand expansion projects were signed, with an additional contracted area of 76.06 million square meters and an annualized saturated income of about 3.726 billion yuan.

As of the end of 2023, in addition to the "three supplies and one industry" business, its contract management area is about 1.633 billion square meters, and the charging management area is about 957 million square meters; the contract management area and fee management area of "three supplies and one industry" are 93.4 million square meters and 88.6 million square meters respectively;

This is Xu Binhuai's report card six months after he succeeded Li Changjiang. In October last year, Li Changjiang resigned as executive director, president and authorized representative of the group, and Xu Binhuai, the former chief strategy officer of the group, took over.

Related-party transactions accounted for only 2.9% of the total revenue, and the independence was further enhanced

But there is one key financial indicator that has declined, and that is profit. In 2023, the gross profit will be 8.732 billion yuan, down 14.9%, and the core net profit will be 3.94 billion yuan, down 21.6% year-on-year.

In response to the decline in profits, Country Garden Services warned in December last year that it would carry out a large amount of accounts receivable provision and goodwill impairment. Roughly calculated, the impact range is between 3.2 billion and 4.1 billion yuan, of which the goodwill impairment is 1.476 billion yuan.

Xu Binhuai explained that there are three main factors: first, after August last year, the rules for the recognition of profits have changed, and the management has noticed the impact on "risk merchants", adopted the business lack of risk merchants, and calculated revenue and profits more conservatively;

Second, there was a relatively large decline in joint transactions last year, which did have a negative impact from the perspective of financial reporting, but from the perspective of business independence, market-oriented business accounted for more than 95%, reaching the highest level in the past year.

At the results meeting, the management once again emphasized the independence of Country Garden Services, isolated from its sister company Country Garden Holdings, maintaining the independence of listing, and the proportion of circular and sustainable third-party revenue has increased year by year, from 79.7% in 2018 to 96.9% in 2023.

The total amount of related party transactions in property management services, value-added services for non-property owners, and commercial management services in 2023 will be about 1.23 billion yuan, far below the upper limit of 4.25 billion yuan, less than one-third, accounting for only 2.9% of the total revenue of the year.

According to its management, the upper limit of the related party transaction volume of the above three businesses in 2024 will be 820 million yuan, 710 million yuan in 2025, and 640 million yuan in 2026.

Third, a number of measures have been taken to improve service quality, with an investment of about 400 million yuan in community renewal, and 320 million yuan in scientific research in digitalization, artificial intelligence, and the Internet of Things, both of which are the highest levels in the past few years, and have also affected the gross profit margin.

In addition, in 2024, the investment in community renewal will increase, and the management said that it will exceed 500 million yuan, and the main investment direction is the renovation and improvement of community facilities and equipment, the upgrading of recreation and sports facilities and the intelligent transformation of the community.

"If the accounting treatment of related party transactions and venture merchants is adjusted back, our core revenue growth is 6.3%. In addition, if this income is to be added back, a profit of 500 million will be added. Management noted.

"If the two objective factors of risk merchants and independence are eliminated, our overall gross profit level is still relatively stable. Xu Binhuai emphasized.

Community value-added services have become a "new engine", and the daily income of electric bicycle charging piles has exceeded 100,000

In the face of the decline in the related business of large owners, since Xu Binhuai was promoted to president last year, he began to adjust the business organization of Country Garden Services, build community value-added services into a new engine of growth, and reform the "1+N+X" matrix, achieving revenue of 3.753 billion yuan last year, accounting for about 8.8% of the total revenue.

"1" refers to the community resource-based business, including home service, basic value-added, venue leasing and community insurance, etc., N refers to the market-oriented business, including near-field retail, cleaning and care, integrated marketing, alcohol and battery car charging business, etc., and X is the innovative business, including corporate welfare, alcohol sales and property SaaS business.

This segment of business has become a major focus of this performance meeting, which is mainly reflected in five business segments:

The first is the inbound retail upgraded from the community group buying business. In 2023, Country Garden Services will attract and develop more than 1,470 community leaders and 229 community distribution partners in the three cities of Foshan, Wuhan and Dongguan, and build thousands of community welfare group buying groups, with a total number of customers in the group exceeding 55,000 and achieving an annual operating income of 50 million.

2023 is the first year of the pilot, and nearly 100 stores have been opened in Beijing, Wuhan and Foshan, of which 60% are external franchised stores located outside the Country Garden service management community, achieving an operating income of 18.16 million yuan;

The third is the integrated marketing business upgraded from the community media business, which reached national or regional strategic cooperation with Yanjing, Luzhou Laojiao, Tencent Public Welfare and other companies last year, with an income of more than 50 million;

In the second half of last year, hundreds of tastings and family banquets were held in the four pilot cities of Foshan, Dongguan, Guangzhou and Nantong, and more than 1,500 C-end owner customers and partners were developed, and more than 28 million yuan of income was formed through the on-site sales and repurchase of the group's strategic cooperative products.

Fifth, the electric bicycle charging pile business, after a quarter of complete operation in the fourth quarter of last year, has achieved 8 million revenue. By the end of 2023, 240 cities will be covered, more than 20,000 sets of equipment will be connected, more than one million owners will be registered, and the average daily income will exceed 100,000 yuan.

In the future, Country Garden Service hopes to become a leader in community retail in the field of inbound retail, vigorously develop the goal of direct sales and franchised stores in the laundry business, and become the largest and most professional cleaning and care platform in the country, build the liquor business into the head enterprise of liquor retail in the country, and the electric bicycle charging pile business to become the leading electric bicycle operation platform in the country through the rooting of its own community and the expansion of external communities.

Article source : Sohu Real Estate & Focus Finance