On behalf of China New City Commercial Development Limited (the "Company") and its subsidiaries (collectively referred as the "Group"), I am pleased to present the results of the Group for the year ended 31 December 2017 ("the year under review").
REVIEW OF RESULTS
For the year under review, the contracted sales revenue of the Group was RMB3,296,300,000, representing an increase of approximately 178% from the year of 2016. The revenue of the Group was approximately RMB295,986,000, gross profit was approximately RMB135,369,000, and proceeds from disposal of investment properties was approximately RMB920,671,000. Profit attributable to equity holders of the Company was approximately RMB488,505,000, representing an increase of 232% when compared with the year of 2016, while basic earnings per share amounted to approximately RMB0.27, increased by 238% over the year of 2016 and recorded net cash inflow. The board of directors does not recommend the payment of final dividend for the year under review (2016:nil).
MARKET AND BUSINESS REVIEW
In 2017, China's economy is booming and residents' spending power is continuously improving. The commercial property of the Company has improved significantly. Driven by the G20 Hanzhou Summit, Hangzhou quickly became the focus of the world with its city influence and brand competitiveness increasingly strengthened. The city cluster on Hangzhou Bay is on the rise and the economic development of the Yangtze River Delta with a strong economy has developed rapidly with industrial structure continuously optimized.
The Group is a commercial property developer and operator committed to developing integrated commercial complexes in the Yangtze River Delta region and other major economy regions. The Group follows the integrated business model of selling and leasing property, strategically decentralizing its income source and return period.
During the year under review, the Group pooled the wisdom and efforts of everyone to overcome difficulties and recorded the best performance in terms of contracted sales and profit since its listing despite the complex market environment. 2017 marked a milestone for the Group's development amidst the stable growth of commerce and real estate as well as a breakthrough development in the culture, tourism, healthcare and other segments.
1. Property Sales
Jia Run Mansion, the serviced apartments of the International Office Center ("IOC") (Plot A3) created successive satisfactory sales results and Xixi New City, the serviced apartments of Xixi parcel was open for sale at the end of the year and quickly achieved remarkable selling, which continued to be the major driver to significantly drive up the property sales income of the Group.
The Jia Run Mansion project is adjacent to the venue of 2016 Group of Twenty (G20) Summit and the stadium of Hangzhou Olympic and International Expo Center, in which the latter will host the 2022 Asian Games, with Qianjiang New Town, the political and cultural center of Hangzhou, just across the river. Thus, it is warmly welcomed by the market due to its favorable geographical location. The Company has developed Plot A2 this year to assure the steady growth of property sales income.
Xixi New City Project is located in the north of Xixi Wetland Park, the tourist attraction of Hangzhou and forms one integrated mass with the park as they are adjacent to each other. The project is in proximity to Hangzhou Future Sci-Tech City（杭州未來科技城）. It is extremely recognized by the market due to its favourable geographical location and perfect surrounding facilities. The Company will continue to develop this project in this year with an aim to achieving the stable increase of the revenue from sales of properties.
For the year under review, the Group strategically disposed of certain investment properties, mainly IOC and Highlong Plaza projects, which not only recorded gain but also generated considerable net cash inflow for the Group.
2. Property Leasing
Currently, the principal property leasing income of the Group is derived from Highlong Plaza and IOC, Hangzhou. In order to consolidate its local influence, the shopping mall portion of the project commenced its assets optimisation programs and commercial portfolio restructuring since April 2016. The occupancy rate of Highlong Plaza reached over 97% after its renovation. With the theme "Happy Moments", the plaza increased commercial elements catered for children, food and beverages, living and services and experience. The Group has successfully launched business invitation for the Zhong An Yin Tai Cheng project located in Yuyao, Ningbo, during the year and commenced operation at the end of 2017, which is expected to rapidly increase the revenue of property leasing segment of the Group in the future.
3. Hotel Operations
As for hotel operations, the hotel Holiday Inn Hangzhou Xiaoshan operated well. Hangzhou Qiandao Lake Bright Resort Hotel, the brand hotel of the Group has officially opened in the first half of 2017 and achieved satisfactory performance during the first half of the year. Huaibei Bright Hotel has been partially completed and commenced operation in the second half of 2017. With the above two brand hotels successively opening, new driver will be injected to the hotel segment of the Group. Benefiting from the obvious growth in terms of leasable guest rooms, it is expected that the hotel segment of the Group will record continual growth of operation revenue.
PRUDENTLY PURCHASE LAND AND REPLENISH LAND RESERVE
The Group implements prudent land purchase strategy and purchases lands with high quality and low cost according to market requirement as and when appropriate while maintaining a sound financial condition, aiming to optimize the local reserve structure.
The total GFA of land reserves of the Group was approximately 2,500,000 square meter ("sq.m.") distributed among six cities and regions of the Yangtze River Delta region.
PROSPECTS AND OUTLOOK AND DEVELOPMENT STRATEGIES
Looking ahead into 2018, with the social stability and the continuous improvement of China's economy and the acceleration of urbanization, per capita income and consumer spending has continually increased, thus the commercial real estate market has great potential. The property market regulation and control policy will adhere to the main principle of "the housing properties are for accommodation but not for speculative trading with shifting from targeted regulation and control featured with one policy for one city to diversified policies for several cities or for one city, and the regulatory mechanism also changing from the short term mechanism represented by "purchase limitation" to the long-term mechanism so as to achieve the stable and healthy development of the real estate market.
As 2017, a growth period when we witnessed a series of property projects completion, ends and 2018 comes, the Group has entered into a period for stable development. The completion and launch of Yuyao Zhong An Times Square in Hangzhou and Yin Tai Cheng project, as well as the successive opening of Qiandao Lake Bright Resort Hotel and Huaibei Bright Hotel, significantly increase our leasable area and the number of leasable guest rooms of the entire property portfolio, providing stable cash flow support to the Group in the long run. In such context, the Group will uphold the synchronous development of traditional and emerging sectors as its development direction. That means the Group will continue to pursue scale development and achieve new industry cultivation and incubation on the basis of strengthening real estate development, small town developments and other traditional sectors, so as to promote the synergetic development of real estate segment and investment segment.
The International Office Center ("IOC") project is still the major development project of the Group. In 2016, G20 Summit was successfully held in Hangzhou, which made Hangzhou becoming a new international focus. Qianjiang Century City（錢江世紀城）, where IOC is located, and Qianjiang New Town（錢江新城）across the river are the new main city centers in Hangzhou. Benefiting from favorable policies, Qianjiang Century City where the project located is under fast construction and development. Hangzhou Olympic Sports Stadium, adjacent to the IOC project, will host international major sports events such as the 2022 Asian Games in future. Benefiting from its strategic layout and cheap cost of land that the Group had acquired in early years, the IOC project enjoys absolute geographical advantage and development potential in this segment. The Group intends to develop Plot A2 of IOC in 2018, which will create sustainable impetus to property sales. The Group plans to explore more lands with low price but high potential in 2018 through mergers and acquisitions.
For new businesses, the Group further adjusts its business model and optimizes its operating structure, achieving an operation model with an aim to satisfy people's demand. The Group will also proactively explore other business opportunities in the field of emerging industries such as recreation and tourism, healthcare, education and culture, movie entertainment and modern agriculture. Meanwhile, the Group has also launched its new child-oriented business model "Happy Moments", on the basis of the traditional business model. The Group will focus on serving children in cities and integrating child health, child education, child entertainment and child sports to build a diversified and intelligentized body of comprehensive functions, with the help of excellent partners around the world and to inject new impetus to the development of the child-related industry.
Last but not the least, on behalf of the Board, I would like to express my sincere gratitude to the continuing support and trust of the shareholders of the Company and business partners as well as the dedicated efforts of all the staff of the Group.
Hong Kong, 22 March 2018