MIDEA REAL ESTATE HOLDING LIMITED Company Profile
Midea Real Estate Holding Limited (the "Company" and together with its subsidiaries, the "Group" or "Midea Real Estate") (Stock Code: 3990) is a listed company of The Stock Exchange of Hong Kong Limited, one of the top 26 listed real estate companies in China, one of top 100 private enterprises in Guangdong Province, and is included in the constituent of seven composite indexes such as Hang Seng Stock Connect Hong Kong Index. Founded in 2004, the Group upholds the development orientation of "Smart Property Manufacturer", and aims to create a better lifestyle by building "5M Smart Health Community" with intelligent, industrialised, digital and high-quality construction and services, leveraging on its profound manufacturing foundation and technological expertise.
Guided by the policy of "intensive development in focused areas and strategy upgrade", Midea Real Estate has established 295 premium projects in five economic regions (data as at 30 June 2020), including the Yangtze River Delta Economic Region ("Yangtze River Delta"), the Pearl River Delta Economic Region ("Pearl River Delta"), the Midstream of Yangtze River Economic Region ("Midstream of Yangtze River"), North China Region and Southwest Economic Region, with presence in national core cities such as Shanghai, Guangzhou, Tianjin, Chongqing, Chengdu, Zhengzhou, and Wuhan, and in provincial capitals such as Hangzhou, Nanjing, Changsha, Hefei, Kunming, Shijiazhuang, Nanchang and Guiyang.
Adhering to real estate development as its core business, Midea Real Estate has formed a business structure of "one principal and two secondary business lines" (一主兩翼), where the main business covers development of boutique residential properties, development and operation of commercial properties, cultural tourism properties, industry and city integration, and property management services. Among them, residential property development and services closely follow the trend of users' demands for smart and healthy living in the technological era of AIoT (Artificial Intelligence of Things). We have created the unique "5M Smart Health Community" strategic product system designed to provide customers with a sophisticated and smart living experience from five dimensions, namely M-Smart,M-Health,M-Quality,M-Service, and M-Life. On the two secondary business lines (兩翼), the Group has developed intelligent industrialisation and building industrialisation, thereby establishing a closed loop of the full value chain from research and development, design, production and construction to management, operation and maintenance, which helps establish our advantages in integrated products and services. Midea Real Estate is recognised as the first National Standard Creation Base for Smart Living (國家智慧居住區標準創制基地), and continuously provides smart and green prefabricated integration solutions to third parties.
Looking forward, Midea Real Estate will continue to consolidate its foundation, innovate and reform, strengthen industrial empowerment, and lead the industry development in a smart and healthy manner, so as to provide the nation with high-quality residence and create better values for a broad range of stakeholders.
Contents | Financial Overview | 2 |
Chairman's Statement | 3 | |
Management Discussion and Analysis | 8 | |
Corporate Governance and Other Information | 23 | |
Report on Review of Interim Financial Information | 30 | |
Interim Condensed Consolidated Statement of Comprehensive Income | 31 | |
Interim Condensed Consolidated Balance Sheet | 32 | |
Interim Condensed Consolidated Statement of Changes in Equity | 34 | |
Interim Condensed Consolidated Statement of Cash Flows | 35 | |
Notes to the Interim Financial Information | 36 | |
Corporate Information | 59 |
Financial Overview
OVERVIEW OF RESULTS
For the Six Months Ended 30 June | |||
2020 | 2019 | Change | |
Revenue (RMB million) | 20,936.6 | 14,194.9 | 47.5% |
Gross profit (RMB million) | 5,523.8 | 5,093.3 | 8.5% |
Net profit (RMB million) | 2,354.2 | 1,888.8 | 24.6% |
Core net profit* (RMB million) | 2,357.0 | 1,889.4 | 24.7% |
Profit attributable to owners of the Company (RMB million) | 2,024.1 | 1,769.4 | 14.4% |
Basic earnings per share (RMB) | 1.64 | 1.49 | 10.1% |
OVERVIEW OF BALANCE SHEET
As at | As at | ||
30 June | 31 December | ||
2020 | 2019 | Change | |
Total assets (RMB million) | 256,037.2 | 249,713.8 | 2.5% |
Total cash and bank deposits (RMB million) | 25,996.4 | 26,935.6 | -3.5% |
Short-term borrowings (RMB million) | 11,508.0 | 9,136.2 | 26.0% |
Long-term borrowings (RMB million) | 44,604.5 | 45,515.5 | -2.0% |
Total equity (RMB million) | 34,689.0 | 31,138.3 | 11.4% |
Total liabilities/total assets | 86.5% | 87.5% | -1.0 |
percentage | |||
points | |||
Gearing ratio | 86.8% | 89.0% | -2.2 |
percentage | |||
points | |||
* Core net profit represents profit excluding the post-tax gains arising from changes in fair value of investment properties.
2 MIDEA REAL ESTATE HOLDING LIMITED
Chairman's Statement
Dear Shareholders:
I am pleased to present to you the interim report of the Group for the six months ended 30 June 2020 (the "Reporting Period").
INTERIM RESULTS
During the Reporting Period, the outbreak of COVID-19 (the "Epidemic") posed a head-on collision to the macro economy and real estate industry. The Group achieved steady operation on the basis of scale layout. With the external environment full of uncertainties and industry competition entering into a deep-water zone, the Group had to concentrate more on building operational quality and its own core competitiveness, firmly adhering to city expansion through penetration and city upgrades, optimising the urban layout structure, accurately controlling the pace of development, strictly controlling asset quality, strengthening the value of its products and services, and building the business evaluation system with ROIC (return on invested capital) at the core, and the effects of our quality growth were starting to show.
During the Reporting Period, the Group achieved performance growth bucking the trend and maintained steady increase in profits, and continued to lower leverage, resulting in an upgrading of its comprehensive capabilities. The Group's revenue amounted to RMB20,936.62 million, representing an increase of 47.5% as compared to the corresponding period of 2019; gross profit amounted to RMB5,523.79 million, representing an increase of 8.5% as compared to the corresponding period of 2019. During the Reporting Period, the core net profit of the Group amounted to RMB2,356.97 million, representing an increase of 24.7% as compared to the corresponding period of 2019. As at 30 June 2020, the gearing ratio was 86.8%, representing a decline of 2.2 percentage points as compared to the end of 2019.
BUSINESS REVIEW FOR THE FIRST HALF OF 2020
- Review of the Real Estate Industry
The Chinese government continued to adhere to "housing is not for speculation" and housing regulations varying by city was more practical. With the emphasis on requiring local governments to shoulder primary responsibility and achieving the goal of stabilising land prices, housing prices, and meeting public expectations, local governments still adhered to the bottom line of policies such as lending curbs and purchase restrictions. Nonetheless, the housing policy became more viable following relaxing of residency policy and issuing of housing purchase subsidies.
The industry's V-shaped reversal had strong resilience and urban differentiation was obvious. The Epidemic caused a greater impact on the real estate market, but after the Epidemic eased, there was a rapid release of the backlog of housing demand. Real estate transactions helped the market recovery from both ends of supply and demand, though there was an intensification of the differentiation between cities. Tier-one,core tier-twoand tier-threecities assumed a relatively rapid recovery, while weak tier-twoand vast tier-threeand tier-fourcities came under significant pressure.
The real estate financing policy remained stable and the overall financing interest rate dropped. The central bank continued to use active monetary policy to maintain reasonable and sufficient liquidity. In the first half of the year, the onshore financial environment was marginally loose, and the overall financing interest rate had dropped.
As premium plots entered the market in a concentrated manner, the land auction market was in high demand.
Under the loose monetary policy, the capital position of some real estate companies improved. This combined with premium plots in hot-spot cities entering the market in a concentrated manner, caused real estate companies to become quite enthusiastic about acquiring land.
INTERIM REPORT 2020 | 3 |
Chairman's Statement (Continued)
(II) Sales Performance
Sales grew against the trend. The Group took the initiative to expand its customer base, and marketing through multiple routes by combining online and offline channels, using scientific method to arrange prompt product supply, and aggressively achieving greater performance, thereby offsetting the impact of the Epidemic on the Group's sales in the first quarter. During the Reporting Period, the contracted sales of the Group and its joint ventures and associates reached approximately RMB48.20 billion, bucking the trend and representing an increase of 2.1% as compared to the corresponding period of 2019, with the ranking increasing by 3 places (data source: CRIC's List of Top 200 Chinese Real Estate Companies by Sales for the first half of 2020); also the contracted sales area reached approximately 4.379 million square metres. Benefiting from the entry of projects in higher-tiered cities and the rapid increase in product capabilities, the average selling price achieved RMB11,008 per square metre, representing an increase of 5.6% as compared to the corresponding period of 2019.
The Yangtze River Delta region posted strong sales growth. In the Yangtze River Delta region, the real estate industry recovered rapidly due to its vast economic hinterland and large market capacity. The Group reaped the returns from its forward- looking layout in the Yangtze River Delta region. During the Reporting Period, the Group's contracted sales in the Yangtze River Delta region was RMB22.41 billion, representing an increase of 37.2% as compared to the corresponding period of 2019.
Dividends from city expansion through penetration were reaped. During the Reporting Period, cities with deep penetration had increasingly contributed to the Group's results. For example, we have penetrated into cities such as Xuzhou and Handan for the past 10 years, which had achieved good sales results in the first half of the year. The customer reputation accumulated over the years had increased the brand premium.
Results from city upgrade strategies were showing. During the Reporting Period, projects in newly-includedhigher-tiered cities had entered the market one after another, gaining market favourability. Benefiting from the strategy of city upgrades in recent years, the proportion of contribution of results from newly-includedhigher-tiered cities such as Hangzhou and Dongguan increased during the Reporting Period, with tier-one/strongtier-two cities accounting for 29%, and tier-two cities accounting for 43%.
(III) Business Layout
During the Reporting Period, the Group responded to market changes, continued to implement the strategies of regional expansion through penetration and city upgrades, adhered to the strategies of determining production and investment based on sales figures, so as to make remarkable achievements in structural adjustment of land reserves and achieve a more rational land reserve layout. As at 30 June 2020, the total gross floor area ("GFA") of the Group's land reserves* reached 54.31 million square metres, comprising 295 property development projects, covering 61 cities in 18 provincial-level administrative divisions across China.
- Properties held by our joint ventures/associates of which the total GFA of the land reserves has been discounted in proportion to ownership percentage.
4 MIDEA REAL ESTATE HOLDING LIMITED
Chairman's Statement (Continued)
(IV) Financial Performance
During the Reporting Period, the Group had continuously reduced its financing costs and improved its rating, actively reduced leverage and improved the efficiency of its financial management, thereby providing sufficient financial support for the Group's steady development.
Financing costs hit a record low, and financing competitiveness was strengthened. During the Reporting Period, Midea Real Estate Group Limited (美的置業集團有限公司) ("Midea Real Estate Group"), a major subsidiary of the Group gained an
- rating as assessed by United Credit Ratings Co., Ltd., the second AAA rating acquired by Midea Real Estate Group. During the Reporting Period, the weighted average effective interest rate of the Group's total borrowings further decreased to 5.52%, of which the weighted average effective interest rate of new borrowings was 5.18%. Midea Real Estate Group seized the window of opportunity in the first half of the year and successfully issued corporate bonds with a coupon rate as low as 4.0%, representing a decrease of 120 basis points as compared to the previous issuance, and setting a record low of the Group's corporate bonds' coupon rate.
Financial resources were ample, and leverage level was further reduced. As at 30 June 2020, the Group had total cash and bank deposits of RMB25,996.45 million, and unused credit facilities from banks of RMB87,410.00 million. As at 30 June 2020, the Group's gearing ratio was 86.8%, representing a decrease of approximately 2.2 percentage points from the end of 2019.
(V) Operational Measures
Starting off the new year, the Group continued to inherit and uphold Midea's manufacturing DNA. Through a series of measures, such as precise investment, refined management, lean operations, product capabilities upgrades, "two secondary business lines" (兩翼) industry empowerment, etc., the Group's operational efficiency, capabilities in products, service and marketing were all effectively improved, which strengthened the model of steady and high-quality growth.
Precise investments and insistence on city expansion through penetration and upgrades. The Group continued to gain further penetration in cities that are in line with its deep penetration strategy and possess development potential, thus obtaining higher brand premiums and profit realisation. During the Reporting Period, the proportion of newly acquired land reserves which were located in tier-twoor above cities reached 85%, which strengthened the results of the Group's strategy of city upgrades, improved the production capacity of a single city, reasonably controlled the total number of cities, and acquired suitable land at the right time, thus maintaining appropriate land reserves.
Lean productions and optimisation of operational leverage. Through standardised management action, dynamic balance management of supply, inventory and sales and effective coordination between large-scaleoperations and large-scaleproduction were achieved. As production was determined by sales, we supplied our products effectively through planning management, and controlled our inventory to sales ratio within a healthy range. We established a full-caliberplanning management system to accurately track the commencement, supply, revenue recognition and delivery status of buildings, and to raise rectification warnings on a timely basis. Inefficient management is reduced and ineffective management is eliminated. Cost adaptation is implemented and the concept of controlling ineffective costs is thoroughly implemented.
Digitisation empowered the entire operation process, effectively enabling refined management. On the basis of progressive achievements, we will continue to speed up digitisation throughout the entire business process, enable management data to be made available online and digitisation of the entire budget, the cost management of the entire cycle of project development and real-timeintegration of business and finance, and one-stopbidding and purchasing business management and services, etc. The online sales centre was firstly launched during the Epidemic, generating almost RMB10 billion in online sales in the first half of the year. The Epidemic management function was rapidly launched to ensure the safety of 80,000 workers back to work and production.
INTERIM REPORT 2020 | 5 |
Chairman's Statement (Continued)
(V) Operational Measures (Continued)
"5M Smart Health Community" maintained leading advantage, improved capabilities in products and services. The Group launched the first AI smart community in association with Alibaba Cloud Computing Co., Ltd., and the Smart Home standard was updated and iterated to version 4.1 from version 4.0 in 2019. As at 30 June 2020, approximately 40,000 sets of Smart Home were delivered in total. Based on sufficient customer research, the Group cooperated with the Architectural Design and Research Institute of Tsinghua University and Antao Design Group to carry out innovative technological research and launched the Midea Healthy Habitat Plan with eight health scenarios to build new lifestyles for future communities. We have completed the integration of our customer relationship system which enhanced and improved our service capabilities.
The accelerated development of the "two secondary business lines" (兩翼) industry. The strategy of carrying out independent research and development together with ecological construction was adopted for intelligent industrialisation and building industrialisation, and the AI smart system of residences in the community was successfully developed. The full implementation of Artificial Intelligence of Things (AIoT) and complete coverage of scenarios in smart dwellings were achieved, and the smart hardware and software ecosystems were improved. The industry and product research institute was established and two factories in the prefabricated industry were put into production to expedite the layout of the ecosystem of prefabricated interior decoration.
BUSINESS OUTLOOK FOR THE SECOND HALF OF 2020
Market Outlook
In the second half of the year, "housing is not for speculation" remains to be the motto, and there is limited space for marginal relaxation. The real estate work forum organised by the central government stressed once again that "housing is not for speculation", and several cities introduced tightening policies on regulation of the real estate market. Under the long-term management mechanism of "implementation of policies according to the city", the local policies on the real estate market are more stable, and the market will continue to maintain stable operational momentum.
Industrial business development will face upgrading, new space will need to be found for city constructions and real estate development. The shortage of land supply in core cities will lead to an upsurge of urban renewals, driving the industry to an era of intensive cultivation of stock. The differentiation of city potential will drive the resources of real estate enterprises to flow towards mainstream cities. The product capitalisation of high-quality projects can be realised to obtain value-added profits only by entering the mainstream market.
Development Strategy and Outlook
The year of 2020 is a year of strategic consolidation of the Group. We will firmly and thoroughly implement operational measures, combined with the opportunity from the increased demands for residential quality in the post-Epidemic era, to strengthen the sorting of our internal business and market research and assessment. We will pursue quality growth as our target, guided by our cash flow and profit, consider customers to be our focus, using our products and services as the basis for competition, and digitalisation as a means, to achieve improvement of quality and efficiency and comprehensively upgrade and maintain our competitiveness.
In the second half of 2020, the Group will study and assess market changes thoroughly, set its investment pace reasonably, comprehensively consider conducting land acquisitions based on the combination of industry cycle, city cycle, city inventory and sustainable development capabilities, and strengthen its efforts to acquire lands for urban renewal projects, to create the competitiveness for city expansion through penetration.
6 MIDEA REAL ESTATE HOLDING LIMITED
Chairman's Statement (Continued)
Development Strategy and Outlook (Continued)
Comprehensively push forward digitalised operations to realise lean management. Digitalisation methods will cover the entire property development process and comprehensive online monitoring will be guided by "profit" and "cash flow" to establish a closed-loopmanagement system based on operating indicators for reserves, construction, supply, sales and inventory.
Build a security system and create system-wide precision quality. Through implementation of standardised management of projects, strategic centralised procurement from suppliers, intelligentisation and informatisation of management tools, and six third- party evaluation systems, a steady increase in our construction quality to produce exceptional products can be achieved.
Focus on intelligence and health, and strengthen the core competitiveness of products. Push forward product upgrades through the dual-dimensionalempowerment of intelligence and health. We will emphasise on investments in smart research and development projects, straighten out management mechanism of M-Smart,put "trendy and popular products" forward according to customers, lifestyle and experience, focus on innovative technologies, reshape the "5M Smart Health Community", and continuously strengthen the core competitiveness of our products.
Focus on service quality and realise the continuous offering of value to customers. We will continue to push forward the upgrading of the integration of our customer relationship system, pay attention to our customer's living experience over the full life cycle, create a smart and healthy lifestyle that can be delivered, return and focus on community services and continue to improve customer satisfaction to realise continuous offering of value to customers.
Appreciation
On behalf of the board of directors of the Company (the "Board" or "Directors"), I would like to take this opportunity to express sincere gratitude to all sectors of the society for your trust and support. In 2020, the Group will continue to improve and create more value for shareholders, investors, partners, customers and the society.
Chairman, Executive Director and President
Hao Hengle
20 August 2020
Hong Kong
INTERIM REPORT 2020 | 7 |
Management Discussion and Analysis
OVERALL PERFORMANCE
During the Reporting Period, the Group recorded a revenue of RMB20,936.62 million (the corresponding period of 2019: RMB14,194.85 million), representing an increase of 47.5% as compared to the corresponding period of 2019. Operating profit amounted to RMB3,393.63 million (the corresponding period of 2019: RMB3,265.69 million), representing an increase of 3.9% as compared to the corresponding period of 2019. Profit for the Reporting Period amounted to RMB2,354.24 million (the corresponding period of 2019: RMB1,888.76 million), representing an increase of 24.6% as compared to the corresponding period of 2019. Core net profit for the Reporting Period increased by 24.7% to RMB2,356.97 million (the corresponding period of 2019: RMB1,889.37 million). Profit attributable to owners of the Company reached RMB2,024.10 million (the corresponding period of 2019: RMB1,769.38 million), representing an increase of 14.4% as compared to the corresponding period of 2019. Basic and diluted earnings per share reached RMB1.64 (the corresponding period of 2019: RMB1.49).
CONTRACTED SALES
During the Reporting Period, the Group and its joint ventures and associates recorded contracted sales of approximately RMB48.20 billion with a contracted sales GFA of approximately 4.379 million square metres. Specifically, the Yangtze River Delta, the Pearl River Delta and other regions accounted for 46.5%, 14.6% and 38.9% of the Group's contracted sales respectively, reflecting the strong operating capabilities of the Group which focuses on the most economically prosperous and dynamic areas in China, the Yangtze River Delta and the Pearl River Delta, while building presence in the Midstream of Yangtze River, North China Region and Southwest Economic Region, which have growth potential and sustained population inflow.
DISTRIBUTION MAP OF CONTRACTED SALES BY PROVINCE
29.7% Jiangsu Province
14.6% Guangdong Province
12.1% Zhejiang Province
8.6% Hunan Province
8.5% Hebei Province
5.3% Jiangxi Province
4.1% Chongqing City
17.1% Others*
- Others: Fujian Province, Anhui Province, Shanghai City, Liaoning Province, Tianjin City, Henan Province, Guizhou Province, Sichuan Province, Yunnan Province and Guangxi Zhuang Autonomous Region
DISTRIBUTION MAP OF CONTRACTED SALES BY REGION
46.5% | Yangtze River Delta Economic Region | |
14.7% | North China Region | |
14.6% | Pearl River Delta Economic Region | |
13.8% | Midstream of Yangtze River Economic Region | |
10.4% | Southwest Economic Region | |
8 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
LAND RESERVES
Overview of Newly-added Land Reserves
During the Reporting Period, the Group strategically replenished its land reserves according to market conditions. We continued to expand towards the central cities and key tier-one and tier-two cities. The total GFA of the newly acquired land reserves* reached 3.99 million square metres, and newly-developed markets included Wenzhou and Luoyang.
List of Newly-added Land Reserves:
Region
Pearl River Delta Economic Region
Yangtze River
Delta Economic
Region
Midstream of
Yangtze River
Economic Region
City
Foshan
City
Yangzhou
City
Wenzhou
City
Quanzhou
City
Jinhua
City
Xuzhou
City
Wuxi
City
Suzhou
City
Zhenjiang
City
Zhuzhou
City
Changde
City
Nanchang
City
Project name
Foshan Chancheng Midea Times Phase 2
(佛山禪城美的時光二期)
Foshan Shunde Beijiao Town West Road Project
(佛山順德北滘環鎮西路項目)
Foshan Gaoming Midea-Helenbergh Cloud Bay*
(佛山高明美的海倫堡雲灣)*
Yangzhou Dawang Temple Project (揚州大王廟項目)
Wenzhou Oujiang Estuary Yanhong Road Project*
(溫州甌江口雁鴻路項目)*
Quanzhou Midea Yunxi Community (泉州美的雲璽台) Quanzhou Zhongnan-Midea Heyue* (泉州中南美的和樾)*
Jinhua Yiwu Fugang Avenue Project
(金華義烏富港大道項目)
Xuzhou Quanshan District Xuefu Road No. 2 Project
(徐州泉山區學府路02項目)
Xuzhou Quanshan District East of Armed Police Detachment
Project* (徐州泉山區武警支隊東項目)*
Wuxi Fangcheng Avenue Project* (無錫紡城大道項目)*
Suzhou Libo Road Project* (蘇州麗波路項目)*
Zhenjiang Elegance of Seasons Phase 2* (鎮江四季風華里二期)*
Zhuzhou Eastern Midea City • Central Park Project
(株洲東部美的城•公園裡項目)
Changde Jinke-Midea Willow Leaf Peace Garden
Phase 3 (常德金科美的柳葉和園三期)
Nanchang Zhenro-Jinmao-Midea Cloud Realm*
(南昌正榮金茂美的雲境)*
Nanchang Lianfa-Midea Yunxi Community*
(南昌聯發美的雲璽台)*
Interest | Land | |
attributable | ||
reserves | ||
to the | ||
(sq.m) | ||
Group** | ||
100% | 74,772.89 | |
100% | 148,119.89 | |
49% | 59,161.58 | |
100% | 433,868.33 | |
50% | 291,597.91 | |
100% | 195,818.70 | |
40% | 84,509.78 | |
100% | 259,455.31 | |
100% | 41,049.44 | |
50% | 152,092.46 | |
50% | 136,507.26 | |
33% | 35,764.01 | |
34% | 12,654.14 | |
100% | 294,559.11 | |
50% | 65,296.69 | |
33% | 59,886.12 | |
49% | 77,746.50 | |
- Properties held by our joint ventures/associates of which the total GFA of the land reserves has been discounted in proportion to ownership percentage.
INTERIM REPORT 2020 | 9 |
Management Discussion and Analysis (Continued)
Interest | Land | |||||||
attributable | ||||||||
Region | City Project name | reserves | ||||||
to the | ||||||||
(sq.m) | ||||||||
Group** | ||||||||
Shenyang | Shenyang Wanghua North Street Project (沈陽望花北街項目) | 100% | 136,505.14 | |||||
Shenyang Broad Aluminium Industry Project (沈陽遠大鋁業項目) | 51% | 270,995.40 | ||||||
North China | City | |||||||
Shenyang Yuhong Pingluo Bay Project (沈陽於洪平羅灣項目) | 100% | 362,290.15 | ||||||
Region | ||||||||
Luoyang | Luoyang Midea-Haode Yunxi Mansion (洛陽美的•浩德雲熙府) | 40% | 210,618.20 | |||||
City | ||||||||
Southwest | Guiyang | Guiyang Midea Elegance of Jingyue (貴陽美的璟悅風華) | 100% | 530,585.50 | ||||
Guiyang Midea Lincheng Times North • Light of Digital | ||||||||
Economic Region | City | 100% | 60,252.44 | |||||
(貴陽美的林城時代北側數字之光) | ||||||||
- Properties held by our joint ventures/associates of which the land reserves GFA has been discounted in proportion to ownership percentage.
- "Interest attributable to the Group" refers to the equity interest held by the Group in each project company as at 30 June 2020, and the ownership structures of some projects may be further adjusted according to the cooperation agreements in the future.
Land Reserves
As at 30 June 2020, the Group had a total of 295 property development projects and 67 of these projects were participated through joint ventures and associates, covering 61 cities in 18 provincial-level administrative divisions across China, and had a total GFA of land reserves of 54.31 million square metres.
DISTRIBUTION MAP OF LAND RESERVES BY PROVINCE
18.8% | Guangdong Province | 2.9% | Fujian Province | ||||||||||
16.5% | Jiangsu Province | 2.8% | Chongqing City | ||||||||||
16.2% | Hunan Province | 2.6% | Guangxi Zhuang | ||||||||||
10.3% | Hebei Province | Autonomous Region | |||||||||||
2.3% | Sichuan Province | ||||||||||||
7.5% | Guizhou Province | ||||||||||||
1.8% | Hubei Province | ||||||||||||
5.8% | Zhejiang Province | ||||||||||||
1.3% | Anhui Province | ||||||||||||
4.8% | Jiangxi Province | ||||||||||||
3.0% | Others* | ||||||||||||
3.4% | Liaoning Province | ||||||||||||
REGIONAL DISTRIBUTION MAP BY PROJECT STATUS | |||||||||||||
Pearl River Delta Economic Region | |||||||||||||
7.5% | 8.6% | 2.8% | |||||||||||
Yangtze River Delta Economic Region | |||||||||||||
8.3% | 17.7% | 1.0% | Land for future development | ||||||||||
Midstream of Yangtze River Economic Region | Properties under construction | ||||||||||||
8.3% | 14.1% | 0.4% | Completed properties | ||||||||||
North China Region | |||||||||||||
4.3% | 10.6% | 0.4% | |||||||||||
Southwest Economic Region | |||||||||||||
6.7% | 8.4% | 0.9% | |||||||||||
- Others: Henan Province, Yunnan Province, Tianjin City and Shanghai City.
10 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
LAND RESERVES BY CITY (AS AT 30 JUNE 2020)
Properties developed by our subsidiaries
Completed | ||||||
Available for | ||||||
Sale and | Planned GFA | |||||
Rentable | GFA Under | for Future | Land | |||
Number | GFA | Development | Development | Reserves | ||
Region | City | of projects | (square metre) | (square metre) | (square metre) | (square metre) |
Foshan City | 31 | 1,042,546 | 1,458,010 | 1,635,543 | 4,136,099 | |
Yangjiang City | 2 | 117,928 | 270,734 | 1,005,882 | 1,394,544 | |
Maoming City | 2 | 308,567 | 699,919 | 1,008,486 | ||
Heyuan City | 2 | 492,822 | 313,320 | 806,142 | ||
Pearl River Delta | Zhaoqing City | 5 | 88,923 | 454,462 | 92,371 | 635,756 |
Economic Region | Jiangmen City | 4 | 20,056 | 399,202 | 419,258 | |
Huizhou City | 2 | 379,766 | 379,766 | |||
Guangzhou City | 1 | 112,875 | 20,791 | 133,666 | ||
Zhongshan City | 3 | 93,310 | 93,310 | |||
Shenzhen City | 1 | 636 | 636 | |||
Subtotal | 53 | 1,363,399 | 3,876,438 | 3,767,826 | 9,007,663 | |
Xuzhou City | 16 | 153,020 | 2,193,378 | 882,187 | 3,228,585 | |
Ningbo City | 10 | 156,556 | 881,073 | 333,464 | 1,371,093 | |
Quanzhou City | 4 | 348,086 | 864,863 | 1,212,949 | ||
Yangzhou City | 4 | 6,223 | 389,972 | 734,680 | 1,130,875 | |
Zhenjiang City | 5 | 59,630 | 759,698 | 254,661 | 1,073,989 | |
Wuxi City | 5 | 2,772 | 841,729 | 117,834 | 962,335 | |
Jinhua City | 6 | 38,724 | 485,729 | 259,455 | 783,908 | |
Yangtze River Delta | Changzhou City | 4 | 675,778 | 675,778 | ||
Suzhou City | 3 | 642,523 | 642,523 | |||
Economic Region | ||||||
Taizhou City | 2 | 369,658 | 369,658 | |||
Fuyang City | 1 | 242,401 | 83,883 | 326,284 | ||
Hangzhou City | 1 | 183,948 | 72,055 | 256,003 | ||
Hefei City | 2 | 23,170 | 233,844 | 257,014 | ||
Shanghai City | 2 | 220,446 | 220,446 | |||
Taizhou City | 1 | 168,369 | 168,369 | |||
Zhoushan City | 1 | 95,489 | 95,489 | |||
Nanjing City | 1 | 44,814 | 44,814 | |||
Subtotal | 68 | 484,909 | 8,732,121 | 3,603,082 | 12,820,112 | |
INTERIM REPORT 2020 | 11 |
Management Discussion and Analysis (Continued)
Completed | ||||||
Available for | ||||||
Sale and | Planned GFA | |||||
Rentable | GFA Under | for Future | Land | |||
Number | GFA | Development | Development | Reserves | ||
Region | City | of projects | (square metre) | (square metre) | (square metre) | (square metre) |
Zhuzhou City | 11 | 101,195 | 1,113,801 | 821,888 | 2,036,884 | |
Changsha City | 8 | 1,399,515 | 529,158 | 1,928,673 | ||
Xiangtan City | 3 | 6,050 | 386,818 | 953,164 | 1,346,032 | |
Wuhan City | 2 | 452,847 | 521,846 | 974,693 | ||
Midstream of | Chenzhou City | 2 | 595,571 | 353,333 | 948,904 | |
Yueyang City | 3 | 8,335 | 703,601 | 163,617 | 875,553 | |
Yangtze River | ||||||
Ganzhou City | 2 | 619,818 | 222,327 | 842,145 | ||
Economic Region | ||||||
Hengyang City | 3 | 416,827 | 384,163 | 800,990 | ||
Shangrao City | 3 | 48,643 | 585,144 | 633,787 | ||
Jiujiang City | 2 | 1,488 | 374,299 | 375,787 | ||
Changde City | 1 | 182,524 | 170,314 | 352,838 | ||
Nanchang City | 2 | 35,294 | 141,395 | 53,541 | 230,230 | |
Subtotal | 42 | 201,005 | 6,972,160 | 4,173,351 | 11,346,516 | |
Handan City | 15 | 119,111 | 2,788,551 | 679,725 | 3,587,387 | |
Shenyang City | 10 | 12,597 | 874,194 | 927,133 | 1,813,924 | |
Xingtai City | 6 | 653,350 | 351,291 | 1,004,641 | ||
North China | Zhengzhou City | 1 | 213,571 | 213,571 | ||
Region | Luoyang City | 1 | 210,618 | 210,618 | ||
Kaifeng City | 1 | 183,304 | 183,304 | |||
Tianjin City | 1 | 98,981 | 98,981 | |||
Shijiazhuang City | 1 | 12,667 | 12,667 | |||
Subtotal | 36 | 144,375 | 4,811,951 | 2,168,767 | 7,125,093 | |
Guiyang City | 7 | 272,672 | 900,318 | 1,293,057 | 2,466,047 | |
Zunyi City | 6 | 90,959 | 1,084,318 | 317,936 | 1,493,213 | |
Chongqing City | 4 | 20,627 | 649,638 | 422,629 | 1,092,894 | |
Wuzhou City | 1 | 303,688 | 766,223 | 1,069,911 | ||
Southwest | Chengdu City | 3 | 478,970 | 203,693 | 682,663 | |
Leshan City | 1 | 202,666 | 115,164 | 317,830 | ||
Economic Region | ||||||
Kunming City | 1 | 44,150 | 251,892 | 296,042 | ||
Meishan City | 2 | 112,123 | 88,700 | 200,823 | ||
Nanning City | 2 | 193,226 | 193,226 | |||
Liuzhou City | 1 | 94,194 | 94,194 | |||
Dali City | 1 | 79,561 | 70,352 | 149,913 | ||
Subtotal | 29 | 428,408 | 4,350,594 | 3,277,754 | 8,056,756 | |
12 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
Properties held by our joint ventures/associates
Completed | |||||||
Available for | Planned GFA | ||||||
Sale and | GFA Under | for Future | |||||
Number of | Rentable GFA | Development | Development | Land Reserves | |||
Region | City | Projects | (square metre) | (square metre) | (square metre) | (square metre) | |
Foshan City | 8 | 119,722 | 472,164 | 267,296 | 859,182 | ||
Pearl River Delta | Jiangmen City | 3 | 17,364 | 128,647 | 20,362 | 166,373 | |
Economic Region | Guangzhou City | 2 | 90,314 | 23,411 | 113,725 | ||
Dongguan City | 1 | 82,862 | 82,862 | ||||
Sub-total | 14 | 137,086 | 773,987 | 311,069 | 1,222,142 | ||
Wenzhou City | 1 | 291,598 | 291,598 | ||||
Changzhou City | 2 | 204,193 | 77,475 | 281,668 | |||
Xuzhou City | 3 | 49 | 48,095 | 176,327 | 224,471 | ||
Nanjing City | 4 | 118,654 | 64,569 | 183,223 | |||
Wuxi City | 2 | 19,112 | 136,507 | 155,619 | |||
Yangtze River Delta | Hefei City | 1 | 149,666 | 149,666 | |||
Hangzhou City | 1 | 129,783 | 129,783 | ||||
Economic Region | |||||||
Suzhou City | 4 | 26,663 | 34,182 | 35,764 | 96,609 | ||
Zhoushan City | 1 | 84,649 | 84,649 | ||||
Quanzhou City | 1 | 84,510 | 84,510 | ||||
Nantong City | 1 | 59,396 | 59,396 | ||||
Zhenjiang City | 2 | 31,326 | 12,654 | 43,980 | |||
Jinhua City | 1 | 16,872 | 21,197 | 38,069 | |||
Sub-total | 24 | 62,696 | 881,141 | 879,404 | 1,823,241 | ||
Nanchang City | 5 | 278,354 | 137,633 | 415,987 | |||
Midstream of Yangtze River Economic | Changsha City | 2 | 211,831 | 44,939 | 256,770 | ||
Yueyang City | 1 | 129,074 | 129,074 | ||||
Region | |||||||
Jiujiang City | 2 | 3,624 | 124,595 | 128,219 | |||
Changde City | 1 | 22,544 | 81,051 | 103,595 | |||
Sub-total | 11 | 26,168 | 695,831 | 311,646 | 1,033,645 | ||
Handan City | 6 | 67,801 | 841,789 | 50,315 | 959,905 | ||
North China Region | Tianjin City | 1 | 89,620 | 103,916 | 193,536 | ||
Xingtai City | 1 | 40,970 | 40,970 | ||||
Sub-total | 8 | 67,801 | 972,379 | 154,231 | 1,194,411 | ||
Chongqing City | 6 | 68,892 | 148,944 | 218,284 | 436,120 | ||
Zunyi City | 1 | 98,478 | 98,478 | ||||
Southwest Economic Region | Dali City | 1 | 69,929 | 69,929 | |||
Nanning City | 1 | 46,296 | 46,296 | ||||
Chengdu City | 1 | 29,637 | 29,637 | ||||
Sub-total | 10 | 68,892 | 224,877 | 386,691 | 680,460 | ||
Total | 295 | 2,984,739 | 32,291,479 | 19,033,821 | 54,310,039 | ||
INTERIM REPORT 2020 | 13 |
Management Discussion and Analysis (Continued)
PROPERTIES DISTRIBUTION MAP
5
Core Economic
Regions
61
Cities
- Including 67 projects that are involved through joint ventures and associates.
295
Boutique
Projects*
14 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
7 | 10 |
Sichuan | |
Chongqing | |
14
Guizhou
3
Yunnan5
Guangxi
10
Liaoning
2
Tianjin
29
Hebei
3 | 57 | |
Henan | ||
Jiangsu | ||
4 | 2 | |
Shanghai | ||
2 | Anhui | |
Hubei | 23 | |
Zhejiang |
16
35 Jiangxi
Hunan
6
Fujian
67
Guangdong
INTERIM REPORT 2020 | 15 |
Management Discussion and Analysis (Continued)
INDUSTRIAL BUSINESS DEVELOPMENT
Prefabricated Construction
In the first half of 2020, Midea Real Estate received over 80,000 cubic metres of PC component orders in the field of prefabricated construction which gradually ramped up the production capacity of its factories in Xuzhou and Handan. We have launched four information systems, including MHR, ERP, SRM and MEC, with different system scenarios based on different business demands to promote efficient information construction, and to enhance project internal management to ensure orders will be delivered with high quality and on a timely manner. In addition, we have also gradually established a quality control mechanism in the factory to strengthen product quality control through the promotion and implementation of quality evaluation system and safeguard for quality control system.
In January 2020, the first PC component for Green Construction Technology Park Project (綠建科技產業園項目) of Handan Liancheng Housing Industrialisation Technology Co., Ltd. (邯鄲聯城住工科技有限公司) was successfully produced, marking the second prefabricated construction production base of Midea Real Estate which was smoothly put into operation for production, and facilitated the development of prefabricated construction industry in the Beijing-Tianjin-Hebei Region.
In terms of research and development and innovation, Midea Real Estate had increased its investment in the field of prefabricated construction. As of the first half of 2020, over 200 patents related to prefabricated construction were obtained.
In May 2020, Guangdong Tianyuan Architectural Design Co., Ltd. (天元建築設計有限公司) ("Tianyuan Design Company"), a subsidiary of Midea Real Estate, was successfully enlisted as "base for the Guangdong prefabricated construction (design) industry". Driven by the development in transformation of prefabricated construction, Tianyuan Design Company integrated the original BIM design centre to establish a digital construction innovation centre. With prefabricated construction and BIM and CIM technology, it can provide design and technology consultation services for the whole process ranging from design planning, construction plan, division of construction drawing and component detail drawing to guidance for on-site installation. Currently, the research and development of prefabricated construction and BIM and CIM technology has been applied to several projects.
Assembled Sanitary Ware
With development achieved in the first half of the year, Guangdong Ruizhu Youka Technology Co., Ltd. (廣東睿住優卡科技有限公司) ("Ruizhu Youka") , in which the Group holds interests, made remarkable improvement in the standardisation of operation management, planning for product series, operation and testing for production equipment, standardisation of warehouse management, standardisation of construction and installation management, and value chain system of production, sales and supply, and gradually increased its production capacity.
In May 2020, 690 sets of assembled sanitary ware products that Ruizhu Youka undertook for Foshan Shunde Midea Wealth Centre project (佛山順德美的財富中心項目) were installed on-site, and it was the first sizable physical project of Ruizhu Youka.
In June 2020, Ruizhu Youka entered into an order agreement for 6,900 sets of products with Guangzhou Zengcheng Vanke City project (廣州增城萬科城項目). It was the first order with large quantity that Ruizhu Youka received, signifying a solid step that Ruizhu Youka took in its application in the real estate industry.
16 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
Smart Home
In the first half of 2020, Guangdong Ruizhu Technology Co., Ltd. (廣東睿住科技有限公司) ("Ruizhu Technology") followed the Group's strategy of "one principal and two secondary business lines" (一主兩翼) to promote the implementation of "smart industrialisation" and empower the real estate industry for smart upgrading.
In March 2020, Midea Real Estate held online news conference for the implementation of AI smart community, announcing that the first AI community with "community brain functions" was rolled out in the Foshan Midea Elite Residence (佛山美的領賢公館). After continuous exploration over the past half year, the concept of "community brain" was achieved with 10 Black Technologies in the AI community, including intelligent non-inductive passage, cloud community App, AI Eye, AI identification of non-mask wearers, AI special watch and warning, environmental health monitoring and surveillance, key area occupation surveillance, local intrusion detection, intelligent video-based night patrol and IOC monitoring control centre. With "2+2+1" as its core, Midea Real Estate created a "cloud-edge-end" smart community AI solution to successfully build an AI smart community and transformed system intelligence to space intelligence and cognition intelligence, thus providing property owners with a greater and better intelligence experience.
In terms of smart community, Cloud Neighbourhood Community 3.0 App and Cloud Neighbourhood Manager App were developed, went live and were promoted nationwide. Currently, promotion was finished for 101 projects, and more than 50,000 property owners upgraded to the latest App.
As the smart home implementation service platform, Guangdong Ruizhu Intelligence Technology Co., Ltd. (廣東睿住智能科技有限 公司) promoted smart home and delivered over 40,000 sets. In terms of expansion of external market, the Group won the bid for Foshan SUNAC Rongbin Huafu (佛山融創融濱華府) smart home project, Foshan Dongjian Pujun community (佛山東建普君社區) intelligent project, Langfang Wen'an AVIC Residence (廊坊文安中航公館) smart community project and several other smart home and smart community benchmark projects in the first half of 2020.
INVESTMENT AND OPERATION OF COMMERCIAL PROPERTIES
While enhancing our capabilities in operating commercial properties and improving our commercial brand system, we had launched three product lines - urban complexes, community neighbourhood commerce and long-term rental apartments to meet the needs of different cities and customers. Foshan Wonderful Apartment (佛山悅然寓), the first long-term rental project built by the Group, was released to the market on 15 June 2020, signifying the full implementation of the three major product lines of "Wonderful ("悅然") Series".
On 1 August 2020, Zhenjiang Midea Wonderful Square opened for business, and the existing commercial properties in operation increased to 5 projects, including Foshan Midea Wonderful Square, Foshan Midea Wonderful Street (formerly known as Foshan Midea Xinduhui Mall), Zhuzhou Midea Times Square in Hunan, Xuzhou Midea Square in Jiangsu and Zhenjiang Midea Wonderful Square, with the areas in operation and management exceeding 300,000 square metres. It is expected that Handan Midea Wonderful Square, Guiyang Midea Wonderful Square, Guiyang Midea Wonderful Street and Foshan Midea Wonderful Future City will be put into operation successively in the year of 2021 to 2023. We will make the cities more charming with our forward-looking planning, strong investment strength, innovative operation ability and smart commercial complexes with vigorous vitality.
INTERIM REPORT 2020 | 17 |
Management Discussion and Analysis (Continued)
PROPERTY MANAGEMENT
Our property management team continued to practice the service concept of "Caring Everywhere" and focus on providing owners with quality property management services in the first half of 2020. When we were struck by COVID-19 pandemic at the beginning of 2020, our property management team made active effort to undertake the mission to fight against the pandemic by applying AI system's non-contact service approach, and taking various measures to build up the last line of defense for our property owners. We also kept up with the application of new technologies such as the Internet, the Internet of Things and big data, and constantly researched on new service models in the industry to address the needs and pain points of property owners based on the nature of services. In June 2020, our Cloud Neighbourhood Community 3.0 APP went live. It is a mobile application that we designed to serve the property owners, and strive to provide property owners with comprehensive and one-stop smart community and smart home life solution.
FINANCIAL REVIEW
Revenue
Property Development and Sales
During the Reporting Period, the Group's recognised revenue from property development and sales increased by 47.9% to RMB20,533.53 million from RMB13,884.15 million in the corresponding period of 2019, primarily due to the increase in the total GFA recognised. Total GFA recognised amounted to 2.3683 million square metres, representing an increase of 52.8% from 1.5500 million square metres in the corresponding period of 2019.
Property Management Services
During the Reporting Period, the Group's revenue derived from property management services increased by 61.5% to RMB346.45 million from RMB214.47 million in the corresponding period of 2019, primarily due to an increase in the GFA of the property under contract management.
Investment and Operation of Commercial Properties
During the Reporting Period, the Group's revenue from investment and operation of commercial properties decreased by 41.1% to RMB56.64 million from RMB96.23 million in the corresponding period of 2019. The decrease was due to the impact of the Epidemic on the cultural-tourism projects.
Cost of Sales
The Group's cost of sales primarily represents the costs incurred directly from the property development activities, the provision of property management services and other businesses. During the Reporting Period, the Group's cost of sales increased by 69.3% to RMB15,412.83 million from RMB9,101.51 million in the corresponding period of 2019, primarily due to the increase in recognised GFA of 52.8% to 2.3683 million square metres from the corresponding period of 2019.
Gross Profit
During the Reporting Period, the Group's gross profit increased by 8.5% to RMB5,523.79 million from RMB5,093.34 million in the corresponding period of 2019. The increase in gross profit was primarily driven by the increase in sales revenue.
Other Income and Gains - Net
During the Reporting Period, the Group's other income and gains - net increased by 52.6% to RMB413.16 million from RMB270.81 million in the corresponding period of 2019. The Group's other income and gains primarily consists of management and consulting service income, realised and unrealised gains on financial assets at fair value through profit or loss, government subsidy income, compensation income, etc.
18 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
Selling and Marketing Expenses
During the Reporting Period, the Group's selling and marketing expenses increased by 20.5% to RMB1,259.50 million from RMB1,045.47 million in the corresponding period of 2019, primarily due to the increase of marketing and advertising to promote sales in response to the poor market conditions caused by Epidemic.
Administrative Expenses
During the Reporting Period, the Group's administrative expenses increased by 22.5% to RMB1,262.96 million from RMB1,030.66 million in the corresponding period of 2019, primarily due to the increase in staff costs caused by the continuing expansion of the Group's property development business, and impairment provision for those property development projects subject to impairment risks.
Finance Income - Net
The Group's net finance income primarily consists of interest expenses for bank loans, other borrowings, issued domestic corporate bonds and lease liability net of capitalised interest relating to properties under construction, interest income from bank deposits, as well as foreign exchange gains and losses arising from financing activities. The general and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (assets that necessarily take a substantial period of time to get ready for their intended use or sale) are capitalised into the cost of those assets, until such assets are substantially ready for their intended use or sale.
During the Reporting Period, the Group's net finance income recorded a net gain of RMB119.51 million as compared with RMB82.07 million in the corresponding period of 2019, representing an increase of 45.6%, primarily due to an increase in interest income from RMB92.69 million in the corresponding period of 2019 to RMB160.18 million during the Reporting Period.
Profit Attributable to Owners of the Company
During the Reporting Period, profit attributable to owners of the Company increased by 14.4% to RMB2,024.10 million from RMB1,769.38 million in the corresponding period of 2019.
LIQUIDITY AND CAPITAL RESOURCES
Cash Position and Available Funds
The Group's total cash and bank deposits reached RMB25,996.45 million as at 30 June 2020 (31 December 2019: RMB26,935.62 million),
including RMB19,913.19 million in cash and cash equivalents (31 December 2019: RMB19,097.27 million), nil in term deposits with
initial terms of over three months (31 December 2019: RMB141.16 million) and RMB6,083.26 million in restricted cash (31 December
2019: RMB7,697.19 million). Several property development companies of the Group are required to deposit certain amounts of pre-sale proceeds at designated bank accounts as guarantee deposits for the construction of related properties. As at 30 June 2020, the Group's unused credit facilities from banks were RMB87,410.00 million.
Borrowings and Gearing Ratio
As at 30 June 2020, the Group's total borrowings amounted to RMB56,112.50 million. Bank and other borrowings, and corporate bonds were RMB44,146.11 million and RMB11,966.39 million, respectively. As at 30 June 2020, the gearing ratio was 86.8% (31 December 2019: 89.0%). The gearing ratio is calculated based on net borrowings divided by total equity. Net borrowings were calculated as total amount of borrowings less cash and cash equivalents, term deposits with initial terms of over three months and restricted cash. Details of the Group's borrowings as at 30 June 2020 are set out in note 22 to the consolidated financial statements.
INTERIM REPORT 2020 | 19 |
Management Discussion and Analysis (Continued)
Borrowing Cost
During the Reporting Period, the total borrowing costs of the Group amounted to RMB1,624.44 million, representing a decrease of RMB63.66 million from RMB1,688.10 million for the corresponding period of 2019, mainly due to the decrease of weighted average effective interest of the Group's total borrowings during the Reporting Period to 5.52% from 5.95% in the same period of last year.
Contingent Liabilities and Guarantees
The Group provides mortgage guarantees to banks in respect of the mortgage loans they provided to our customers in order to secure the repayment obligations of such customers. The mortgage guarantees were issued from the date of grant of the relevant mortgage loans, and released upon the earlier of (i) issuance of the real estate ownership certificate which are generally available within three months after the purchasers take possession of the relevant properties; and (ii) the satisfaction of mortgaged loans by the purchasers of the properties. Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, we are responsible to repay the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and we are entitled to retain the legal title and take over the possession of the related properties. If we fail to do so, the mortgagee banks will auction the underlying property and recover the balance from us if the outstanding loan amount exceeds the net foreclosure sale proceeds. In line with industry practice, we do not conduct independent credit checks on our customers but rely on the credit checks conducted by the mortgagee banks. As at 30 June 2020, the value of the Group's guarantee in respect of mortgage facilities for certain purchasers amounted to RMB70,465.42 million (31 December 2019: RMB62,687.03 million).
In addition, the Group also provides guarantees for borrowings of several joint ventures and associates. As at 30 June 2020, the value of the Group's guarantee for the loans of joint ventures and associates amounted to RMB9,547.39 million (31 December 2019: RMB6,991.18 million). Details of the Group's mortgage guarantees as at 30 June 2020 are set out in note 15 and note 22 to the consolidated financial statements.
Interest Rate Risk
The Group's interest rate risk arises from interest-bearing bank deposits, corporate bonds, bank and other borrowings. Bank deposits, bank and other borrowings issued at variable rates expose the Group to cash flow interest rate risk. Corporate bonds, bank and other borrowings issued at fixed rates expose the Group to fair value interest rate risk.
Currency Risk
The Group's businesses are mainly conducted in RMB and most of its assets are denominated in RMB. Non-RMB assets and liabilities are mainly bank deposits and borrowings denominated in Hong Kong dollars and US dollars. The Group is subject to certain foreign exchange risks arising from future commercial transactions and recognised assets and liabilities which are denominated in Hong Kong dollars and US dollars.
LEGAL CONTINGENCIES
The Group may be involved in litigations and other legal proceedings in its ordinary course of business from time to time. The Group believes that the liabilities arising from these legal proceedings will not have a material adverse effect on our business, financial condition or results of operations.
HUMAN RESOURCES
As at 30 June 2020, the Group had employed approximately 14,200 full time employees, most of whom were based in the PRC. Employee's remuneration includes salaries, bonuses and other cash subsidies. The remuneration and bonuses of the employees are determined based on the Group's remuneration and welfare policies, the performance of the employees, the profitability of the Group and market level. The Group will also provide employees with comprehensive welfare plans and career development opportunities, including social insurances, housing provident funds, commercial insurance as well as internal and external training opportunities.
20 MIDEA REAL ESTATE HOLDING LIMITED
Management Discussion and Analysis (Continued)
SIGNIFICANT INVESTMENTS HELD, MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS
During the Reporting Period, there were no other significant investments held, and no material acquisitions or disposals of subsidiaries, associates and joint ventures, nor was there any plan authorised by the Board for other material investments or additions of capital assets at the date of this interim report.
CHANGES SINCE 31 DECEMBER 2019
Save as disclosed in this report, there were no other significant changes in the Group's financial position or from the information disclosed under the section headed "Management Discussion and Analysis" in the Group's annual report for the year ended 31 December 2019.
SUBSEQUENT EVENTS
On 14 July 2020, Midea Real Estate Group publicly issued the third tranche of domestic corporate bonds in an aggregate sum of RMB1 billion to qualified investors in China with a coupon rate of 4.10% per annum for a term of 4 years or 4.18% per annum for a term of 5 years, which will mature in July 2024 and July 2025 respectively (the "2020 Public Issuance of Domestic Corporate Bonds (Third Tranche)"). Midea Real Estate Group has an option to adjust the coupon rate at the end of (in the case of the 4-year corporate bonds) the second year or (in the case of the 5-year corporate bonds) the third year, and investors are entitled to sell back. For further details about the 2020 Public Issuance of Domestic Corporate Bonds (Third Tranche), please refer to the Company's announcements dated 9 July 2020 and 13 July 2020.
On 3 August 2020, Midea Construction (Hong Kong) Limited, an indirectly wholly-owned subsidiary of the Company (as borrower), the Company (as listing guarantor) and certain of its subsidiaries incorporated outside the PRC (as original guarantors) entered into a facility agreement with certain financial institutions (as lenders) for a dual tranche transferrable term loan facility denominated in HKD and USD in an initial amount of HKD1,050 million and USD60 million respectively, which may be subsequently increased up to HKD1,170 million or its US dollars equivalent (exclusive of the said initial amount). The final repayment date of the loan(s) shall be the date falling 36 months after the first withdrawal date.
INTERIM REPORT 2020 | 21 |
Management Discussion and Analysis (Continued)
USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING
Trading of shares in the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") commenced on 11 October 2018, and the Company raised net proceeds of approximately RMB2,786.87 million (including the exercise of the over-allotment option), after deducting the underwriting commission and other expenses in connection with the initial public offering ("IPO").
As at 30 June 2020, an analysis of the utilisation of IPO proceeds of the Company is as follows:
Original | ||||
allocation of | ||||
IPO proceeds | Expected | |||
(including the | timeline | |||
exercise of the | Utilised IPO | Unutilised IPO | for the use | |
over-allotment | proceeds as at | proceeds as at | of unutilised | |
option) | 30 June 2020 | 30 June 2020 | IPO proceeds | |
RMB million | RMB million | RMB million | ||
Land acquisition or mergers and | ||||
acquisitions to increase land reserves | 1,950.81 | 749.09 | 1,201.72 | On or before |
(Note 1) | 31 December | |||
2020 | ||||
Land acquisition and construction for | ||||
prefabricated construction projects | 418.03 | 418.03 | - | - |
Research and development of | ||||
Smart Home solutions | 139.34 | 139.34 | - | - |
General working capital | 278.69 | 278.69 | - | - |
Total | 2,786.87 | 1,585.15 | 1,201.72 | |
Note:
1. The outbreak of the novel coronavirus has affected the business and economic activities of the Group in the first half of 2020 to some extent. The Company predicts that the real estate market of core cities is expected to rebound in the second half of 2020 and has been constantly evaluating targets and potential opportunities for expanding its land reserves through the public land auction market in Changzhou (常州), Wuxi (無鍚) and Jiujiang (九江), the PRC with potential investments in an estimated aggregate sum of RMB1,534.42 million to be funded by the unutilised IPO proceeds and other funding resources of the Group in the third quarter of 2020. It is also expected that an estimated aggregate sum of RMB488.22 million will be used for development in Yangzhou (揚州) and Xuzhou (徐州), the PRC in the fourth quarter of 2020. However, the implementation of these projects may vary due to the high competition in the auction or the demand on the local real estate market.
The Company intends to apply the remaining proceeds in the manner set out in the Company's prospectus dated 28 September 2018. Nonetheless, the Board will constantly evaluate the Group's business objectives and may change or modify the plans against changing market conditions as necessary and will make the necessary announcement(s) in compliance with the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") where appropriate.
22 MIDEA REAL ESTATE HOLDING LIMITED
Corporate Governance and Other Information
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Company has adopted the code provisions of the Corporate Governance Code (the "CG Code") as set out in Appendix 14 to the Listing Rules as its corporate governance policies and practices. The Company had complied with the provisions of the CG Code during the six months ended 30 June 2020, except for certain deviations as specified under the paragraph headed "Chairman and President" below.
The Company is committed to achieving a high standard of corporate governance so as to enhance the transparency and accountability to the shareholders of the Company. The Board believes that good corporate governance will contribute to maximising the corporate value of the Company to its shareholders. The Board will continue to review and monitor the procedures in place with reference to Appendix 14 to the Listing Rules so as to maintain a high standard of corporate governance of the Company.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Listing Rules as the code of conduct of the Company for Directors' securities transactions. Having made specific enquiry of the Directors, all the Directors confirmed that they have complied with the Model Code during the six months ended 30 June 2020.
THE BOARD
Board Composition
During the six months ended 30 June 2020 and up to the date of this interim report, the Board comprised of nine Directors:
Executive Directors
Mr. Hao Hengle (Chairman)
Mr. Yao Wei
Mr. Lin Ge
Ms. Lin Dongna
Non-executive Directors
Mr. He Jianfeng
Mr. Zhao Jun
Independent non-executive Directors
Mr. Tan Jinsong
Mr. O'Yang Wiley
Mr. Lu Qi
During the six months ended 30 June 2020, the Company has complied with Rules 3.10(1), 3.10(2) and 3.10A of the Listing Rules regarding the appointment of at least three independent non-executive directors (representing at least one-third of the board) including at least one independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise.
The Directors have no financial, business, family or other material or relevant relationships with each other.
INTERIM REPORT 2020 | 23 |
Corporate Governance and Other Information (Continued)
CHAIRMAN AND PRESIDENT
Our Chairman is responsible for formulating the overall strategies and policies of the Company and providing leadership for the Board in fulfilling its roles and responsibilities and the establishment of sound corporate governance practices and procedures for the Company. Our Chairman, as chief executive of the Company, is also delegated the authority by the Board to lead the day-to-day operation and business management of the Group in accordance with the objectives, directions and policies laid down by the Board.
According to code provision A.2.1 of the CG Code, the roles of chairman and the chief executive officer should be separate and should not be performed by the same individual. During the six months ended 30 June 2020, Mr. Hao Hengle performed his duties as the chairman and president of the Company. As such, the Company has deviated from code provision A.2.1 of the CG Code. Given Mr. Hao has considerable experience in the PRC real estate industry and the business operations of the Group, and is familiar with Midea's operations and management core values. The Board believes that vesting both roles of chairman and president in Mr. Hao facilitates the execution of the Group's long-term strategic aims and achieving its operations and business objectives, thereby maximising the effectiveness of the Group's operations.
The Board believes that this structure is in the best interest of the Company, and that this situation will not impair the balance of power and authority between the Board and the management of the Company because the Board comprises nine experienced and high- calibre individuals with demonstrated integrity, of which three are independent non-executive Directors. Further, decisions of the Board are collectively made by way of majority voting. The Board will nevertheless review the effectiveness of this structure from time to time.
AUDIT COMMITTEE
The Audit Committee was established by the Board on 12 September 2018 with written terms of reference revised and adopted on 1 January 2019 in compliance with Rule 3.21 of the Listing Rules and the CG Code. As at 30 June 2020, the Audit Committee comprised three members including two independent non-executive Directors, Mr. Tan Jinsong (chairman of the Audit Committee) and Mr. O'Yang Wiley, and one non-executive Director, Mr. Zhao Jun. Mr. Tan Jinsong is the independent non-executive Director who possesses the appropriate professional qualifications and accounting and financial management expertise. None of the members of the Audit Committee is a former partner of the auditor of the Company.
The Audit Committee is responsible for, among other things, reviewing and monitoring the integrity of the consolidated financial statements of the Group, reviewing the effectiveness of the risk management and internal control systems of the Group, reviewing the findings from the works carried out by the internal audit department and monitoring the effectiveness of the Group's internal audit function. The Audit Committee is also responsible for making recommendations to the Board on the appointment of the external auditor and approving the remuneration and terms of engagement of the external auditor. Before commencement of annual audit, the Audit Committee will discuss with the external auditor the nature and scope of audit, the significant risk analysis and the impact of the change in accounting policies on the financial statements of the Group. The Audit Committee is required to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standards.
The Audit Committee has reviewed the unaudited interim results of the Group for the six months ended 30 June 2020, including the accounting principles and policies adopted by the Group. In addition, PricewaterhouseCoopers, the Company's auditor, has reviewed the unaudited interim financial information of the Group for the six months ended 30 June 2020 in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by Hong Kong Institute of Certified Public Accountants.
24 MIDEA REAL ESTATE HOLDING LIMITED
Corporate Governance and Other Information (Continued)
UPDATED INFORMATION ON DIRECTORS PURSUANT TO RULE 13.51B(1) OF THE LISTING RULES
During the six months ended 30 June 2020 and up to the date of this interim report, there is no change in the information of the Directors required to be disclosed pursuant to paragraphs (a) to (e) and (g) of Rule 13.51(2) of the Listing Rules since the Company's latest published annual report.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the listed securities of the Company during the six months ended 30 June 2020.
EQUITY-LINKED AGREEMENTS
During the six months ended 30 June 2020, the Company had not entered into any equity-linked agreement, and there did not subsist any equity-linked agreement entered into by the Company as at 30 June 2020.
SHARE OPTION SCHEME
A share option scheme was approved and adopted by the shareholders of the Company at the Company's annual general meeting held on 29 May 2020 (the "2020 AGM"), which is valid and effective for a period of 10 years commencing on the adoption date and ending 28 May 2030 (the "Share Option Scheme"). The following is a summary of the principal terms of the Share Option Scheme:
The purposes of the Share Option Scheme are to enable the Group to recognise and acknowledge the contributions that any director or proposed director of any member of the Group, and any management, key technician, officer, manager and employee of any member of the Group (the "Eligible Participant(s)") have made or may make to the Group (whether directly or indirectly), remunerate the best possible quality of the Eligible Participants, and attract, retain and motivate the Eligible Participants to continue to contribute to the growth and development of the Group; and provide Eligible Participants with direct economic benefits in order to maintain a long term relationship between the Group and the Eligible Participants.
The maximum number of shares in respect of which options may be granted under the Share Option Scheme and any other share option schemes of the Company shall not, in aggregate, exceed 10% of the total number of shares in issue as at the date of the 2020 AGM (being 123,056,700 shares), unless the Company seeks approval by its shareholders in a general meeting for refreshing the 10% limit under the Share Option Scheme. The limit on the total number of shares that may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the shares in issue from time to time. No options may be granted if such a grant would result in such 30% limit or maximum permissible limit being exceeded.
INTERIM REPORT 2020 | 25 |
Corporate Governance and Other Information (Continued)
The maximum entitlement of each Eligible Participant under the Share Option Scheme and any other share option schemes of the Company shall not, in any 12-month period up to and including the date of such grant, exceed 1% of the total number of shares in issue as at the date of the 2020 AGM, being 12,305,670 shares. Any further grant of share options in excess of such limit must be separately approved by its shareholders in a general meeting.
Share options granted under the Share Option Scheme to a Director, chief executive or substantial shareholder of the Company, or any of their respective associates, must be approved by the independent non-executive Directors, (excluding independent non- executive Director who is the proposed grantee of such share options). In addition, any share options granted to a substantial shareholder or an independent non-executive Director, or any of their respective associates, in aggregate more than 0.1% of the total number of shares of the Company in issue and with an aggregate value (based on the closing price of the Company's shares at the date of each grant) in excess of HKD5 million, within any 12-month period up to and including the date of such grant, must be subject to approval by its shareholders in a general meeting.
The exercise price shall be at least the highest of (i) the closing price of the shares as stated in the Stock Exchange's daily quotations sheet on the date of grant; (ii) the average of the closing prices of the shares as stated in the Stock Exchange's daily quotations sheets for the 5 business days immediately preceding the date of grant; and (iii) the nominal value of a share prevailing on the date of grant. Consideration for each grant of share options is HKD1.00 or RMB1.00 and is required to be paid within 28 days from the date of grant of share options, with full payment for the exercise price to be made on exercise of the relevant options.
Subject to the terms and conditions of the Share Option Scheme, the Board may in its absolute discretion specify such conditions as it thinks fit when making such an offer to an Eligible Participant (including, without limitation, as to any performance targets which must be satisfied by the Eligible Participant and/or us, and any minimum period for which an option must be held, before an option may be exercised, if any). The exercise period shall not be more than 10 years from the date upon which any particular share options are granted in any event.
As at the date of this interim report, no share options were granted to any Eligible Participants since the adoption of the Share Option Scheme.
26 MIDEA REAL ESTATE HOLDING LIMITED
Corporate Governance and Other Information (Continued)
DISCLOSURE OF INTERESTS
Directors' Interests
Save as disclosed below, as at 30 June 2020, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ("SFO")) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code adopted by the Company contained in the Listing Rules:
Long Position in the Shares of the Company
Approximate | |||||
percentage of | |||||
Beneficial | Family | Corporate | shareholding | ||
Name | owner | interests | interests | Total | (Note 2) |
Mr. He Jianfeng (Note 1) | - | 1,000,000,000 | - | 1,000,000,000 | 81.26% |
Notes:
- Mr. He Jianfeng, a non-executive Director, is the spouse of Ms. Lu Deyan, a controlling shareholder of the Company. Therefore, Mr. He Jianfeng is deemed to be interested in Ms. Lu's interest in the Company by virtue of the SFO.
- The percentage has been compiled on the basis of 1,230,567,000 shares of the Company in issue as at 30 June 2020.
Apart from the Share Option Scheme, during the six months ended 30 June 2020, neither the Company nor any of its subsidiaries entered into any arrangement to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
INTERIM REPORT 2020 | 27 |
Corporate Governance and Other Information (Continued)
DISCLOSURE OF INTERESTS (Continued)
Substantial Shareholders' Interests
Save as disclosed below, as at 30 June 2020, the Directors and chief executive of the Company were not aware of any other persons who had interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO or which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:
Long Position in the Shares of the Company
Approximate | |||
percentage of | |||
Number of | shareholding | ||
Name | Capacity | shares held | (Note 4) |
Midea Development Holding (BVI) Limited | Beneficial owner | 940,000,000 | 76.39% |
Ms. Lu Deyan (Note 1) | Interests of controlled corporations | 1,000,000,000 | 81.26% |
Mr. He Xiangjian (Note 2) | Interest held jointly with another person | 1,000,000,000 | 81.26% |
Mr. He Jianfeng (Note 3) | Interest of spouse | 1,000,000,000 | 81.26% |
Notes:
- Ms. Lu Deyan ("Ms. Lu") holds the entire equity interest in each of Midea Development Holding (BVI) Limited ("Midea Development (BVI)"), Midea Ever Company Limited ("Midea Ever") and Midea Field Company Limited ("Midea Field"). Midea Development (BVI), Midea Ever and Midea Field held 940,000,000, 30,000,000 and 30,000,000 shares of the Company, respectively. Therefore, Ms. Lu is deemed to be interested in the shares of the Company held by Midea Development (BVI), Midea Ever and Midea Field by virtue of the SFO.
- Mr. He Xiangjian ("Mr. He") and Ms. Lu are parties acting-in-concert. Therefore, Mr. He is deemed to be interested in Ms. Lu's interest in the Company by virtue of the SFO. However, as confirmed by Mr. He and Ms. Lu in the deed of acting-in-concert dated 14 May 2018 entered into between Mr. He and Ms. Lu, Mr. He does not hold any economic interest (including the right to dividend) in the Group.
- Mr. He Jianfeng, a non-executive Director, is the spouse of Ms. Lu. Therefore, Mr. He Jianfeng is deemed to be interested in Ms. Lu's interest in the Company by virtue of the SFO.
- The percentage has been compiled on the basis of 1,230,567,000 shares of the Company in issue as at 30 June 2020.
28 MIDEA REAL ESTATE HOLDING LIMITED
Corporate Governance and Other Information (Continued)
SPECIFIC PERFORMANCE OBLIGATIONS ON THE CONTROLLING SHAREHOLDERS
The following disclosure is made in compliance with the disclosure requirements under rule 13.21 of the Listing Rules.
On 21 June 2019, Midea Construction (Hong Kong) Limited, an indirectly wholly-owned subsidiary of the Company (as borrower), the Company (as listing guarantor) and certain of its subsidiaries incorporated outside the PRC (as original guarantors) entered into a facility agreement with a syndicate of financial institutions in respect of a three-year term loan facility of HKD2.9 billion (the "2019 Loan").
On 3 August 2020, Midea Construction (Hong Kong) Limited (as borrower), the Company (as listing guarantor) and certain of its subsidiaries incorporated outside the PRC (as original guarantors) entered into a facility agreement with certain financial institutions (as lenders) for a three-year dual tranche transferrable term loan facility denominated in HKD and USD in an initial amount of HKD1,050 million and USD60 million respectively, which may be subsequently increased up to HKD1,170 million or its US dollars equivalent (exclusive of the said initial amount) (the "2020 Loan(s)").
Pursuant to the provisions of each of the facility agreements, if (i) Mr. He and/or Ms. Lu (taking into account their combined shareholdings) jointly do not or cease to, remain as the single largest shareholder of the Company or maintain (directly or indirectly) not less than 51% of all beneficial shareholding interests in the issued share capital and management control of the Company; and/or
- Mr. He, Ms. Lu and Midea Development (BVI) collectively cease to, maintain the power to the exercise of 30% or more of the voting rights at general meetings of the Company, or cease to be the controlling shareholders of the Company as such term is used under the Listing Rules, it will be a "Change of Control" upon which the financial institutions may, among other things, require repayment of all or part of the 2019 Loan and/or the 2020 Loan, together with accrued interest, and all other amounts accrued or outstanding.
USE OF PROCEEDS FROM IPO
Please refer to the "Management Discussion and Analysis" section set out on page 22 for the details of the use of proceeds from IPO.
INTERIM DIVIDEND
The Board has resolved not to declare an interim dividend for the six months ended 30 June 2020 (for the corresponding period of 2019: Nil).
INTERIM REPORT 2020 | 29 |
Report on Review of Interim Financial Information
TO THE BOARD OF DIRECTORS OF MIDEA REAL ESTATE HOLDING LIMITED
(incorporated in Cayman Islands with limited liability)
Introduction
We have reviewed the interim financial information set out on pages 31 to 58, which comprises the interim condensed consolidated balance sheet of Midea Real Estate Holding Limited (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the interim condensed consolidated statement of comprehensive income, the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 20 August 2020
30 MIDEA REAL ESTATE HOLDING LIMITED
Interim Condensed Consolidated Statement of Comprehensive Income
Unaudited | |||||
Six months ended 30 June | |||||
2020 | 2019 | ||||
Note | RMB'000 | RMB'000 | |||
Revenue | 6 | 20,936,620 | 14,194,850 | ||
Cost of sales | 7 | (15,412,831) | (9,101,508) | ||
Gross profit | 5,523,789 | 5,093,342 | |||
Other income and gains - net | 8 | 413,155 | 270,813 | ||
Selling and marketing expenses | 7 | (1,259,503) | (1,045,473) | ||
Administrative expenses | 7 | (1,262,958) | (1,030,663) | ||
Net impairment losses on financial assets | (20,850) | (22,331) | |||
Operating profit | 3,393,633 | 3,265,688 | |||
Finance income | 9 | 160,183 | 92,688 | ||
Finance costs | 9 | (40,678) | (10,615) | ||
Finance income - net | 9 | 119,505 | 82,073 | ||
Share of results of joint ventures and associates | 13 | 198,027 | 90,013 | ||
Profit before income tax | 3,711,165 | 3,437,774 | |||
Income tax expenses | 10 | (1,356,930) | (1,549,015) | ||
Profit for the period | 2,354,235 | 1,888,759 | |||
Profit attributable to: | |||||
Owners of the Company | 2,024,099 | 1,769,384 | |||
Non-controlling interests | 330,136 | 119,375 | |||
Total comprehensive income for the period | 2,354,235 | 1,888,759 | |||
Total comprehensive income attributable to: | |||||
Owners of the Company | 2,024,099 | 1,769,384 | |||
Non-controlling interests | 330,136 | 119,375 | |||
2,354,235 | 1,888,759 | ||||
Earnings per share for profit attributable to owners | |||||
of the Company (expressed in RMB per share) | |||||
Basic and diluted earnings per share | 11 | 1.64 | 1.49 | ||
The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
INTERIM REPORT 2020 | 31 |
Interim Condensed Consolidated Balance Sheet
Unaudited | Audited | ||
30 June | 31 December | ||
2020 | 2019 | ||
Note | RMB'000 | RMB'000 | |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 14 | 1,205,919 | 1,199,369 |
Investment properties | 14 | 1,772,795 | 1,737,291 |
Right-of-use assets | 471,183 | 529,632 | |
Intangible assets | 148,839 | 146,719 | |
Properties under development | 15 | 2,947,686 | 2,670,275 |
Investments in joint ventures | 13(a) | 7,857,884 | 6,074,679 |
Investments in associates | 13(b) | 5,381,016 | 4,685,994 |
Finance lease receivables | 38,690 | 26,421 | |
Deferred income tax assets | 2,757,276 | 2,333,448 | |
22,581,288 | 19,403,828 | ||
Current assets | |||
Inventories | 67,847 | 49,270 | |
Contract assets and contract acquisition costs | 6(a) | 1,960,818 | 1,496,830 |
Properties under development | 15 | 140,552,697 | 142,697,242 |
Completed properties held for sale | 8,900,551 | 8,767,493 | |
Trade and other receivables | 16 | 41,009,459 | 36,205,754 |
Prepaid taxes | 13,025,159 | 12,244,457 | |
Financial assets at fair value through profit or loss | 17 | 1,942,954 | 1,913,355 |
Restricted cash | 18 | 6,083,260 | 7,697,191 |
Term deposits with initial terms of over three months | 18 | - | 141,159 |
Cash and cash equivalents | 18 | 19,913,188 | 19,097,265 |
233,455,933 | 230,310,016 | ||
Total assets | 256,037,221 | 249,713,844 | |
EQUITY | |||
Equity attributable to owners of the Company | |||
Share capital and premium | 19 | 7,654,595 | 9,465,989 |
Other reserves | 20 | 1,898,536 | 1,875,120 |
Retained earnings | 20 | 10,332,629 | 8,308,530 |
19,885,760 | 19,649,639 | ||
Non-controlling interests | 14,803,231 | 11,488,654 | |
Total equity | 34,688,991 | 31,138,293 | |
32 MIDEA REAL ESTATE HOLDING LIMITED
Interim Condensed Consolidated Balance Sheet (Continued)
Unaudited | Audited | ||
30 June | 31 December | ||
2020 | 2019 | ||
Note | RMB'000 | RMB'000 | |
LIABILITIES | |||
Non-current liabilities | |||
Corporate bonds | 21 | 5,910,022 | 8,049,059 |
Bank and other borrowings | 22 | 38,694,522 | 37,466,454 |
Lease liabilities | 129,472 | 199,662 | |
Deferred income tax liabilities | 1,376,793 | 1,548,454 | |
46,110,809 | 47,263,629 | ||
Current liabilities | |||
Contract liabilities | 6(b) | 93,863,011 | 84,891,715 |
Corporate bonds | 21 | 6,056,368 | 2,437,720 |
Bank and other borrowings | 22 | 5,451,588 | 6,698,484 |
Lease liabilities | 61,375 | 49,830 | |
Trade and other payables | 23 | 64,340,173 | 71,823,898 |
Current income tax liabilities | 5,464,906 | 5,410,275 | |
175,237,421 | 171,311,922 | ||
Total liabilities | 221,348,230 | 218,575,551 | |
Total equity and liabilities | 256,037,221 | 249,713,844 | |
The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.
Approved by the Board of Directors on 20 August 2020 and were signed on its behalf.
Hao Hengle | Lin Ge |
Director | Director |
INTERIM REPORT 2020 | 33 |
Interim Condensed Consolidated Statement of Changes in Equity
Unaudited | |||||||
Attributable to owners of the Company | |||||||
Non- | |||||||
Share | |||||||
capital and | Other | Retained | controlling | Total | |||
premium | reserves | earnings | Total | interests | equity | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Balance at 1 January 2019 | 8,787,079 | 1,293,695 | 6,076,085 | 16,156,859 | 7,427,577 | 23,584,436 | |
Comprehensive Income | |||||||
Profit for the period | - | - | 1,769,384 | 1,769,384 | 119,375 | 1,888,759 | |
Total comprehensive income for | |||||||
the period ended 30 June 2019 | - | - | 1,769,384 | 1,769,384 | 119,375 | 1,888,759 | |
Total transactions with owners, | |||||||
recognised directly in equity | |||||||
Disposal of subsidiaries | - | - | - | - | (378,966) | (378,966) | |
Dividends paid to shareholders | - | - | (1,282,003) | (1,282,003) | - | (1,282,003) | |
Acquisition of subsidiaries which | |||||||
do not contain a business | - | - | - | - | 425,527 | 425,527 | |
Capital injections from | |||||||
non-controlling interests | - | - | - | - | 3,337,497 | 3,337,497 | |
Additional investment in subsidiaries | - | (7,653) | - | (7,653) | 1,547 | (6,106) | |
Total transactions with owners | - | (7,653) | (1,282,003) | (1,289,656) | 3,385,605 | 2,095,949 | |
Balance at 30 June 2019 | 8,787,079 | 1,286,042 | 6,563,466 | 16,636,587 | 10,932,557 | 27,569,144 | |
Balance at 1 January 2020 | 9,465,989 | 1,875,120 | 8,308,530 | 19,649,639 | 11,488,654 | 31,138,293 | |
Comprehensive Income | |||||||
Profit for the period | - | - | 2,024,099 | 2,024,099 | 330,136 | 2,354,235 | |
Total comprehensive income for | |||||||
the period ended 30 June 2020 | - | - | 2,024,099 | 2,024,099 | 330,136 | 2,354,235 | |
Total transactions with owners, | |||||||
recognised directly in equity | |||||||
Disposal of subsidiaries | - | - | - | - | (690,343) | (690,343) | |
Disposal of ownership interests | |||||||
in subsidiaries without change | |||||||
of control | - | 31,698 | - | 31,698 | (28,198) | 3,500 | |
Dividends payable to shareholders | (1,811,394) | - | - | (1,811,394) | - | (1,811,394) | |
Acquisition of subsidiaries which | |||||||
do not contain a business | - | - | - | - | 123,417 | 123,417 | |
Capital injections from | |||||||
non-controlling interests | - | - | - | - | 3,593,205 | 3,593,205 | |
Additional investment in subsidiaries | - | (8,282) | - | (8,282) | (13,640) | (21,922) | |
Total transactions with owners | (1,811,394) | 23,416 | - | (1,787,978) | 2,984,441 | 1,196,463 | |
Balance at 30 June 2020 | 7,654,595 | 1,898,536 | 10,332,629 | 19,885,760 | 14,803,231 | 34,688,991 | |
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
34 MIDEA REAL ESTATE HOLDING LIMITED
Interim Condensed Consolidated Statement of Cash Flows
Unaudited | |||||
Six months ended 30 June | |||||
2020 | 2019 | ||||
Note | RMB'000 | RMB'000 | |||
Cash flows from operating activities | |||||
Cash used in operations | (2,218,725) | (3,744,220) | |||
Income tax paid | (2,588,937) | (2,831,469) | |||
Interest paid | (1,887,660) | (1,690,517) | |||
Net cash used in operating activities | (6,695,322) | (8,266,206) | |||
Cash flows from investing activities | |||||
Payments for acquisition of subsidiaries, net of cash acquired | 186,866 | (374,324) | |||
Net cash outflow from disposal of subsidiaries | 26 | (559,411) | (527,040) | ||
Purchases of property, plant and equipment | (58,260) | (159,069) | |||
Purchases of land use right for own-used properties | - | (33,681) | |||
Purchases of intangible assets | (6,139) | (12,521) | |||
Investments in joint ventures | (974,866) | (198,622) | |||
Investments in associates | (563,002) | (1,188,812) | |||
Proceeds from disposal of a joint venture | 2,400 | - | |||
Dividend received from a joint venture | 66,700 | - | |||
Repayment of advances from joint ventures and associates | 5,039,915 | 3,462,541 | |||
Proceeds from disposal of property, plant and equipment, | |||||
investment properties and intangible assets | 14,834 | 24,200 | |||
Decrease in term deposits with initial terms of over three months | 141,159 | 2,729,638 | |||
Payments for financial assets at fair value through profit or loss | (19,263,372) | (12,791,127) | |||
Proceeds from disposal of financial assets at fair value through profit or loss | 19,360,498 | 13,807,914 | |||
Interest received | 160,183 | 92,688 | |||
Net cash generated from investing activities | 3,547,505 | 4,831,785 | |||
Cash flows from financing activities | |||||
Capital injections from non-controlling interests | 505,850 | 3,337,497 | |||
Payments for acquisition of additional interests in subsidiaries | (21,922) | (2,066) | |||
Proceeds from disposal of interests in subsidiaries without loss of control | 3,500 | - | |||
Proceeds from bank and other borrowings | 17,004,567 | 21,145,062 | |||
Repayments of bank and other borrowings | (14,569,333) | (17,457,967) | |||
Principal elements of lease payments | (58,645) | (46,000) | |||
Proceeds from corporate bonds | 2,911,952 | 5,049,422 | |||
Repayment of corporate bonds | (1,440,000) | (3,499,268) | |||
Repayment of advances from related parties controlled by | |||||
the Ultimate Controlling Parties | (396,090) | (29,998) | |||
Dividends paid to shareholders | - | (1,282,003) | |||
Net cash generated from financing activities | 3,939,879 | 7,214,679 | |||
Net increase in cash and cash equivalents | 792,062 | 3,780,258 | |||
Cash and cash equivalents at the beginning of the period | 19,097,265 | 15,439,152 | |||
Exchange gains on cash and cash equivalents | 23,861 | 4,606 | |||
Cash and cash equivalents at end of the period | 19,913,188 | 19,224,016 | |||
The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.
INTERIM REPORT 2020 | 35 |
Notes to the Interim Financial Information
1 GENERAL INFORMATION
The Company was incorporated in the Cayman Islands on 29 November 2017 as an exempted company with limited liability under the Companies Law (Cap. 22, Law 3 of 1961 as consolidated and revised) of the Cayman Islands. The address of the Company's registered office is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.
The Company is an investment holding company. The Company and its subsidiaries (the "Group") are principally engaged in property development and sales, property management services and investment and operation of commercial properties in the People's Republic of China (the "PRC").
The ultimate holding company of the Company is Midea Development Holding (BVI) Limited ("Midea Development (BVI)"), and the ultimate controlling parties of the Company are Mr. He Xiangjian (何享健, "Mr. He") and Ms. Lu Deyan (盧德燕, "Ms. Lu") (the "Ultimate Controlling Parties").
This interim financial information for the six months ended 30 June 2020 ("Interim Financial Information") is presented in Renminbi ("RMB"), unless otherwise stated, and was approved by the Board of Directors of the Company for issue on 20 August 2020.
2 BASIS OF PRESENTATION AND PREPARATION
This Interim Financial Information has been prepared in accordance with the Hong Kong Accounting Standard ("HKAS") 34, 'Interim financial reporting'. This Interim Financial Information should be read in conjunction with the annual consolidated financial statements of the Company for the year ended 31 December 2019 ("2019 Financial Statements"), which have been prepared in accordance with the Hong Kong Financial Reporting Standards ("HKFRS") and disclosure requirements of the Stock Exchange of Hong Kong Limited, and any public announcements made by the Company during the interim reporting period.
3 SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied are consistent with those of 2019 Financial Statements, except for the adoption of new and amendments to the HKFRS effective for the financial year beginning 1 January 2020.
- New and amended standard adopted by the Group
A number of new or amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.
- New standards and amendments to existing standards have been issued but not yet effective and have not been early adopted by the Group
Effective for accounting periods beginning on or after
Amendment to HKFRS 16 HKFRS 17 Amendments to HKFRS 3 Amendments to HKAS 16
Amendments to HKAS 37 Annual Improvements to HKFRS
- Standards 2018-2020 Amendments to HKAS 1 Amendments to HKFRS 10
- and HKAS 28
Covid-19 - related rent concessions | 1 June 2020 |
Insurance contract | 1 January 2021 |
Reference to the conceptual framework | 1 January 2022 |
Property, Plant and Equipment - proceeds before | 1 January 2022 |
intended use | |
Onerous Contracts - cost of fulfilling a contract | 1 January 2022 |
1 January 2022 | |
Classification of liabilities as current or non-current | 1 January 2023 |
Sale or contribution of assets between an investor | To be determined |
and its associates or joint ventures |
None of these is expected to have a significant impact on the Group's accounting policies.
36 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
4 ESTIMATES
The preparation of Interim Financial Information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this Interim Financial Information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the 2019 Financial Statements.
5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
5.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.
The Interim Financial Information does not include all financial risk management information and disclosures required in the 2019 Financial Statements, and should be read in conjunction with the 2019 Financial Statements.
There have been no significant changes in the risk management policies since 31 December 2019.
5.2 Liquidity risk
Management of the Group aims to maintain sufficient cash and cash equivalents or have available funding through proceeds from pre-sale of properties and an adequate amount of available financing including short-term and long-term borrowings and obtaining additional funding from shareholders. Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by maintaining adequate amount of cash and cash equivalents and through having available sources of financing.
The Group has a number of alternative plans to mitigate the potential impacts on anticipated cash flows should there be significant adverse changes in economic environment. These include reducing land acquisition, adjusting project development timetable to adapt the changing local real estate market environment, implementing cost control measures, promotion of sales of completed properties, accelerating sales with more flexible pricing and seeking joint venture partners to develop projects. The Group will pursue such options basing on its assessment of relevant future costs and benefits. The directors consider that the Group will be able to maintain sufficient financial resources to meet its operation needs.
The table below sets out the Group's financial liabilities by relevant maturity grouping at each balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than | Between 1 | Between 2 | |||||
1 year | and 2 years | and 5 years | Over 5 years | Total | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
As at 30 June 2020 (Unaudited) | |||||||
Corporate bonds | 6,720,686 | 3,897,919 | 2,378,690 | - | 12,997,295 | ||
Bank and other borrowings | 7,826,543 | 15,052,544 | 25,587,167 | 2,565,687 | 51,031,941 | ||
Lease liabilities | 63,432 | 41,284 | 102,498 | 31,115 | 238,329 | ||
Trade and other payables (excluding salaries | |||||||
payable and other taxes payable) | 58,567,461 | - | - | - | 58,567,461 | ||
Financial guarantees | 71,999,080 | 2,561,992 | 5,010,835 | 440,900 | 80,012,807 | ||
145,177,202 | 21,553,739 | 33,079,190 | 3,037,702 | 202,847,833 | |||
INTERIM REPORT 2020 | 37 |
Notes to the Interim Financial Information (Continued)
5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Continued)
5.2 Liquidity risk (Continued)
Less than | Between 1 | Between 2 | |||
1 year | and 2 years | and 5 years | Over 5 years | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
As at 31 December 2019 (Audited) | |||||
Corporate bonds | 2,997,417 | 6,901,003 | 1,343,851 | - | 11,242,271 |
Bank and other borrowings | 9,024,622 | 13,370,960 | 25,448,250 | 2,567,283 | 50,411,115 |
Lease liabilities | 52,762 | 71,090 | 84,397 | 69,735 | 277,984 |
Trade and other payables (excluding salaries | |||||
payable and other taxes payable) | 66,313,109 | - | - | - | 66,313,109 |
Financial guarantees | 63,832,290 | 2,227,962 | 3,397,955 | 220,000 | 69,678,207 |
142,220,200 | 22,571,015 | 30,274,453 | 2,857,018 | 197,922,686 | |
5.3 Fair value estimation
The table below analyses the Group's financial instruments carried at fair value as at 30 June 2020 and 31 December 2019, by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Level 1 | Level 2 | Level 3 | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
At 30 June 2020 (Unaudited) | |||||
Financial assets at fair value through profit or loss | 37,074 | 1,905,880 | - | 1,942,954 | |
At 31 December 2019 (Audited) | |||||
Financial assets at fair value through profit or loss | 61,304 | 1,852,051 | - | 1,913,355 | |
- There were no transfers among level 1, 2 and 3 during the period.
- There were no changes in valuation techniques during the period.
38 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
6 REVENUE AND SEGMENT INFORMATION
The executive directors review the Group's internal reporting in order to assess performance and allocate resources. The executive directors have determined the operating segments based on these reports.
The executive directors assess the performance of the Group organised into three business segments as follows:
- Property development and sales
- Property management services, and
- Investment and operation of commercial properties
For the six months ended 30 June 2020 and 2019, the aggregate revenues, profits or losses or total assets of the business segments other than property development and sales accounted for less than 5% of the total revenues, profits or assets of the Group, therefore, the directors of the Company consider these business segments not reportable and the executive directors assess the Group's performance as a whole. Thus operating segment information is not presented.
Revenue of the Group for the six months ended 30 June 2020 and 2019 is analysed as follows:
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Property development and sales | 20,533,533 | 13,884,154 | |
Property management services | 346,445 | 214,469 | |
Investment and operation of commercial properties | 26,402 | ||
- Property lease income | 27,079 | ||
- Hotel operation | 3,360 | 5,049 | |
- Cultural-tourism project | 26,880 | 64,099 | |
20,936,620 | 14,194,850 | ||
Represented by: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Revenue from property development and sales: | 15,860,755 | ||
Recognised at a point in time | 8,684,677 | ||
Recognised over time | 4,672,778 | 5,199,477 | |
20,533,533 | 13,884,154 | ||
Revenue from rendering of services: | 376,685 | ||
Recognised over time | 283,617 | ||
Revenue from other sources: | 26,402 | ||
Property lease income | 27,079 | ||
20,936,620 | 14,194,850 | ||
Over 95% of the Group's revenue is attributable to the PRC market and over 95% of the Group's non-current assets are located in the PRC. No geographical information is therefore presented.
The Group has a large number of customers, none of whom contributed 10% or more of the Group's revenue.
INTERIM REPORT 2020 | 39 |
Notes to the Interim Financial Information (Continued)
6 REVENUE AND SEGMENT INFORMATION (Continued)
- Details of contract assets and contract acquisition costs
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Contract assets related to property development and sales (i) | 1,339,786 | 972,568 |
Contract acquisition costs (ii) | 621,032 | 524,262 |
Total contract assets and contract acquisition costs | 1,960,818 | 1,496,830 |
- Contract assets related to property development and sales consist of unbilled amount resulting from sale of properties when revenue recognised over time exceeds the amount billed to the property purchasers.
- Management expects to recover the contract acquisition costs, primarily sale commissions and stamp duty paid/ payable, as a result of obtaining the property sale contracts. The Group capitalised these incremental costs and amortised them when the related revenue is recognised. The amount of amortisation for the six months ended 30 June 2020 were RMB151,983,000 (six months ended 30 June 2019: RMB108,517,000). There was no impairment loss in relation to the costs capitalised.
(b) Contract liabilities
The Group has recognised the following revenue-related contract liabilities: | ||
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Contract liabilities | 93,863,011 | 84,891,715 |
The Group receives payments from customers based on billing schedule as established in contracts. Payments are usually received in advance of the performance under the contracts which are mainly from property development and sales.
The following table shows how much of the revenue recognised during the period related to carried-forward contract liabilities.
Six months ended 30 June
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Revenue recognised that was included in the contract liability balance | ||
at the beginning of the period | ||
Property development and sales | 16,142,795 | 9,519,625 |
40 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
6 REVENUE AND SEGMENT INFORMATION (Continued)
- Unsatisfied contracts related to property development and sales
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Expected to be recognised within one year | 53,562,853 | 51,019,872 |
Expected to be recognised after one year | 50,262,465 | 45,061,689 |
103,825,318 | 96,081,561 | |
- For property management services contracts, the Group recognises revenue equal to the right to invoice amount when it corresponds directly with the value to the customer of the Group's performance to date, on a monthly basis. The Group has elected the practical expedient for not to disclose the remaining performance obligations for these type of contracts. The majority of the property management service contracts do not have a fixed term.
7 EXPENSES BY NATURE
Expenses included in cost of sales, selling and marketing expenses and administrative expenses were analysed as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Cost of property development and sales - including construction cost, | ||
land cost, capitalised interest expenses | 15,005,235 | 8,867,691 |
Employee benefit expenses | 955,233 | 943,622 |
Marketing and advertising expenses | 720,511 | 419,547 |
Write-downs of properties under development and completed properties held for sale | 253,205 | - |
Amortisation of contract acquisition costs | 151,983 | 108,517 |
Taxes and surcharges | 155,227 | 121,529 |
Depreciation and amortisation | 104,412 | 94,103 |
Property management fees | 46,127 | 38,240 |
Auditor's remuneration | ||
- Interim review services | 1,400 | 1,400 |
Travelling and entertainment expenses | 42,899 | 71,735 |
Office expenses | 22,044 | 77,807 |
Others | 477,016 | 433,453 |
Total | 17,935,292 | 11,177,644 |
INTERIM REPORT 2020 | 41 |
Notes to the Interim Financial Information (Continued)
8 | OTHER INCOME AND GAINS - NET | |||||||
Six months ended 30 June | ||||||||
2020 | 2019 | |||||||
RMB'000 | RMB'000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Other income | ||||||||
Management and consulting service income | 185,437 | 77,946 | ||||||
Government subsidy income | 40,929 | 4,245 | ||||||
Compensation income | 38,809 | 126,094 | ||||||
265,175 | 208,285 | |||||||
Other gains - net | ||||||||
Realised and unrealised gains on financial assets at fair value through profit or loss | 126,725 | 56,397 | ||||||
Losses arising from changes in fair value of investment properties | (3,641) | (813) | ||||||
Losses on disposal of a joint venture | (5,812) | - | ||||||
(Losses)/gains on disposal of property, plant and equipment, | ||||||||
investment properties and intangible assets | (114) | 155 | ||||||
Net foreign exchange gains/(losses) | 16,833 | (7,940) | ||||||
Others | 13,989 | 14,729 | ||||||
147,980 | 62,528 | |||||||
Other income and gains - net | 413,155 | 270,813 | ||||||
9 | FINANCE INCOME - NET | |||||||
Six months ended 30 June | ||||||||
2020 | 2019 | |||||||
RMB'000 | RMB'000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Finance costs | ||||||||
- Interest expenses | ||||||||
- Bank and other borrowings | (1,264,210) | (1,407,884) | ||||||
- Corporate bonds | (353,958) | (272,566) | ||||||
- Lease liabilities | (6,276) | (7,647) | ||||||
(1,624,444) | (1,688,097) | |||||||
Less: | ||||||||
- Capitalised interest | 1,624,444 | 1,688,097 | ||||||
- Net foreign exchange losses on financing activities | (40,678) | (10,615) | ||||||
(40,678) | (10,615) | |||||||
Finance income | ||||||||
- Interest income | 160,183 | 92,688 | ||||||
Finance income - net | 119,505 | 82,073 | ||||||
42 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
10 INCOME TAX EXPENSES
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Current income tax | |||
- Corporate income tax | 1,323,494 | 1,214,511 | |
- PRC land appreciation tax ("LAT") | 648,664 | 948,954 | |
1,972,158 | 2,163,465 | ||
Deferred income tax | |||
- Corporate income tax | (615,228) | (614,450) | |
1,356,930 | 1,549,015 | ||
Note:
Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the six months to 30 June 2020 is 37%, compared to 45% for the six months ended 30 June 2019. The tax rate was lower in 2020 due to the decrease in LAT expense as a result of the drop in gross profit margin.
As at 30 June 2020, the retained earnings of the Group's PRC subsidiaries not yet remitted to holding companies incorporated outside the PRC, for which no deferred income tax liability had been provided, were approximately RMB10,817,782,000 (31 December 2019: RMB8,734,814,000). Such earnings are expected to be retained by the PRC subsidiaries for reinvestment purposes and would not be remitted to their overseas holding companies in the foreseeable future based on management's estimations of demand for overseas funding.
11 EARNINGS PER SHARE
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
Profit attributable to owners of the Company (RMB'000): | 2,024,099 | 1,769,384 |
Weighted average number of ordinary shares in issue (thousands) | 1,230,567 | 1,190,567 |
Earnings per share - Basic (RMB per share) | 1.64 | 1.49 |
The Company had no dilutive potential shares in issue during the six months ended 30 June 2020 and 2019, thus the diluted earnings per share equalled the basic earnings per share.
12 DIVIDENDS
The Board of Directors has resolved not to declare an interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: nil).
INTERIM REPORT 2020 | 43 |
Notes to the Interim Financial Information (Continued)
13(a) INVESTMENTS IN JOINT VENTURES
The movement of investments in joint ventures are as follows: | ||
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
At January 1 | 6,074,679 | 1,023,571 |
Transfer from investments in subsidiaries (note 26) | 676,058 | 388,494 |
Other additions | 974,866 | 198,622 |
Dividend received from a joint venture | (66,700) | - |
Transfer to investments in subsidiaries | (54,814) | - |
Disposal | (8,212) | - |
Share of results | 262,007 | 115,305 |
At June 30 | 7,857,884 | 1,725,992 |
As at 30 June 2020 and 31 December 2019, there were no significant commitments and contingencies relating to the Group's interests in the joint ventures, while certain borrowings of the joint ventures were guaranteed by the Group (note 24).
13(b) INVESTMENTS IN ASSOCIATES
The movement of investments in associates are as follows:
Six months ended 30 June
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
At January 1 | 4,685,994 | 841,896 | |
Additions | 759,002 | 1,188,812 | |
Share of results | (63,980) | (25,292) | |
At June 30 | 5,381,016 | 2,005,416 | |
As at 30 June 2020 and 31 December 2019, there were no significant contingencies relating to the Group's interests in the associates, while certain borrowings of the associates were guaranteed by the Group (note 24).
44 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
14 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES
Property, | |||
plant and | Investment | ||
equipment | properties | ||
RMB'000 | RMB'000 | ||
Six months ended 30 June 2019 (Unaudited) | |||
Opening net book amount at 1 January 2019 | 836,712 | 749,350 | |
Transfer from properties under development | 94,882 | - | |
Other additions | 167,418 | - | |
Fair value changes | - | (813) | |
Disposal of subsidiaries | (665) | - | |
Other disposals | (24,045) | - | |
Depreciation | (42,837) | - | |
Closing net book amount at 30 June 2019 | 1,031,465 | 748,537 | |
Six months ended 30 June 2020 (Unaudited) | |||
Opening net book amount at 1 January 2020 | 1,199,369 | 1,737,291 | |
Additions | 66,260 | 46,255 | |
Fair value changes | - | (3,641) | |
Disposals | (7,838) | (7,110) | |
Depreciation | (51,872) | - | |
Closing net book amount at 30 June 2020 | 1,205,919 | 1,772,795 | |
There were no changes to the valuation techniques during the period.
The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. At 30 June 2020 and 31 December 2019, the Group had only level 3 investment properties.
INTERIM REPORT 2020 | 45 |
Notes to the Interim Financial Information (Continued)
15 PROPERTIES UNDER DEVELOPMENT
As at | As at | |||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(Unaudited) | (Audited) | |||
Properties under development expected to be completed: | ||||
- Within normal operating cycle included under current assets | 140,552,697 | 142,697,242 | ||
- Beyond normal operating cycle included under non-current assets | 2,947,686 | 2,670,275 | ||
143,500,383 | 145,367,517 | |||
Properties under development comprise: | ||||
- Construction costs | 35,113,219 | 33,482,853 | ||
- Land use rights | 103,799,486 | 107,210,641 | ||
- Capitalised interest expenses | 6,123,475 | 6,177,634 | ||
145,036,180 | 146,871,128 | |||
Less: provision of impairment | (1,535,797) | (1,503,611) | ||
143,500,383 | 145,367,517 | |||
Properties under development were all located in the PRC.
The amounts of RMB90,303,569,000 as at 30 June 2020 (31 December 2019: RMB89,629,245,000) under normal operating cycle classified as current assets were expected to be completed and delivered beyond one year.
The capitalisation rates of general borrowings were 5.81% per annum for the six months ended 30 June 2020 (six months ended 30 June 2019: 5.86% per annum).
As at 30 June 2020, properties under development with net book value of RMB48,022,291,000 (31 December 2019: RMB45,395,676,000) were pledged as collateral for the Group's bank and other borrowings.
46 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
16 TRADE AND OTHER RECEIVABLES
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Included in current assets: | ||
Trade receivables - net (note (a)) | 1,175,783 | 1,203,717 |
Other receivables - net (note (b)) | 31,537,482 | 30,431,785 |
Prepayments for land use rights (note (c)) | 7,072,648 | 3,744,866 |
Other prepayments | 1,223,546 | 825,386 |
41,009,459 | 36,205,754 | |
As at 30 June 2020 and 31 December 2019, the fair value of trade and other receivables approximated their carrying amounts.
- Details of trade receivables are as follows:
As at | As at | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Trade receivables - related parties (note 25(b)) | 202,678 | 144,646 | |
Trade receivables - third parties | 1,004,192 | 1,092,990 | |
Less: allowance for impairment | (31,087) | (33,919) | |
Trade receivables - net | 1,175,783 | 1,203,717 | |
Aging analysis of the gross trade receivables based on invoice date at the balance sheet date are as follows:
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Within 90 days | 752,554 | 924,707 |
Over 90 days and within 180 days | 67,341 | 47,711 |
Over 180 days and within 365 days | 118,810 | 15,641 |
Over 365 days | 268,165 | 249,577 |
1,206,870 | 1,237,636 | |
The Group's trade receivables are denominated in RMB.
INTERIM REPORT 2020 | 47 |
Notes to the Interim Financial Information (Continued)
16 TRADE AND OTHER RECEIVABLES (Continued)
- Details of trade receivables are as follows: (Continued)
Trade receivables mainly arise from property development and sales. Proceeds from property development and sales are generally received in accordance with the terms stipulated in the sale and purchase agreements. There is generally no credit period granted to the property purchasers.
The Group applies the simplified approach to provide for expected credit losses prescribed by HKFRS 9. For the six months ended 30 June 2020, reversal of RMB2,832,000 (six months ended 30 June 2019: provision of RMB9,283,000) were made against the gross amount of trade receivables.
(b) Details of other receivables are as follows:
As at | As at | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Amounts due from related parties (note 25(b)) | 13,249,638 | 16,275,460 | |
Amounts due from non-controlling interests (note (i)) | 9,168,391 | 8,162,999 | |
Deposits and others from third parties (note (ii)) | 9,213,608 | 6,063,799 | |
31,631,637 | 30,502,258 | ||
Less: allowance for impairment | (94,155) | (70,473) | |
Other receivables - net | 31,537,482 | 30,431,785 | |
- Amounts due from non-controlling interests mainly represented current accounts with the non-controlling interests of certain subsidiaries of the Group in the ordinary course of business, which are interest-free, unsecured and repayable on demand.
- Other receivables from third parties mainly represented deposits and various payments on behalf of and advances made to construction and design vendors.
- Prepayments for land use rights are mainly related to acquisition of land use rights which will be reclassified to properties under development for sale when land certificates were obtained.
48 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Investments in wealth management products (a) | 1,730,730 | 992,700 |
Investments in asset management schemes (a) | 101,000 | 786,475 |
Investments in listed equity security | 37,074 | 61,304 |
Others | 74,150 | 72,876 |
1,942,954 | 1,913,355 | |
- Investments in wealth management products and asset management schemes mainly represented investments in certain financial instruments issued by commercial banks and other financial institutions which had no guaranteed returns. The fair values of these investments were determined based on the statements provided by the counter parties. The ranges of return rates of these investments as at 30 June 2020 were 1.30% to 5.22% (31 December 2019: 0.30% - 5.22%).
18 CASH AND CASH EQUIVALENTS
As at | As at | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Cash at bank and in hand | 24,220,499 | 26,533,464 | |
Bank deposits | 1,775,949 | 402,151 | |
25,996,448 | 26,935,615 | ||
Less: restricted cash | (6,083,260) | (7,697,191) | |
term deposits with initial terms of over three months | - | (141,159) | |
19,913,188 | 19,097,265 | ||
INTERIM REPORT 2020 | 49 |
Notes to the Interim Financial Information (Continued)
18 CASH AND CASH EQUIVALENTS (Continued)
Cash and deposits are denominated in the following currencies: | ||
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Denominated in RMB | 23,958,988 | 26,494,846 |
Denominated in United States Dollar ("USD") | 4,708 | 32,328 |
Denominated in Hong Kong Dollar ("HKD") | 2,032,752 | 408,441 |
25,996,448 | 26,935,615 | |
The conversion of RMB denominated balances into other currencies and the remittance of bank balances and cash out of the PRC is subject to relevant rules and regulations of foreign exchange control promulgated by the PRC government.
19 SHARE CAPITAL AND PREMIUM
Equivalent | ||||||||
Nominal | nominal | |||||||
Number of | value of | value of | ||||||
ordinary | ordinary | ordinary | Share | |||||
shares | shares | shares | premium | Total | ||||
Note | HKD'000 | RMB'000 | RMB'000 | RMB'000 | ||||
Authorised | ||||||||
Ordinary share of HKD1.00 each | ||||||||
upon incorporation | 1,000,000,000 | 1,000,000 | - | - | - | |||
Increase in authorised share capital | 1,000,000,000 | 1,000,000 | - | - | - | |||
2,000,000,000 | 2,000,000 | - | - | - | ||||
Issued and fully paid | ||||||||
At 31 December 2018 and | ||||||||
1 January 2019 | 1,190,567,000 | 1,190,567 | 1,005,366 | 7,781,713 | 8,787,079 | |||
Placing of shares | 40,000,000 | 40,000 | 35,943 | 642,967 | 678,910 | |||
At 31 December 2019 and | ||||||||
1 January 2020 | 1,230,567,000 | 1,230,567 | 1,041,309 | 8,424,680 | 9,465,989 | |||
Dividends payable to shareholders | (a) | - | - | - | (1,811,394) | (1,811,394) | ||
At 30 June 2020 | 1,230,567,000 | 1,230,567 | 1,041,309 | 6,613,286 | 7,654,595 | |||
- On 30 March 2020, the board of directors of the Company recommended the payment of a final dividend of HK$1.60 per share for the year ended 31 December 2019 (2018: HK$1.2253 per share) out of the share premium account of the Company, which was approved by the shareholders of the Company at the annual general meeting held on 29 May 2020.
50 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
20 OTHER RESERVES AND RETAINED EARNINGS
Merger | Statutory | Retained | |||||
reserve | reserves | Others | Total | earnings | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Balance at 1 January 2019 | 173,000 | 1,075,688 | 45,007 | 1,293,695 | 6,076,085 | 7,369,780 | |
Profit for the period | - | - | - | - | 1,769,384 | 1,769,384 | |
Dividends paid to shareholders | - | - | - | - | (1,282,003) | (1,282,003) | |
Additional investment in subsidiaries | - | - | (7,653) | (7,653) | - | (7,653) | |
Balance at 30 June 2019 (unaudited) | 173,000 | 1,075,688 | 37,354 | 1,286,042 | 6,563,466 | 7,849,508 | |
Balance at 1 January 2020 | 173,000 | 1,866,404 | (164,284) | 1,875,120 | 8,308,530 | 10,183,650 | |
Profit for the period | - | - | - | - | 2,024,099 | 2,024,099 | |
Additional investment in subsidiaries | - | - | (8,282) | (8,282) | - | (8,282) | |
Disposal of ownership interests in | |||||||
subsidiaries without change of control | - | - | 31,698 | 31,698 | - | 31,698 | |
Balance at 30 June 2020 (unaudited) | 173,000 | 1,866,404 | (140,868) | 1,898,536 | 10,332,629 | 12,231,165 | |
21 CORPORATE BONDS
Corporate bonds as at 30 June 2020 and 31 December 2019 were as follows:
As at | As at | |||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(Unaudited) | (Audited) | |||
As at 1 January | 10,486,779 | 5,933,586 | ||
Additions | 2,911,952 | 8,042,764 | ||
Interests charges | 353,958 | 597,562 | ||
Interests paid | (346,299) | (587,133) | ||
Repayment upon maturity | (1,440,000) | (3,500,000) | ||
Ending balance | 11,966,390 | 10,486,779 | ||
Analysed as | ||||
- Current portion | 6,056,368 | 2,437,720 | ||
- Non-current portion | 5,910,022 | 8,049,059 | ||
11,966,390 | 10,486,779 | |||
The Group's corporate bonds of RMB3,060,000,000, as at 30 June 2020 (31 December 2019: RMB3,060,000,000) were guaranteed by its related parties (note 25(a)).
INTERIM REPORT 2020 | 51 |
Notes to the Interim Financial Information (Continued)
22 BANK AND OTHER BORROWINGS
As at | As at | |||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(Unaudited) | (Audited) | |||
Bank borrowings | 36,040,325 | 35,847,775 | ||
Other loans | 8,105,785 | 8,317,163 | ||
44,146,110 | 44,164,938 | |||
Included in non-current liabilities: | ||||
- Secured/guaranteed | 26,729,705 | 29,002,071 | ||
- Unsecured | 16,974,105 | 14,183,079 | ||
Less: current portion of non-current liabilities | (5,009,288) | (5,718,696) | ||
38,694,522 | 37,466,454 | |||
Included in current liabilities: | ||||
- Secured/guaranteed | 350,000 | 350,000 | ||
- Unsecured | 92,300 | 629,788 | ||
- Current portion of non-current liabilities | 5,009,288 | 5,718,696 | ||
5,451,588 | 6,698,484 | |||
Total | 44,146,110 | 44,164,938 | ||
As at 31 December 2019 and 30 June 2020, all of the Group's borrowings were denominated in following currencies:
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
RMB | 40,215,590 | 41,983,176 |
HKD | 3,930,520 | 2,181,762 |
44,146,110 | 44,164,938 | |
The Group's bank and other borrowings as at 30 June 2020 of RMB20,384,920,000 (31 December 2019: RMB21,019,509,000) were secured by certain buildings, right-of-use for land, properties under development and completed properties held for sale of the Group with total carrying values of RMB48,863,788,000 (31 December 2019: RMB46,212,574,000).
The Group's bank and other borrowings of RMB6,105,785,000, as at 30 June 2020 (31 December 2019: RMB6,000,163,000) were
guaranteed by its related parties (note 25(a)), and RMB589,000,000 (31 December 2019: RMB2,332,399,000) were guaranteed by third parties.
The annual weighted average effective interest rate of bank and other borrowings is 5.41% per annum for the six months ended 30 June 2020 (year ended 31 December 2019: 5.79% per annum).
52 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
23 TRADE AND OTHER PAYABLES
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Trade payables (note (a)) | 28,398,681 | 32,477,765 |
- related parties (note 25(b)) | 50,491 | 22,793 |
- third parties | 28,348,190 | 32,454,972 |
Amounts due to related parties (note 25(b)) | 12,368,554 | 10,554,551 |
Amounts due to non-controlling interests (note (b)) | 9,334,177 | 17,196,319 |
Outstanding acquisition considerations payable | 1,766,171 | 1,867,489 |
Deposit payables | 2,169,788 | 1,624,857 |
Accrued expenses | 854,158 | 592,301 |
Salaries payable | 680,684 | 1,114,310 |
Interests payable | 442,193 | 713,068 |
Other taxes payable | 5,092,028 | 4,396,479 |
Dividends payable to shareholders | 1,811,394 | - |
Other payables (note (c)) | 1,422,345 | 1,286,759 |
64,340,173 | 71,823,898 | |
- The aging analysis of the trade payables based on invoice dates is as follows:
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Within 90 days | 14,740,260 | 25,668,865 |
Over 90 days and within 365 days | 13,204,585 | 6,033,564 |
Over 365 days | 453,836 | 775,336 |
28,398,681 | 32,477,765 | |
The Group's trade and other payables as at 30 June 2020 and 31 December 2019 are denominated in RMB.
- Amounts due to non-controlling interests mainly represented current accounts with the non-controlling interests of certain subsidiaries of the Group in the ordinary course of business, which are interest-free, unsecured and repayable on demand.
- Other payables mainly represented miscellaneous payments received from property purchasers for various purposes such as obtaining approvals/certificates from government authorities.
INTERIM REPORT 2020 | 53 |
Notes to the Interim Financial Information (Continued)
24 GUARANTEES
As at | As at | |
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Guarantees in respect of mortgage facilities for certain purchasers (note (a)) | 70,465,422 | 62,687,030 |
Guarantees to joint ventures and associates in respect of borrowings (note (b)) | 9,547,385 | 6,991,177 |
80,012,807 | 69,678,207 | |
- These represented the guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of the Group's properties. Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and the Group is entitled to retain the legal titles and take possession of the related properties. The above guarantees are to be discharged upon the earlier of (i) issuance of the real estate ownership certificate which are generally available within three months after the purchasers take possession of the relevant properties; and (ii) the satisfaction of mortgaged loans by the purchasers of properties.
- These mainly represented the maximum exposure of the guarantees provided for the borrowings of certain joint ventures and associates.
- The directors of the Company have assessed that the fair values of guarantees provided to the purchasers and joint ventures and associates as at initial recognition and 30 June 2020 and 31 December 2019 were insignificant.
54 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
25 RELATED PARTY TRANSACTIONS
The ultimate holding company of the Company is Midea Development (BVI), and the Ultimate Controlling Parties of the Company are Mr. He and Ms. Lu.
- Transactions with related parties
Six months ended 30 June
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
(i) | Entities controlled by the Ultimate Controlling Parties | ||
Rendering of property management services | 3,204 | 3,347 | |
Management and consulting service income | 7,451 | 1,289 | |
Purchase of home appliances and smart home technology products | 56,846 | 27,719 | |
Purchase of information technology support services | - | 1,069 | |
Interest expenses on loans from related parties | 40,948 | 14,844 | |
Receiving guarantee in respect of borrowings | 9,165,785 | 7,234,622 | |
Licensing fees | 4,567 | 4,399 | |
Guarantee fees | 20,130 | 15,517 | |
Lease payments | 579 | 362 | |
Interest expenses on lease liabilities | 15 | 16 |
- Entities controlled by certain directors
Lease payments | - | 3,715 | |
Interest expenses on lease liabilities | - | 93 | |
(iii) | Joint ventures | ||
Management and consulting service income | 144,430 | 29,006 | |
Providing guarantee in respect of borrowings | 6,578,323 | 2,590,474 | |
Rendering of property management services | 18,303 | 10,615 | |
(iv) | Associates | ||
Management and consulting service income | 23,454 | - | |
Providing guarantee in respect of borrowings | 2,969,062 | 2,187,091 | |
Rendering of property management services | 6,544 | 3,281 |
- Directors and/or their close family members
Sales of properties | - | 9,750 |
The prices for the above transactions were determined in accordance with the terms agreed by the relevant contracting parties.
INTERIM REPORT 2020 | 55 |
Notes to the Interim Financial Information (Continued)
25 RELATED PARTY TRANSACTIONS (Continued)
- Balances with related parties
As at | As at | ||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
(i) | Joint ventures | ||
Amounts due from related parties | 10,117,378 | 11,123,648 | |
Amounts due to related parties | 8,917,146 | 7,550,957 | |
(ii) | Associates | ||
Amount due from related parties | 3,232,018 | 5,227,579 | |
Amount due to related parties | 3,463,455 | 2,639,701 |
- Entities controlled by the Ultimate Controlling Parties
Amounts due from related parties | 102,915 | 66,556 |
Amounts due to related parties | 38,423 | 386,686 |
Lease liabilities | 315 | 47 |
- Entities controlled by certain directors and/or their close family members
Amounts due from related parties | 5 | 2,323 |
Amounts due to related parties | 21 | - |
Lease liabilities | - | 536 |
- Analysis on amounts due from related parties:
Trade | 202,678 | 144,646 |
Non-trade | 13,249,638 | 16,275,460 |
- Analysis on amounts due to related parties:
Trade | 50,491 | 22,793 |
Non-trade | 12,368,554 | 10,554,551 |
Amounts due from/to related parties mainly represented the cash advances which are unsecured, interest-free, and repayable on demand.
56 MIDEA REAL ESTATE HOLDING LIMITED
Notes to the Interim Financial Information (Continued)
25 RELATED PARTY TRANSACTIONS (Continued)
- Loans from related parties
Six months ended 30 June
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Beginning of the period | - | - | |
Loans advanced | 1,809,358 | 1,003,356 | |
Loans repayments | (1,809,358) | (1,003,356) | |
End of the period | - | - | |
During the six months ended 30 June 2020 and 2019, loans from related parties carried variable interest rates ranging 5.50% to 6.00% per annum, and the terms of the loans were between 3 months to 6 months.
(d) Key management compensation
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Key management compensation | |||
- Salaries and other employee benefits | 11,856 | 11,382 | |
- Pension costs | 74 | 86 | |
- Fees | 273 | 263 | |
12,203 | 11,731 | ||
INTERIM REPORT 2020 | 57 |
Notes to the Interim Financial Information (Continued)
26 DISPOSAL OF SUBSIDIARIES
During the current period, the Group disposed of interests in a number of subsidiaries. Details of the disposal are as follows:
Six months | ||
ended 30 June | ||
2020 | ||
RMB'000 | ||
(Unaudited) | ||
Disposal consideration | ||
- Fair value of investments in joint ventures | 676,058 | |
Cash and cash equivalents | (559,411) | |
Restricted cash | (377,213) | |
Deferred income tax assets | (19,739) | |
Prepaid taxes | (591,070) | |
Properties under development and completed properties held for sale | (6,343,462) | |
Trade and other receivables | (3,453,145) | |
Trade and other payables | 3,053,353 | |
Bank and other borrowings | 2,974,740 | |
Contract liabilities | 3,982,050 | |
Others | (32,504) | |
Total net assets disposed of | (1,366,401) | |
Non-controlling interest disposed of | 690,343 | |
Gains on disposal | - | |
Cash proceeds from disposal, net of cash disposed of | ||
- Cash and cash equivalents of the subsidiaries disposed of | (559,411) | |
Net cash outflow on disposal | (559,411) | |
27 SUBSEQUENT EVENTS
In July 2020, Midea Real Estate Group Limited issued two corporate bonds in an aggregate principal amounts of RMB1,000,000,000. These corporate bonds carry a coupon interest rate of 4.10% and 4.18% per annum with maturity dates of 14 July 2024 and 14 July 2025, respectively. At the end of the second year and the third year, respectively, Midea Real Estate Group Limited has the option to adjust the coupon rate , and investors have the option to sell their bonds back.
On 3 August 2020, Midea Construction (Hong Kong) Limited, an indirectly wholly-owned subsidiary of the Company (as borrower), the Company (as listing guarantor) and certain of its subsidiaries incorporated outside the PRC (as original guarantors) entered into a facility agreement with certain financial institutions (as lenders) for a dual tranche transferrable term loan facility denominated in HKD and USD in an initial amount of HKD1,050 million and USD60 million respectively, which may be subsequently increased up to HKD1,170 million or its US dollars equivalent (exclusive of the said initial amount) (the "Loan(s)"). The final repayment date of the Loan(s) shall be the date falling 36 months after the first withdrawal date.
58 MIDEA REAL ESTATE HOLDING LIMITED
Executive Directors
Mr. Hao Hengle (Chairman and President)
Mr. Yao Wei
Mr. Lin Ge
Ms. Lin Dongna
Non-Executive Directors
Mr. He Jianfeng
Mr. Zhao Jun
Independent Non-Executive Directors
Mr. Tan Jinsong
Mr. O'Yang Wiley
Mr. Lu Qi
Audit Committee
Mr. Tan Jinsong (Chairman)
Mr. Zhao Jun
Mr. O'Yang Wiley
Remuneration Committee
Mr. O'Yang Wiley (Chairman)
Mr. Hao Hengle
Mr. Zhao Jun
Mr. Tan Jinsong
Mr. Lu Qi
Nomination Committee
Mr. Hao Hengle (Chairman)
Mr. Tan Jinsong
Mr. Lu Qi
Authorised Representatives
Mr. Hao Hengle
Mr. Zeng Chaoming
Joint Company Secretaries
Mr. Zeng Chaoming
Ms. Chan Bo Shan
Corporate Information
Principal Place of Business and Head Office in the Mainland China
34/F, Tower 4, Midea Real Estate Plaza
No.1 Chengde Road, Beijiao Town
Shunde District, Foshan City
Guangdong Province, the PRC
Place of Business in Hong Kong, China
Suites 3906-3910, 39/F, Tower 6, The Gateway
Harbour City, No. 9 Canton Road
Tsim Sha Tsui, Kowloon, Hong Kong
Registered Office
Walkers Corporate Limited
Cayman Corporate Centre
27 Hospital Road, George Town
Grand Cayman KY1-9008, Cayman Islands
Cayman Islands Principal Share Registrar and Transfer Office
Walkers Corporate Limited
Cayman Corporate Centre
27 Hospital Road, George Town
Grand Cayman KY1-9008, Cayman Islands
Hong Kong Branch Share Registrar and Transfer Office
Tricor Investor Services Limited
Level 54, Hopewell Centre
183 Queen's Road East, Hong Kong
Auditor
PricewaterhouseCoopers
Legal Adviser
Hogan Lovells
INTERIM REPORT 2020 | 59 |
Corporate Information (Continued)
Principal Banks in the Mainland China
(in Alphabetical Order)
Agricultural Bank of China Limited Bank of China Limited
Bank of Communications Co., Ltd. China Construction Bank Corporation China Everbright Bank Company Limited China Guangfa Bank Co., Ltd.
China Merchants Bank Co., Ltd. China Minsheng Banking Corp., Ltd.
Guangdong Shunde Rural Commercial Bank Company Limited Industrial and Commercial Bank of China Limited
Industrial Bank Co., Ltd.
Shanghai Pudong Development Bank Co., Ltd.
Principal Banks in Hong Kong, China
(in Alphabetical Order)
Bank of China (Hong Kong) Limited China CITIC Bank International Limited
China Construction Bank (Asia) Corporation Limited
China Everbright Bank Company Limited, Hong Kong Branch Chong Hing Bank Limited
CMB Wing Lung Bank Limited Hang Seng Bank Limited LUSO International Banking Ltd.
Shanghai Pudong Development Bank Company Limited,
-
Hong Kong Branch Tai Fung Bank Limited
The Bank of East Asia, Limited
Stock Code
3990
Email of Investor Relations
investor@midea.com
Company's Website
http://www.mideadc.com
60 MIDEA REAL ESTATE HOLDING LIMITED
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