Net profit nearly halved, executive compensation plummeted, Vanke rethink with the future

2022-07-09 0 By

“Last night I was very nervous, like a student who has to show his parents his report card after failing an exam.”I can understand all kinds of shareholder emotions, whether they are upset, disappointed, confused or concerned. I feel for them.”On the evening of March 31, Vanke Group (000002.SZ;02202.HK) 2021 results conference, with the chairman of the board of directors Yu Liang a “review” opening.”I would like to offer my sincere apologies to investors and stakeholders for disappointing our shareholders in 2021.”Prior to this, Vanke released the 2021 annual report, achieving revenue of 452.8 billion yuan, a year-on-year growth of 8.0%;Net profit of 22.52 billion yuan, down 45.7 percent year on year, nearly halved.Red Star capital bureau noted that this was vanke’s third net profit decline in its 31 years of listing, the first in 1995 and the second in 2008.At the performance meeting, Yu Liang concluded that shareholders are most concerned about two questions: one is “why vanke’s net profit dropped by 45.7%”, and the other is “whether Vanke can realize the stabilization and recovery of profit”.The annual report shows that the net profit is mainly affected by the decline in gross margin of development business, investment income and the provision of asset impairment loss.Among them, the decline of gross margin is the main reason for the financial level.In terms of specific data, vanke’s overall gross margin in 2021 was 21.8%, down 7.4 percentage points year-on-year.The overall gross margin after deducting business tax and surcharges was 17.2 percent, down 5.6 percentage points from 22.8 percent in 2020.Vanke said the decline in gross margin was mainly affected by the increase in the ratio of land price to sales price of settlement projects in recent years.The second is the decline in investment income. In 2021, Vanke achieved investment income of 6.61 billion yuan, 6.90 billion yuan less than the high level of 13.51 billion yuan in 2020.The main factors were lower gross margins on joint ventures and lower gains on disposal of subsidiaries.Another reason is in the provision of impairment. The annual report shows that since the second half of 2021, the market has declined significantly, and the decline has intensified in the fourth quarter. The company has conducted a comprehensive impairment test on assets at the end of 2021.Finally, In 2021, Vanke deducted 3.53 billion yuan of asset impairment, including 3.12 billion yuan of inventory impairment and 410 million yuan of other assets impairment, reducing the net profit of equity by about 2.55 billion yuan in total., YuLiang in the “shareholder” plate reflect on the company’s action and said the company in the industry earlier aware of high-speed growth will eventually end, but failed to resolutely get rid of high inertia, investment in some cities after high, the market judgment too optimistic, some investment expected no implementation of the project, led to the decline in gross margin.In addition to the 8 billion tuition report for diversified business, Yu Liang also added two points of reflection and review at the performance meeting.First of all, in terms of management, Yu Liang said that the company has a big problem of dispersion.In the past, the fully authorized and distributed mechanism helped the company to seize market opportunities quickly when the industry was in a good situation.However, as market competition intensifies and large and complex projects increase, some single companies and single regions do not have complete capabilities, showing uneven and large dispersion, dragging down the overall performance.In addition, in business, Vanke multi-track exploration at the same time to pay the cost, greater than expected.”In the past, the development business grew at a fast pace and took on related costs. After the market environment changed, the impact of these tuition fees on performance became apparent,” yu said.According to the cost method, the depreciation and amortization cost of these diversified businesses reached 8.06 billion yuan, which objectively had an impact on the reported profit.Red Star Capital Bureau learned that as early as 2014, Vanke proposed to shift its focus from “real estate development” to “real estate development, operation and service”, officially starting the exploration of diversified transformation.According to Vanke’s official website, its diversified business units include property service “AnythingCloud”, logistics and warehousing “Wanwei Logistics”, commercial development and operation “Yinli Group”, long-term rental apartment “Boyu”, as well as snow and ice, hotel holidays, education and pig breeding.To promote diversification, Vanke has introduced mechanisms such as “trial and error” and “horse racing” to stimulate diversified business development, in order to foster new businesses that can cope with the real estate slowdown.However, the 2021 annual report shows that vanke’s income from real estate development and related asset operations reached 429.93 billion yuan, accounting for 95% of the total revenue, and remains the largest source of income.Vanke, galloping ahead on the diversified track, seems to be only a “have” rather than a “excellent” course.For example, in the field of long-term rental apartments, Vanke is the earliest and most active responder.In 2017, Vanke made a “principal landlord” project — “Ten thousand Villages Plan”, which was specially designed for the reconstruction and upgrading of urban villages. The plan carried out fine operation of urban villages in the way of reconstruction after renting.Although the ideal is beautiful, in reality, Vanke seems to underestimate the difficulty of comprehensive renovation of urban villages, is too aggressive in financial calculation and construction schedule, and also falls into the public opinion vortex of “pushing up rent”.Yu Liang said at the performance meeting that the “principal landlord” model has cost Vanke a lot, and even today it is still “paying off debts”.”If there were no ‘primary landlord’ business in urban villages, Vanke could have started to make money from its long-term apartment business.”Can The Independent listing of All Things Cloud in Hong Kong boost earnings?Yu Liang said at the performance meeting that in the future, the company will take “whether each business can be listed independently” as one of the signs of success, hoping that institutional investors can reevaluate the comprehensive development and operation services of Vanke’s real estate. “Vanke looks at these business services in the way of raising his son.I hope vanke’s businesses can become promising sons.”The Red Star Capital Bureau noted that Vanke’s “All Things Cloud” had formally submitted its prospectus to the Hong Kong Stock Exchange on April 1.The prospectus disclosed that The revenue of All Things Cloud was 13.927 billion yuan, 18.145 billion yuan and 23.705 billion yuan respectively, with a growth rate of 30.6% and 30.3% in 2021 and 2020 respectively.Gross profit was $2.468 billion, $3.365 billion and $4.02 billion respectively, while profit for the year was $1.04 billion, $1.519 billion and $1.714 billion respectively.In 2019-2021, the revenue generated by Cloud property services (including residential property services under the community space residential and consumer services segment, and property and facilities management services under the commercial and urban space integrated services segment) is 9.82 billion yuan, 13.154 billion yuan and 16.651 billion yuan, respectively.Accounting for 70.5%, 72.5% and 70.2% of its total income in the same year.In addition, Sales revenue from Vanke Group, The company’s largest single customer, was 1.77 billion yuan, 2.798 billion yuan and 3.821 billion yuan, accounting for 12.7%, 15.4% and 16.1% of the company’s total revenue, respectively.It is not difficult to see that everything cloud is more dependent on Vanke Group.Whether the independent listing can bring a broader room for growth for Vanke and All Things Cloud remains to be verified by time.More than two months ago, Yu Liang shouted the slogan of “Black Iron Era” and “Fight with our backs” at vanke’s annual meeting.At the performance meeting, Yu Liang also set the task of Vanke in 2022 — “Stop the slump and stabilize, and improve steadily”.According to vanke’s annual report, Yu voluntarily gave up all his bonus in 2021. His annual pre-tax salary was 1.547 million yuan, up from more than 12 million yuan in the previous two years.Zhu Jiusheng, president and director of Vanke, saw his annual salary drop from 11.23 million yuan in 2020 to 5.927 million yuan last year.Vanke’s eight directors, supervisors and senior managers received a total pre-tax compensation of 34.096 million yuan, down 50% year-on-year.Perhaps as Yu liang said at the annual meeting at the beginning of the year, the compensation system should also establish new anchors to adapt to the “black iron era.”At the same time, to boost market confidence, Vanke also along with the annual report to throw out a large buyback program.Red Star Capital Bureau learned that Vanke plans to repurchase some A-shares in the next three months at an opportunity, with the amount of repurchase being 2 billion to 2.5 billion yuan. The repurchase price is no more than 18.27 yuan per share. It is expected that the total share capital to be repurchased will not be less than 109 million yuan, and all the repurchased shares will be used for sale.In addition, Vanke also increased this year’s dividend strength.The proportion of dividend is expected to jump to 50% of the net profit returned to the parent, and the total dividend is expected to be 11.28 billion yuan.Red Star news reporter Yu Yaoqiang Sub-milling intern Zhao Yiyi Lei Xuan editor Tao Yueyang (download Red Star news, report the prize!)