2 Financial Highlights 3 Corporate Information 5 Letter to Shareholders 9 Directors and Senior Management Proles 14 Corporate Governance Report 23 Directors’ Report 47 Independent Auditor’s Report 51 Consolidated Statement of Prot or Loss 52 Consolidated Statement of Comprehensive Income 53 Consolidated Balance Sheet 55 Consolidated Statement of Changes in Equity 57 Consolidated Statement of Cash Flows 58 Notes to the Consolidated Financial Statements 125 Financial Summary 126 Property Prole FINANCIAL HIGHLIGHTS For the year ended 31 December 2016 2015 Change RMB’000 RMB’000 (%) Revenue 5,270,090 3,378,217 56.0% Gross profit 1,085,339 1,088,246 (0.3%) Profit before income tax 944,311 821,271 15.0% Profit for the year 538,328 393,649 36.8% Attributable to: owners of the Company 434,319 401,030 8.3% Total assets 14,806,697 13,195,623 12.2% Cash and cash equivalents 2,417,219 1,689,142 43.1% Total bank and other borrowings 3,629,232 3,220,540 12.7% Earnings per share for profit attributable to owners of the Company (Restated) – Basic and diluted (expressed in RMB cents per share) 12.23 12.27 (0.3%) 2 REDCO PROPERTIES GROUP LIMITED ANNUAL REPORT 2016 CORPORATE INFORMATION BOARD OF DIRECTORS LEGAL ADVISORS Executive Directors Sidley Austin 39th Floor, Two International Finance Centre Mr. WONG Yeuk Hung Central, Hong Kong Mr. HUANG Ruoqing Mr. TANG Chengyong REGISTERED OFFICE Independent Non-executive Directors Cricket Square Hutchins Drive Dr. WONG Yau Kar, David BBS, JP P.O. Box 2681 Mr. CHAU On Ta Yuen SBS Grand Cayman, KY1-1111 Mr. YIP Tai Him Cayman Islands Mr. CHOW Kwong Fai, Edward JP HEADQUARTERS AND PRINCIPAL PLACE OF COMPANY SECRETARY BUSINESS IN THE PRC Mr. CHAN Hing Chau 28th Floor, Block B, The Rongchao Tower No. 6003 Yitian Road AUTHORISED REPRESENTATIVES CBD, Shenzhen Mr. HUANG Ruoqing People’s Republic of China Mr. CHAN Hing Chau PRINCIPLE PLACE OF BUSINESS IN HONG KONG AUDIT COMMITTEE Room 2001-2, Enterprise Square 3 Mr. CHOW Kwong Fai, Edward JP (Chairman) 39 Wang Chiu Road, Kowloon Bay Mr. YIP Tai Him Kowloon, Hong Kong Dr. WONG Yau Kar, David BBS, JP Mr. CHAU On Ta Yuen CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE REMUNERATION COMMITTEE Appleby Trust (Cayman) Ltd. Mr. YIP Tai Him (Chairman) Clifton House, 75 Fort Street Mr. CHAU On Ta Yuen P.O. Box 1350 Mr. HUANG Ruoqing Grand Cayman, KY1-1108 Cayman Islands NOMINATION COMMITTEE Mr. HUANG Ruoqing (Chairman) Dr. WONG Yau Kar, David BBS, JP Mr. CHAU On Ta Yuen AUDITOR PricewaterhouseCoopers REDCO PROPERTIES GROUP LIMITED ANNUAL REPORT 2016 3 CORPORATE INFORMATION HONG KONG SHARE REGISTRAR Computershare Hong Kong Investor Services Limited Shops 1712-1716 17/F, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong PRINCIPAL BANKERS Bank of China Hang Seng Bank Wing Lung Bank Bank of China (Hong Kong) Limited China Minsheng Bank INVESTOR RELATIONS Email: [email protected] Fax: (852) 2758 8392 STOCK CODE 1622 WEBSITE www.redco.cn 4 REDCO PROPERTIES GROUP LIMITED ANNUAL REPORT 2016 LETTER TO SHAREHOLDERS Dear Shareholders, Redco Properties Group Limited (the “Company”) and its subsidiaries (the “Group”) adhere to the principle of stable and pragmatic operation consistently. Under the continuous favourable market condition which brings optimal opportunities, the Group recorded over RMB10 billion worth of contracted sales during Year 2016, representing a significant year-on-year increase of 149.8% and a leaping growth of our business. Year 2016 was a good year for the real estate industry, and yet there have been some underlying concerns in terms of high land costs, creating a dilemma of whether to take action or not when the flour becomes more expensive than the bread. Facing such dilemma, the government has launched a series of control policies in a timely manner to curb the irrational and overheated market. Such control policies inevitably cause significant impact on the industry development; however, taking into account the new trend of overall market development, we are confident of our ability to take on such market trend. From various analytical data, we have noted that although government policies and demographic dividend are no longer supporting the increase in both the real estate supply and prices, there is no sign of any decline in terms of industry development; the market demand and purchasing power of people remain well supported, backing up the stabilization of total volume of the industry and pushing it towards the inventory-building stage. The industry development is supported by the three new key factors, i.e. the urbanization development, industry status and policy directions, and the monetary supply. Based on such estimations and prevailing optimistic sentiment towards the real estate market, Redco shall persist in furthering the real estate development business and offer even better products to our customers. REDCO PROPERTIES GROUP LIMITED ANNUAL REPORT 2016 5 LETTER TO SHAREHOLDERS At the same time, we are aware that as the industry enters into the inventory-building stage, the customers are developing new and diversified demands towards city infrastructures, including community services, health and elderly infrastructures, cultural and traveling businesses, education, and financial and wealth management services. Based on past experiences of the developed countries, we have noticed that as the real estate development matures, the scale of real estate market, on a broader sense, will not only maintain its current level, but will also solidify as one of the economic pillars based on the vertical and horizontal extension of services. Going forward, the industry development will be based on a more diversified services. Redco will seize this market trend, focusing on real estate development as its core business and diversified development as its support, to further expand our scale of operation as well as our earnings. BUSINESS REVIEW Market and Sales Performance 2016 has been a year of the most changes in the PRC real estate policies, the largest transaction volume as well as record-high land costs and housing prices. During the first three quarters, “inventory elimination” has been the primary theme of policies, with various cities across the nation encouraging its citizens to buy houses while the government lowers the land supply, and offer more favourable credit policies in an effort to eliminate inventory, such effort has shown significant effects. During the fourth quarter, the government policies took a sudden turn, with dozens of cities launching or tightening the limitation on purchase and credit on real estates, in an attempt to curb the overheated market. Nonetheless, Year 2016 has become the year of record-high real estate transactions across the nation in terms of floor area and transaction amount since Year 2013. The Group persist in implementing the investment layout strategy of “expansion into the first-tier cities and further development into the strategically targeted second-tier cities (大力拓展一線城市,深耕已進入的強二線城市)”, we continued to focus on the central cities development, such as Shenzhen, Guangzhou, Shanghai, Hefei, Nanchang, Jinan and Tianjin with high growth potential and strong demand, and ventured into the Australian international market in mid-year, and entered into the core city of the Pearl River Delta, i.e. Zhongshan by the end of year. The Group adhere to the principle of improving the living environment of home-buyers by constructing upgraded products for first-time purchasers and first-time upgraders. The operating principles consistently upheld by the Group closely match with the market development direction and demand in 2016, achieving a leaping growth in terms of results performance of the Group. During 2016, the Group achieved contracted sales of RMB10,134.7 million, representing a year-on-year increase of 149.8%; area of completed and delivered construction was 647,822 sq.m., representing a year-on-year increase of 49.0%. Financial Management The Company continued to maintain a steady financial policy, and abide to its healthy and reasonable capital structure and debt level. The Group’s net gearing ratio continued to drop amid its rapid growth of business, down from 23% on 31 December 2015 to 0.8% on 31 December 2016. 6 REDCO PROPERTIES GROUP LIMITED ANNUAL REPORT 2016 LETTER TO SHAREHOLDERS Land Bank Following the guidance of the investment planning strategy of “expansion into the first-tier cities and further development into the strategically targeted second-tier cities (大力拓展一線城市,深耕已進入的強二線城市)”, the Group has clearly focused expansion and further developments on the key cities in the groups of cities located in the Pearl River Delta Region, Yangtze River Delta Region, middle reaches of the Yangtze River and the Bohai Rim region. The Group adhered to the following favourable strategies on land acquisition methods: (i) forming alliance(s) with stateowned enterprise(s) with strong capabilities to benefit from complementary advantages and obtain quality projects for principal operations; (ii) offering management experience for external replication by leveraging professional experience in the real estate development sector to acquire more projects in the same city or assist the government in developing first grade land parcels; (iii) improving and upgrading product lines constantly to enhance operation management standards persistently and leading the market in product capability and operational efficiency. In 2016, the Group has purchased 10 pieces of construction land in Nanchang, Jinan, Yantai, Hefei and other cities where we have put efforts in development, and further entered into overseas market through deploying resources in Australia in July. It has established business in Zhongshan in December to further expand its business in the groups of cities located in the Pearl River Delta Region. As of 31 December 2016, the Group’s total land bank amounted to 3.5 million sq.m., forming the base for development by the Group in the next three to five years.