Shimao Services Holdings Limited (Shimao Services or the Company; HKG:873), a leading comprehensive property management and community living services provider in China, has announced its 2021 interim results, reporting an operating revenue of RMB 4,234 million, a year-on-year increase of 171%. Profit attributable to equity shareholders of our Company was RMB578 million, a 136% surge year-on-year. The Company’s GFA under management and various operating indicators also swelled markedly, accomplishing strong growth during the reporting period.
During the results announcement press conference, Mr. Hui Sai Tan, Vice Chairman of the Board and President of Shimao Group, and Chairman of the Board of Shimao Services, stressed that Shimao Group has always affirmed Shimao Services as an important solid wing of the Group’s “big aircraft strategy”. He remains optimistic toward the entire property service industry, and will continue to invest resources Shimao Services in the future with a variety of business opportunities. The recent announced nationwide policies would help regulate property enterprises to better serve cities, communities, and people. In response to the national policies in an active manner, Shimao Services will not only provide comprehensive property management, but also strives to provide community life services and expand university campus and city services. It is committed to upholding longstanding values and becoming China’s leading provider of comprehensive city life services.
Contracted area expanded 91% to over 239 million sq. m.
In the first half year, the Company’s GFA under management increased rapidly to 175 million sq. m., and contracted GFA soared by 91% year-on-year to 239 million sq. m. Of the contracted GFA, those from third-party market increased notably to 69%. In the first half of 2021, projects from the third-party bidding already exceeded the entire last year, with 26.11 million sq. m. added, up nearly 29 times as compared with the same period last year and 18% higher than the entire previous year. In the first half of 2021, Shimao Services expanded coverage to more types of properties via participating in greater varieties of tenders, as such enlarged its GFA under management and gained improved market expansion capabilities.
Shimao Services is one of the important wings of Shimao Group’s “big aircraft” strategy. Shimao Group, a leading and fast-growing property developer, has brought sufficient reserve projects to Shimao Services. Among the projects from Shimao Group, up to 82.4% are in first- and second-tier cities in China with high-quality users and assets locked in, giving more room for the Company’s value-added services to tap into. In fact, Shimao Group’s projects target mid-range to high-end customer groups, meaning the Company can in turn secure return from higher property management fees, and also stimulate demand for more diversified and all-round value-added services, in other words, seizing higher margin business opportunities. Leveraging the synergies with Shimao Group’s business layout, Shimao Service’s projects located in the most economically developed and fastest-growing regions including Yangtze River Delta, the Greater Bay Area, Bohai Economic Rim, and Central and Western China.
Always putting users first and quality as the core, Shimao Services boasted customer satisfaction level at 91%, 12 percentage points higher than the industry average. The average monthly property management fee of third-party bidding projects also reached new high at RMB 2.2 per sq.m. The contract renewal rate was near 100% during the reporting period. All business indicators remained strong braced by the Company’s stable and healthy operational foundation.
Strong synergies among four core business segments, cultivate city services business
In the first half of 2021, property management services achieved revenue of RMB 2,322 million, a 183.3% year-on-year increase, accounting for over 54.8% of the Company’s revenue. Revenue of the community value-added services segment also increased significantly, by an impressive 233.9% year-on-year, to RMB1,393 million, accounting for 32.9% of the Company’s revenue. In addition, city services have become the Company’s new growth engine. In the first half of 2021, it generated revenue of RMB134 million, accounting for 3.2% of the Company’s revenue, with an expected promising growth in the future. Value-added services to non-property owners realized revenue of RMB384 million, up by 17.3% year-on-year.
The contribution from value-added services to the Company’s results has continued to increase and the service portfolio has become stronger. The Company has built a “1+N+X” product matrix for its new retail business and achieved rapid growth at the launch of marketing activities targeting first-tier cities. As for campus value-added services, Shimao Services realized all-round empowerment which has allowed it to break management boundaries and advance outside original districts. As a result, it obtained more large and good quality orders during the period. Regarding smart community solutions, the Company realized stable business expansion with reach extended from smart communities to covering multiple business scenarios. It also continued to forge more strategic partnerships to drive continuous growth in revenue.
Shimao Services is committed to developing city services into a new future growth driver. From strategic positioning and planning to detailed product system design and project implementation, the product system covers the upgrade, management and maintenance of city facilities, comprehensive urban governance, urban space resource operation, city smart platforms and urban renewal services.
Shimao Services, through mergers and acquisitions, has also built presence in the two key areas – Yangtze River Delta and the Greater Bay Area. Such moves have allowed it to develop core integrated strengths in city services and also extend the coverage of its city service products to the entire country. The number of expansion projects had increased from three in 2020 to nine just in the first half of 2021, with two projects already launched. Take Sucheng District in Suqian City as an example, the district, through formulating comprehensive strategic cooperation plan, has created benchmark projects, replicated them in multiple regions and implemented them in batches. It has executed projects such as urban common space management, government construction and residential projects, as well as won the bid for Jiudu Park, a landmark integrated common space management project in the city. It is set to take over more urban spaces and expand correspondingly the urban space service business in the future.
Improve third-party bidding capability comprehensively, actively apply renewal strategies on mergers and acquisitions
During the period under review, Shimao Services accelerated expanding and improving the quality of third-party bidding, and in turn saw its all-round capabilities much enhanced. More property varieties were covered. Quality and well-known projects served as showcases of strong exemplary effect. During the period, the Company developed residential projects quickly and secured more high-quality projects such as Wenzhou Grand Mansion and Jiangnan Mingyue Mansion in Shaoxing. As for clients in the higher education sector, having proved that it has taken its development capabilities to a new level, the Company secured more bigger and well-known projects, such as the Beijing University of Posts and Telecommunications, Tianjin University and Minzu University of China (Fengtai campus). As for other non-residential projects, it covered more property types, such as benchmark projects a water treatment plant in Liede, Guangzhou and Line 2 of the Chengdu Metro.
It is benefited by the Company which built standardized capabilities applying formative thinking. It also established four major systems. First, an end-to-end product system to iterate original categories and devise a new product spectrum. Secondly, an expanded network beyond central cities to build a project details database and for connecting with important cooperative channels. Thirdly, a formidable sales team set up through its “100 Leaders Scheme” to assure its sales capabilities, and the last, a full-cycle digital-technology-supported tracking and deployment system that covers from collecting information to when a contract is signed.
Regarding mergers and acquisitions, Shimao Services embraces M&A “integration” system, and it is the only in the industry that engages post-investment management right at the initial stage, conducting business due diligence and preparing integration plans in advance. During the period under review, in addition to strengthening that system from precise pre-investment evaluation to integrated post-investment management, it also actively implemented renewal strategies, including upgrading organizational capabilities and management mechanisms, to ensure it matches the Company’s overall strategy, optimizing management structure and strengthening business units based on the characteristics of the business. Moreover, to enhance professional capabilities of specific segments, efforts were made including strengthening the market dominance of its original businesses, and horizontally expanding into similar fields, like Zheda Sinew expanding from campus to industrial parks. In addition, reinforcing the synergistic project expansion mechanism to give full play to the strengths of the companies acquired in niche markets, with the headquarters coordinating taking advantage of their niche edges to realize expansion of specific businesses.
For example, Shimao Services completed the acquisition of Shenzhen Shenxiong Environmental Co., Ltd. and Yefeng Property in April and May 2021, respectively, and its three-month panorama plan is progressing smoothly. Shimao Services has built an industry benchmark for integration and upgrading capacity. Since July 2019, Shimao Services has been cooperating with enterprises, which has significantly empowered efficiency and generate remarkable performance improvement. Hence, the more integrated the companies are into Shimao Services’ operation and management system, the more obvious would be the improvement in their results.
Property management industry looking at the blue ocean, pushing forward with developing five key capabilities extensively
Although the property management industry has a 40-year-old history and its important role will continue in the future, it is very much still in the initial development stage with the blue ocean just opening for it to tap. Demand of the country and regions for refined social and urban governance has kept growing and property owners also have become more and more discerning when it comes to safeguarding and maximizing the value of their property assets throughout their lifecycle. Thus, the physical boundary and business scope of the property management industry has continued to expand, while the originally fragmented and disorganized supply side of the industry has gradually transformed managing higher quality development. With competition barriers rising gradually, resources and markets are leaning towards leading enterprises.
The strategy of Shimao Services is to uphold its longstanding values and realize sustainable and quality growth. Hence, Shimao Services is committed to building five key capabilities, including stepping up development of central cities, building product system based on user demand, integrating cost management along the supply chain, enhancing delicacy management and advancing innovative development of its talent system, all to the end of promoting the Company’s continuous growth.
Regarding operational capacity, determined to become an industry leader in adopting delicacy operation and management, the Company continued to iterate and update its internal marketization strategy. Shimao Services boasts the most outstanding operational capacity in the industry and is shrewd at integrating cost management capability along the supply chain. It has also optimized the cost and enhanced the efficiency of the supply chain of “security, cleaning and gardening” businesses through lean management and technology empowerment.
Implement five major strategies, strive to become the industry leading player by 2023
Before the results announcement teleconference and webcast closed, the management elaborated on the Company’s future medium-to-long-term strategic goals. In the next three years, the Company will continue to build its four business segments, namely integrated property services, diversified value-added services, smart city services and digital technology business, as well as promote development of the 5+5+N business units.
Shimao Services’ five major strategies include “horizontal integration”, which aims to promote business development through mergers and acquisitions and scalable growth, and strive to promote “related diversification strategies” to achieve organic growth. It will continue to focus on improving its “vertical integration strategy” including developing key business areas aiming for sophistication and specialization, enhancing “centralized strategy” to improve project density, as well as implementing “updated strategy” to achieve agility as an organization, and also iteration and upgrade.
Looking ahead, Shimao Services will push to expand business scale through “internal growth and external expansion”, as well as to enhance quality and efficiency. To develop professional capabilities, it will establish presence in high potential businesses with users and assets as its service focus as always. Its goal is to become a leading comprehensive city life services provider in China and a leading player in the property management industry by 2023.
About Shimao Services Holdings Limited (HKG:873)
Established in 2005, Shimao Services is China’s leading provider of integrated property management and community life services. It is also one of the important wings of Shimao Group’s “big aircraft” strategy. Shimao Services takes the “Smart Maker of Good Life” as its brand concept and implements the “iBlue Strategy”, focusing on the four core high-energy city clusters in the Yangtze River Delta Region, Central and Western China, Southern China and Bohai Economic Rim. As of December 2020, the company had more than 530 properties under management, 210 million square meters of contract area, covering residential, schools, government and public facilities, health care centers and hospitals, VIP lounges in waiting rooms, etc, and provided comprehensive property management, community life services and non-owner value-added services for nearly 2.4 million owners and users.
For more information, please visit Shimao Services’ website: https://www.shimaofuwu.com/