Shimao Services strives for quality development in 2021: Strong synergies among four core business segments, city services saw leaping growth
On 22 June 2022, Shimao Services (873.HK) released the audited annual results of 2021. For the year ended 31 December 2021, Shimao Services recorded revenue of RMB 8,343.4 million, representing a year-on-year increase of 66.0%. Profit for the year was RMB 1,216.8 million, representing a year-on-year increase of 68.0%.
In 2021, the four core business segments developed steadily and created strong synergies. Specifically, property management services was the major revenue contributor which generated RMB 4,169.6 million, accounting for 50.0% of total revenue. Community value-added services contributed RMB 2,448.2 million to revenue, accounting for 29.3% of total revenue; whereas revenue contribution of value-added services to non-property owners decreased gradually to 10.4% of the total revenue, which amounted to RMB 870.5 million. Revenue from city services achieved leapfrog growth, reaching RMB 855.1 million.
Contracted gross floor area (“GFA”) exceeded 300 million sq.m., of which over 75% were from independent third-party developers
Shimao Services has strategically implemented horizontal integration through acquisitions and third-party bidding expansion to expand the area under management rapidly, diversify the management operation, and thereby solidifying the business foundation of the property services.
As of 31 December, 2021, Shimao Services achieved contracted GFA of 308.0 million sq.m, representing a year-on-year increase of 53.2%. The GFA under management amounted to 240.5 million sq.m., representing a year-on-year increase of 64.6%. Shimao Services has been managing 830 properties in 107 cities across the country, covering residential buildings, colleges, industrial parks, and hospitals.
It is worth mentioning that the Group’s GFA under management from third parties and the contracted GFA from third parties were 75.8% and 75.3% respectively, where both exceeded 75%. The share of non-residential properties in GFA under management and contracted GFA was 42.3% and 40.0%, which were both not less than 40%.
On the back of its achievements, Shimao Services has developed independent development capability and established its unique market expansion system, effectively cultivating and enhancing its outreaching capabilities while expanding its markets in areas of non-residential projects. In 2021, the Group attained exceptional performance in third-party bidding expansion. 61.6 million sq.m. were added to its area from third-party bidding expansion, representing a year-on-year increase of 162.1%. It obtained quality bids such as Beijing University of Posts and Telecommunications and other high-quality customers.
During the market expansion, Shimao Services implemented a centralization strategy, prioritizing its efforts in advanced cities. The group has established five key cities in 2021 and regarded them as its foothold to execute an intensive development plan. In those cities where it has established presence, the Shimao Services continuously increased its management efforts and business coverage to maximize the economies of scale of individual cities and unleash their values. Taking Hangzhou as an example, the contracted GFA increased from 2.3 million sq.m. in 2019 to 15.4 million sq.m. in 2021, achieving a tremendous growth which significantly increased the comprehensive business operation capabilities of Hangzhou.
In 2022, Shimao Services will continue to expand in the market and acquire more third-party projects. It will also continue to enhance its capabilities and fully upgrade its market expansion strategies to boost its business competitiveness.
Building professional capabilities by strategizing for key fields such as city services and elderly home care services
While growing in scale, Shimao Services also highly values the development of professional capabilities and implements the vertical integration strategy. In August 2020, Shimao Services cooperated with Zheda Sinew Group and deeply cultivated the service subdivision of college campuses. Since 2021, Shimao Services has developed professional capabilities through investment expansion to strategize for key fields such as city services, elderly home care services, and hospitals.
Since 2021, Shimao Services has established equity cooperation with 9 companies, including 6 property services companies, Zhejiang Yefeng Property Service Co., Ltd, Wuhan Ruizhengxindadi Property Management Co., Ltd, Suzhou Tianxiang Real Estate Management Co., Ltd, Hunan Jili Property Management Co., Ltd, Quanzhou Youda real Estate Management Co., Ltd, and Zhejiang Xindadi Property Management Co., Ltd. In specific, Hunan Jili Property Management Co., Ltd. has a leading position in the Hunan hospital property market, which has been serving the Hunan Xiangya and Provincial hospital systems, thus will enhance the hospital property service capabilities of Shimao Services.
On 29 October 2021, on the first anniversary of its listing, Shimao Services officially introduced the city services business and positioned itself as a "municipal services manager ", launching a system specifically for the research and development of city services. It also committed to realizing the development vision of "making the city better with services". To better promote the implementation of the city services business, Shimao Services has established a city services development center and city services professional companies such as Space Manager and Smart Manager.
In terms of city services business, after the preliminary stage, Shimao Services has already expanded to 15 model cities including Sucheng District, Suqian City, and Acheng District, Harbin City. Since April 2021, through the cooperation with Shi Lu Yuan and Jinshatian, Shimao Services has rapidly built up its comprehensive capabilities of city services and tapped into core markets such as the Greater Bay Area and Yangtze River Delta, building a management foundation and talent pool to promote its business nationwide. Leveraging its dominant position of the two companies in the city services and environmental sanitation businesses, Shimao Services will further expand its market share, quickly roll out the Group’s development strategies and grow bigger and stronger with its city services business.
Since the start of 2022, Jinshatian, a subsidiary of Shimao Services, has found much success in market expansion. It was responsible for the domestic waste transfer projects in Chongli District and Xuanhua District of the Zhangjiakou Zone, where the Beijing Winter Olympic Games venues were. It also won bids for a number of urban sanitation integration projects from across the country. These projects include the ones in the Yiyang County, the Gande township of Anxi County, the Lantian County, the Shuangdun township of Changfeng County, the Yang County, the Bayi township of Nanchang County and Fugu County, where some were multi-million-dollar projects. Among these, the total contract value of the relevant projects in Lantian County and Yang County amounted to RMB348 million and RMB122 million, respectively.
Shi Lu Yuan, another subsidiary of Shimao Services, has successfully won and renewed the contract for sanitation services in the Jinhaihu New District of Guizhou Province’s Bijie City. While expanding the service area for this project, the total contract amount also increased to RMB 120 million. With the latest renewal, Shi Lu Yuan is expected to provide continuous services for 10 years. In May, Shi Lu Yuan successfully won and renewed the contract for the sanitation operation service project in Liantang Jiedao, Luohu District of Shenzhen, with a total contract value of over RMB 90 million. After the renewal, it is expected to provide continuous service for six years.
Shimao Services is also promoting the "property services + elderly services" model through its cooperation with Chun Xi Tang, an elderly care service company. Operating in an asset-light model, this lays out a niche track for Shimao Services into elderly home care services.
Based on the investments and expansions mentioned above, Shimao Service has effectively enhanced its scale and density in key regions with improved regional comprehensive capabilities on the one hand, and has rapidly established its city services business network to successfully position itself in key business lines of value-added services with developed core capabilities on the other.
Shimao Services integrated and enhanced all the companies it acquired. Through the integration of finance, human resources, risk control and business information, all of the target companies were able to align with Shimao Services’ standards. By implementing the internal marketization policy, sharing resources and achieving comprehensive empowerment, target companies were able to realize higher operational capability, service quality and customer satisfaction.
Obtaining more area and clients to expand Various Business Value-added Services
Market expansions have allowed Shimao Services to gain more area and users, both of which would, in the long run, be the new engines for value-added service and build a lasting competitive edge for the Company. The rapid expansion of Shimao Services in terms of GFA and households covered have created a good foundation for the development of value-added services.
In terms of community value-added services, Shimao Services develop on the layout of users and assets, paying attention to high potential fields such as local lifestyle, community education, home furnishing, and home retirement to build its core competitive ability. In FY2021, Shimao Services’ revenue from community value-added services was RMB2,448.2 million, up 53.0% YoY, achieving high growth.
At the same time, Shimao Services also actively expands into a rich variety of value-added services, and providing these to non-residential projects such as universities, hospitals and industrial parks.
In FY2021, campus value-added services achieved a revenue of RMB462.2 million - an increase of 100.3% YoY. Relying on Zheda Sinew, Shimao Services provides teachers and students with various value-added services, including catering services, accommodation services, business services and other kinds of value-added services around campus life. In the future, Shimao Services will base on its campus group dining business to grasp the general trend of “socialization reform” of campus logistics and focus on developing the group dining business. On top of growing the scale further, the Company will also increase the density of its regional group dining projects. With the campus services being supplemented by group dining businesses for enterprises and institutions, hospitals and various parks, profitability and industry competitiveness of the group dining business will rise.
Forming the Combination of "Four Business Segments" and Developing "High-Quality Growth”
In the future, Shimao Services is committed to forming a combination of "four business segments". In addition to continuously improving the three existing business segments of comprehensive property management services, diversified value-added services and city services, the Company is developing the business of digital technology, which will take the form of a professional company in doing model trial runs and business cultivation.
In 2021, Shimao Services fully dived into building an "user-responsive" organization. Through high-quality services, customer satisfaction and stickiness were enhanced. The achievement of a stand-out score of 94.2 in customer satisfaction created more opportunities for promoting value-added services. In 2022, Shimao Services will pay even more attention to business quality, consolidation of business depth, exploration of more intrinsic value, and development of "high quality growth".
To be more specific, in terms of business scale, the total volume, structure and quality indicators will all be taken into account. In respect of operational capability, more attention will be paid to operational efficiency, operating cash flow and long-term sustainability. With regard to customer value, higher value will be created by improving service satisfaction and customer stickiness. As for operational management, the Company will approach from all four aspects of strategy, operation, organization mechanism and talents to achieve high quality operational management.
The Management of Shimao Services believes that with the encouragement from national policies and the opportunities from market development, the property service industry is in its best times over its 40 year-span of development.
Looking into the future, Shimao Services is positioned as a leading comprehensive property management and community services provider in China. The Company aspires to be among the leaders of the property management industry in the future, and is committed to become a leading “all-scenario” service provider of everyday city life in China. The Company is devoted to creating a better life for customers.
23/06/2022 Dissemination of a Financial Press Release, transmitted by EQS Group.