"First let's talk about the data of Henglong before acquiring Haoyu Construction.
As of the end of August last year - that is, before the acquisition of Haoyu - Henglong had total assets of 17.3 billion and total liabilities of 7.5 billion.
There are also Off-Balance Sheet Liabilities 2 billion."
He glanced at Zhao Chen, and Zhao Chen nodded, indicating for him to continue.
"In September, we acquired Haoyu Construction.
The asset situation of Haoyu has just been mentioned by Mr. Chen - total assets are 5.5 billion, total liabilities are 4.5 billion, Off-Balance Sheet Liabilities is 200 million. The purchase price is 100 million."
Chen Qiming picked up the pen and wrote on the whiteboard:
"The Henglong entity before the acquisition: total assets 17.3 billion, total liabilities 7.5 billion, Off-Balance Sheet Liabilities 2 billion."
"Add Haoyu Construction: total assets + 5.5 billion = 22.8 billion, total liabilities + 4.5 billion = 12 billion, Off-Balance Sheet Liabilities + 200 million = 2.2 billion."
He paused. "But here we need to subtract 100 million yuan for the acquisition fee. The acquisition fee is paid in cash, so the total assets will be reduced by 100 million yuan - 22.7 billion."
Meeting Room was quiet. Zhao Chen leaned back on the chair and looked at the numbers on the whiteboard.
22.7 billion total assets.
12 billion total liabilities.
2.2 billion Off-Balance Sheet Liabilities.
Chen Qiming continued, "This is the data when we first acquired it in September. Next, we need to add the operating changes in the past four months."
He picked up the pen and continued writing on the whiteboard:
"Haoyu Construction Changes in the past nearly four months: total assets dropped from 5.5 billion to 5.4 billion--
Mainly due to the sale of the headquarters building and other non-Core Assets, cash increased, but fixed assets decreased, and the overall change was not significant.
Total liabilities dropped from 4.5 billion to 4 billion - 500 million were repaid.
Off-Balance Sheet Liabilities dropped from 200 million to 0."
"Changes in the Henglong entity in the past three months: profit increased by 150 million, Off-Balance Sheet Liabilities 2 billion was completely cleared - a 100 million impairment occurred here."
He stopped and made a summary list on the whiteboard:
As of December 31, 2017:
Total assets: 17.3 billion + 5.4 billion + 150 million = 22.85 billion
Total liabilities: 7.2 billion + 4 billion = 11.2 billion
Off-Balance Sheet Liabilities:0
Chen Qiming put down the pen, turned around and looked at everyone in Meeting Room:
"As of December 31, 2017, Henglong Group had consolidated total assets of 22.85 billion, total liabilities of 11.2 billion, and Off-Balance Sheet Liabilities was zero.
Net assets are 11.65 billion, with a debt ratio of 49%, successfully completing the goal of reducing debt at the beginning of the year."
Meeting Room was quiet for three full seconds.
Then there was thunderous applause.
After calming down, Liu Mingyu was the first to speak, "11.65 billion net assets? I remember that before the acquisition of Haoyu, Henglong's net assets were less than 10 billion."
Chen Qiming nodded. "Yes. When Haoyu was acquired, Haoyu's net assets were 1 billion."
Zhao Chen leaned back on the chair, looked at the numbers on the whiteboard, and said nothing.
Net assets of 11.65 billion and total assets of 22.85 billion. The asset-liability ratio is just 49%.
This number was better than he expected.
When he first took over Henglong a year ago, the total assets were less than 15 billion, the total liabilities were more than 9 billion, and there were still 3 billion Off-Balance Sheet Liabilities, and the net assets were less than 6 billion.
Now, one year later, the net assets have more than doubled, Off-Balance Sheet Liabilities has been cleared, and the asset-liability ratio has dropped to less than 50%.
All the operations of this year - Strategic Contraction, Rights Issue, selling properties, collecting Haoyu, and clearing the balance sheet - are all reflected in this set of numbers.
Su Wantang said softly next to him:
"The asset-liability ratio is 49%. In the real estate industry, this level is definitely second to none."
Zhao Chen nodded. He looked at Chen Qiming:
"Director Chen, thank you for your hard work. These data are organized very clearly."
Chen Qiming breathed a sigh of relief and sat down.
Zhao Chen looked around Meeting Room, his voice was not loud, but every word was very clear:
"2017 is a year of transformation for Henglong.
We cleared all Off-Balance Sheet Liabilities, shrank our main real estate business, and freed up funds to do two things - invest in new tracks and optimize our asset structure."
He paused. "The main real estate business profit for the whole year was 550 million, which was lower than in 2016.
But our net assets have increased from less than 6 billion to 11.85 billion. This exchange is worth it."
He looked at Chen Wei: "Haoyu Construction, what is the goal for 2018?"
Chen Wei stood up. "In 2018, Haoyu plans to reduce debt by 3 billion.
The current total debt is 4 billion, which has dropped to about 1 billion. All six projects under construction have been completed and delivered.
For the remaining land reserves, we will decide whether to start construction based on market conditions."
Zhao Chen asked, "Reducing debt by 3 billion, will the cash flow be enough?"
Chen Wei said, "Enough. After the completion of the six projects under construction, it is expected that about 4 billion yuan of funds will be recovered.
Return 3 billion and keep 1 billion as Working Capital.
In addition, the previously sold non-Core Assets has already collected some cash, which is enough to cover this year's operating expenses."
Zhao Chen nodded. "Okay. Haoyu, you can go ahead and do it. If you need support, just come to me directly."
Chen Wei nodded and sat down.
Zhao Chen turned to Song Zhongping: "As for the main real estate business, what are the plans for 2018?"
Song Zhongping coughed lightly. "Shrinking is still the main theme.
In 2018, we plan to no longer add new land reserves, speed up the turnover of existing projects, and collect funds as soon as possible.
The goal is to maintain annual revenue around 8 billion and strive to achieve a net profit of more than 500 million.
The debt of 7.2 billion dropped to less than 4 billion."
Zhao Chen asked, "Can the profit reach 500 million?"
Song Zhongping nodded:
"Profits were low in the second half of last year, mainly due to the National Day discounts.
Although there will be fewer launches this year, we won't have such a big discount this year, and the profit margin will be back to some 50 million yuan, so it won't be a big problem."
Zhao Chen thought for a while and then said:
"As my main business, real estate, I don't ask for growth. I just want it to be stable.
All the funds and energy freed up will be invested in the new track."
He looked at everyone in Meeting Room:
"In 2018, Henglong will do two things.
First, reduce the overall debt to less than 20%. Second, achieve results on the new track."
He paused and his voice slowed down a bit. "The dividend period for real estate is still a few years away.
But these few years are the window period for our transformation. Once the window period is over, it will be too late to change."
Meeting Room was quiet for a few seconds.
Chen Xi is away, and her work has been taken over by Su Wantang.
So she added next to her, "Zhao Zong means that in 2018 we do not seek speed, but stability. Lay a good foundation first, and then consider expansion."
Zhao Chen glanced at Su Wantang and nodded.
He leaned back in his chair, glanced at everyone in Meeting Room, and suddenly remembered something.
"By the way, there's one more thing."
He put down the teacup, with a hint of smile in his voice,
"In February last year, I promised one thing - if the group's Consolidated Statements debt ratio can be reduced to less than 50% by the end of the year, all employees, including everyone here, will receive a sum of Special Bonus.
The amount is 20% of the individual's annual total salary, which is paid in conjunction with the year-end bonus.
Now the debt ratio is 49%, Finance Department is ready to calculate the bonus."
Meeting Room suddenly became quiet.