Century 21 China Real Estate Reports Third Quarter 2013 Unaudited Financial Results

BEIJING - Nov. 14, 2013 // PRNewswire-FirstCall // - IFM Investments Limited (NYSE: CTC) ("Century 21 China Real Estate" or the "Company"), a leading comprehensive real estate services provider and the exclusive franchisor for the CENTURY 21® brand in China, today announced its unaudited financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Highlights[1]

  • Consolidated net revenue in the third quarter of 2013 was RMB202.9 million (US$33.2 million), a decrease of 4.3% from the second quarter of 2013, and an increase of 6.5% from the third quarter of 2012.
  • Revenue from company-owned brokerage services in the third quarter of 2013 was RMB167.5 million (US$27.4 million), an increase of 7.2% from the second quarter of 2013, and an increase of 1.8% from the third quarter of 2012.
  • Revenue from primary and commercial services in the third quarter of 2013 was RMB22.0 million (US$3.6 million), a decrease of 49.8% from the second quarter of 2013, and an increase of 42.9% from the third quarter of 2012.
  • Net loss in the third quarter of 2013 was RMB17.7 million (US$2.9 million), compared to a net loss of RMB29.6 million in the second quarter of 2013, and a net loss of RMB7.1 million in the third quarter of 2012.
  • Net loss attributable to IFM Investments Limited in the third quarter of 2013 was RMB18.0 million (US$2.9 million), compared to net loss attributable to IFM Investments Limited of RMB33.0 million in the second quarter of 2013, and net loss attributable to IFM Investments Limited of RMB7.1 million in the third quarter of 2012.

"Throughout the third quarter, we streamlined our company-owned brokerage network, focusing on neighborhoods where Century 21 China Real Estate has a significant competitive advantage," said Mr. Donald Zhang, chairman and chief executive officer of Century 21 China Real Estate. "Combined with several project delays in our primary brokerage business, our network optimization caused revenue for the quarter to be lower than we expected."

Mr. Harry Lu, vice chairman and president, added, "Our core business continues to perform solidly as we work to optimize Century 21 China Real Estate's network for growth. While this may place some pressure on our results in the near term, we are confident that by focusing on our best-performing stores in key neighborhoods, we are allocating our resources in the most efficient way possible for future profitable growth."

[1] This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollar ("US$") amounts at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from RMB amounts into US$ as of and for the quarter ended September 30, 2013, were made at a rate of RMB6.1200 to US$1.00 which is the noon buying rate on September30, 2013 in New York for cable transfers in RMB as certified in the H.10 weekly statistical release of the Federal Reserve Board. The Company's functional and reporting currency is the RMB.

Third Quarter 2013 Results

The Company's consolidated net revenue in the third quarter of 2013 was RMB202.9 million (US$33.2 million), representing a decrease of 4.3% from RMB212.1 million in the second quarter of 2013 and an increase of 6.5% from RMB190.6 million in the third quarter of 2012. The sequential decrease was primarily due to a decrease in revenue from primary and commercial services resulting from project delays, which offset higher revenue from company-owned brokerage services. The year-over-year increase in consolidated net revenue was primarily attributable to an increase in revenue from primary and commercial services.

Revenue from company-owned brokerage services in the third quarter of 2013 was RMB167.5 million (US$27.4 million), representing an increase of 7.2% from RMB156.2 million in the second quarter of 2013, an increase of 1.8% from RMB164.5 million in the third quarter of 2012, and 82.6% of total net revenue. The sequential increase was primarily due to an increase in sales and purchase transaction volumes following the improvement in the Company's company-owned sales offices in Beijing and Shanghai as compared to the second quarter of 2013.

Revenue from primary and commercial services in the third quarter of 2013 was RMB22.0 million (US$3.6 million), representing a decrease of 49.8% from RMB43.8 million in the second quarter of 2013, an increase of 42.9% from RMB15.4 million in the third quarter of 2012, and 10.8% of total net revenue. The sequential decrease was primarily due to lower gross floor area ("GFA") of new properties sold and lower weighted commission rates realized on sales. The year-over-year increase was due to a higher weighted average selling price per square meter and a higher weighted average commission rate, in spite of a slight decline in GFA sold.

Revenue from mortgage management services in the third quarter of 2013 was RMB9.7 million (US$1.6 million), representing an increase of 4.3% from RMB9.3 million in the second quarter of 2013, an increase of 18.3% from RMB8.2 million in the third quarter of 2012, and 4.8% of total net revenue. The sequential increase was primarily due to an increase in mortgage credit loans provided by the Company, which was partially offset by a decrease in home equity loans brokered by the Company. The year-over-year increase was due to an increase in mortgage credit loans provided by the Company.

Revenue from franchise services in the third quarter of 2013 was RMB3.7 million (US$0.6 million), representing an increase of 32.1% from RMB2.8 million in the second quarter of 2013, an increase of 48.0% from RMB2.5 million in the third quarter of 2012, and 1.8% of total net revenue. The sequential and year-over-year increases were primarily a result of an increase in franchise fees recognized in the third quarter of 2013.

Commissions and other agent-related costs in the third quarter of 2013 were RMB129.0 million (US$21.1 million), representing a decrease of 9.7% from RMB142.9 million in the second quarter of 2013, an increase of 10.3% from RMB117.0 million in the third quarter of 2012, and 63.6% of total net revenue. The sequential decrease was primarily due to a decrease in commission expenses as a result of lower revenues from primary and commercial services.The year-over-year increase was primarily due to an increase in payroll sales as a result of an increase in the number of sales professionals employed.

Operating costs in the third quarter of 2013 were RMB45.7 million (US$7.5million), representing a decrease of 3.8% from RMB47.5 million in the second quarter of 2013, an increase of 12.0% from RMB40.8 million in the third quarter of 2012, and 22.5% of total net revenue. The sequential decrease was primarily due to lower service charges associated with lower revenue from the primary and commercial services segment. The year-over-year increase was primarily attributable to an increase in sales-office rental costs due to an increase in average rental rates, as well as higher sales office closure-related costs incurred in Beijing and Shenzhen.

Selling, general and administrative expenses in the third quarter of 2013 were RMB53.1 million (US$8.7 million), representing a decrease of 1.5% from RMB53.9 million in the second quarter of 2013, an increase of 9.7% from RMB48.4 million in the third quarter of 2012, and 26.2% of total net revenue. The year-over-year increase was primarily due to an increase in marketing expenses as well as higher non-sales payroll expenses.

Loss from operations in the third quarter of 2013 was RMB24.8 million (US$4.1 million), compared to loss from operations of RMB30.6 million in the second quarter of 2013, and loss from operations of RMB14.0 million in the third quarter of 2012. Non-GAAP[2] loss from operations in the third quarter of 2013 was RMB24.8 million (US$4.1million), compared to non-GAAP loss from operations of RMB32.1 million in the second quarter of 2013, and non-GAAP loss from operations of RMB13.2 million in the third quarter of 2012.

The Company estimates its quarterly income tax provisions based on U.S. GAAP and will reconcile the total annual provisions at year end. The income tax provisions of the Company in the third quarter of 2013 were primarily related to its Shanggu business unit. The effective tax rate of the Company fluctuates from quarter to quarter as the income or losses generated from the Company's operating entities may fluctuate.

Net loss attributable to IFM Investments Limited in the third quarter of 2013 was RMB18.0 million (US$2.9 million), compared to net loss attributable to IFM Investments Limited of RMB33.0 million in the second quarter of 2013, and net loss attributable to IFM Investments Limited of RMB7.1 million in the third quarter of 2012. Non-GAAP net loss attributable to IFM Investments Limited in the third quarter of 2013 was RMB17.9 million (US$2.9 million), compared to non-GAAP net income attributable to IFM Investments Limited of RMB34.5 million in the second quarter of 2013, and non-GAAP net loss attributable to IFM Investments Limited of RMB6.3 million in the third quarter of 2012.

Basic net loss per American depositary share ("ADS") and diluted net loss per ADS in the third quarter of 2013 were RMB1.21 (US$0.20) and RMB1.21 (US$0.20), respectively. Non-GAAP basic net loss per ADS and non-GAAP diluted net loss per ADS in the third quarter of 2013 were RMB1.21 (US$0.20) and RMB1.21 (US$0.20), respectively. Each of the Company's ADSs represents 45 Class A ordinary shares.

As of September 30, 2013, the Company had cash and cash equivalents of RMB157.8 million (US$25.8 million), a decrease of RMB11.5 million from June 30, 2013. The decrease was mainly due to the fact that net cash used in operating activities, financing activities and provided by investing activities in the third quarter of 2013 were RMB16.3 million (US$2.7 million), RMB9.2 million (US$1.5 million) and RMB13.9 million (US$2.3 million), respectively.

During the third quarter of 2013, the Company's CENTURY 21® China Real Estate network covered 25 major cities with an average of more than 956 sales offices, including an average of 302 company-owned sales offices in operation. As of September 30, 2013, the Company's CENTURY 21® China Real Estate network, including its franchise network, employed more than 12,900 sales professionals.

[2] Explanation of the Company's non-GAAP financial measures and related reconciliations to GAAP financial measures is included in the "Non-GAAP Financial Measures" and "Reconciliations to Unaudited Condensed Consolidated Statements of Operations" in the accompanying condensed financial information included in this press release.

Business Outlook

The Company currently estimates that its total net revenue for the fourth quarter of 2013 will be in the range of RMB 210 million to RMB 220 million. This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Century 21 China Real Estate's management will host an earnings conference call on November 14, 2013, at 8 a.m. U.S. Eastern Time (9 p.m. Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

U.S. Toll / International: +1-845-675-0437

United States Toll Free: +1-866-519-4004

Hong Kong: +852-2475-0994

Please dial in 10 minutes before the call is scheduled to begin and provide the pass code to join the call. The pass code is "Century 21 China Real Estate Earnings Call."

A live and archived webcast of the conference call will be available until November 21, 2013 at http://ir.century21cn.com.

About Century 21 China Real Estate

IFM Investments Limited ("Century 21 China Real Estate" or "CTC") is a leading comprehensive real estate services provider and the exclusive franchisor for the CENTURY 21® brand in China. CTC primarily focuses on China's fast-growing and highly fragmented secondary real estate market, providing company-owned brokerage services, franchise services, mortgage management services, primary services, commercial services and fund management services. CTC has experienced substantial growth since it commenced operations in 2000, and received numerous awards and recognition as franchisor and real estate services provider for its service quality and business achievements. Century 21 China Real Estate became a public company in January 2010 and its ADSs, each of which represents 45 ordinary shares of CTC, currently trade on the New York Stock Exchange under the symbol "CTC." For more information about CTC, please visit http://www.century21cn.com/english.

Safe Harbor: Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as "aim," "anticipate," "believe," "confident," "continue," "estimate," "expect," "future," "intend," "is currently reviewing," "it is possible," "likely," "may," "plan," "potential," "will" or other similar expressions or the negative of these words or expressions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Among other things, the Business Outlook section and quotations from management in this press release, as well as the Company's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed or furnished with the U.S. Securities and Exchange Commission, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements and are subject to change, and such change may be material and may have a material adverse effect on the Company's financial condition and results of operations for one or more periods. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained, either expressly or impliedly, in any of the forward-looking statements in this press release. Potential risks and uncertainties include, but are not limited to, the risks outlined in the Company's Annual Report on Form 20-F and other documents filed with the U.S. Securities and Exchange Commission, particularly the recent fluctuations in the real estate market in China. Unless otherwise specified, all information provided in this press release and in the attachments is as of the date of this press release, and the Company does not undertake any obligation to update any such information, except as required under applicable law.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release includes non-GAAP financial measures of adjusted income (loss) from operations, adjusted net income (loss) attributable to IFM Investments Limited and adjusted earnings per ADS, each of which is adjusted to exclude share-based compensation, impairment of goodwill and net change in fair value. The Company believes these non-GAAP financial measures are important to help investors understand the Company's current financial performance and future prospects, compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the accompanying condensed financial information included with this press release. One limitation of using non-GAAP financial measures as described above is that these expense charges have been and will continue to be significant recurring expenses in the Company's business for the foreseeable future. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies. Management compensates for this limitation by providing specific information regarding the GAAP amount excluded from the non-GAAP measure.

Investor and Media Contacts:

In China:

Steve Ye
Chief Financial Officer
IFM Investments Limited
Phone: +86-10-6561-7188
E-mail: ir@century21cn.com

Josh Gartner
Brunswick Group
+86-10-5960-8600
ctc@brunswickgroup.com

In the United States

Cindy Zheng
Brunswick Group
+1-212-333-3810
ctc@brunswickgroup.com

IFM Investments Limited

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 
 

December 31,

      

September 30,

    

September 30,

 

2012

 

2013

 

2013

 

RMB

 

RMB

 

US$

           

ASSETS

         

Current assets:

         

Cash and cash equivalents

191,048

 

157,795

 

25,783

Restricted cash

18,036

 

14,516

 

2,372

Accounts receivable, net

176,287

 

180,115

 

29,431

Amounts due from related parties

110

 

142

 

23

Loans receivable

35,229

 

84,445

 

13,798

Prepaid expenses and other current assets

41,265

 

48,989

 

8,005

Deferred tax assets

4,880

 

8,004

 

1,308

Total current assets

466,855

 

494,006

 

80,720

Non-current assets:

         

Investment in associates

13,141

 

14,958

 

2,444

Property and equipment, net

40,832

 

35,813

 

5,852

Intangible assets, net

90,253

 

86,072

 

14,064

Goodwill

103,943

 

83,559

 

13,653

Other non-current assets

19,644

 

22,089

 

3,609

Total assets

734,668

 

736,497

 

120,342

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY

         

Current liabilities:

         

Accounts payable

14,168

 

14,027

 

2,292

Accrued expenses and other current liabilities

217,694

 

276,424

 

45,167

Amounts due to related parties

272

 

282

 

46

Deferred revenue

8,539

 

13,549

 

2,214

Contingent consideration payable– Current

--

 

11,602

 

1,896

Total current liabilities

240,673

 

315,884

 

51,615

Long-term deposits payable

10,541

 

10,926

 

1,785

Contingent consideration payable

33,774

 

--

 

--

Deferred tax liabilities

16,652

 

15,985

 

2,612

Total liabilities

301,640

 

342,795

 

56,012

Redeemable non-controlling interest

69,430

 

73,700

 

12,042

Shareholders' equity:

         

Class A ordinary shares (US$0.001 par value, 3,133,000 
         and 3,133,000 shares authorized as of December 31, 
         2012 and September 30, 2013, respectively; 667,672 
         and 668,108 shares issued and outstanding as of 
         December 31, 2012 and September 30, 2013, 
         respectively)

4,939

 

4,942

 

808

Additional paid-in capital

1,035,651

 

1,035,950

 

169,273

Statutory reserves

5,595

 

5,595

 

914

Accumulated deficit

(691,891)

 

(737,507)

 

(120,508)

Total IFM Investments Limited

       shareholders' equity

354,294

 

308,980

 

50,487

Non-controlling interest

9,304

 

11,022

 

1,801

Total shareholders' equity

363,598

 

320,002

 

52,288

TOTAL LIABILITIES, REDEEMABLE
               NON-CONTROLLING INTEREST AND  
               SHAREHOLDERS' EQUITY

734,668

 

736,497

 

120,342

                     

               

 

IFM Investments Limited

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share and per ADS data)

   
 

For the Three Months Ended

 

September 30,

    

June  30,

    

September 30,

    

September 30,

 

2012

 

2013

 

2013

 

2013

 

RMB

 

RMB

 

RMB

 

US$

               

Net revenue

190,596

 

212,085

 

202,927

 

33,158

Costs and expenses:

             

Commissions and other agent-related costs

(117,017)

 

(142,880)

 

(129,015)

 

(21,081)

Operating costs

(40,763)

 

(47,527)

 

(45,672)

 

(7,463)

Selling, general and administrative expenses

(48,360)

 

(53,920)

 

(53,077)

 

(8,673)

Goodwill impairment

--

 

(20,384)

 

--

 

--

Net change in fair value

1,536

 

21,991

 

--

 

--

Total costs and expenses

(204,604)

 

(242,720)

 

(227,764)

 

(37,217)

Loss from operations

(14,008)

 

(30,635)

 

(24,837)

 

(4,059)

Interest income

667

 

1,277

 

900

 

147

Other income

5,352

 

1,245

 

5,712

 

933

Foreign currency exchange loss

(22)

 

(31)

 

(24)

 

(4)

Loss before income tax and share of associates'income

(8,011)

 

(28,144)

 

(18,249)

 

(2,983)

Income tax

293

 

(1,912)

 

35

 

6

Share of associates' income

601

 

500

 

465

 

76

Net loss

(7,117)

 

(29,556)

 

(17,749)

 

(2,901)

Net (loss) income attributable to non-controlling 
interest

21

 

(3,469)

 

(212)

 

(35)

Net loss attributable to IFM Investments Limited

(7,096)

 

(33,025)

 

(17,961)

 

(2,936)

               

Net loss attributable to ordinary shareholders

(7,096)

 

(33,025)

 

(17,961)

 

(2,936)

               

Net loss per share, basic

(0.01)

 

(0.05)

 

(0.03)

 

(0.00)

Net loss per share, diluted

(0.01)

 

(0.05)

 

(0.03)

 

(0.00)

               

Net loss per ADS, basic

(0.48)

 

(2.22)

 

(1.21)

 

(0.20)

Net loss per ADS, diluted

(0.48)

 

(2.22)

 

(1.21)

 

(0.20)

               

Number of shares used in calculating net loss per share, 
    basic

667,672

 

668,108

 

668,108

 

668,108

Number of shares used in calculating net loss per share, 
    diluted

667,672

 

668,108

 

668,108

 

668,108

               

Number of ADSs used in calculating net loss per ADS, 
    basic

14,837

 

14,847

 

14,847

 

14,847

Number of ADSs used in calculating net loss per ADS, 
    diluted

14,837

 

14,847

 

14,847

 

14,847

 

IFM Investments Limited

Reconciliations to Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per ADS data)

   
 

For the Three Months Ended

 

September 30,

    

June 30,

    

September 30,

    

September 30,

 

2012

 

2013

 

2013

 

2013

 

RMB

 

RMB

 

RMB

 

US$

GAAP loss from operations

(14,008)

 

(30,635)

 

(24,837)

 

(4,059)

Plus:                                                             

             

Share-based compensation

2,325

 

107

 

23

 

4

Goodwill impairment

--

 

20,384

 

--

 

--

Net change in fair value

(1,536)

 

(21,991)

 

--

 

--

Non-GAAP loss from operations

(13,219)

 

(32,135)

 

(24,814)

 

(4,055)

               

GAAP net loss attributable to IFM Investments Limited

(7,096)

 

(33,025)

 

(17,961)

 

(2,936)

Plus:

             

Share-based compensation

2,325

 

107

 

23

 

4

Goodwill impairment

--

 

20,384

 

--

 

--

Net change in fair value

(1,536)

 

(21,991)

 

--

 

--

Non-GAAP net loss attributable to IFM 
Investments Limited

(6,307)

 

(34,525)

 

(17,938)

 

(2,932)

               

GAAP net loss attributable to ordinary shareholders

(7,096)

 

(33,025)

 

(17,961)

 

(2,936)

Plus:

             

Share-based compensation

2,325

 

107

 

23

 

4

Goodwill impairment

--

 

20,384

 

--

 

--

Net change in fair value

(1,536)

 

(21,991)

 

--

 

--

Non-GAAP loss attributable to ordinary shareholders

(6,307)

 

(34,525)

 

(17,938)

 

(2,932)

               

GAAP net loss per ADS, basic

(0.48)

 

(2.22)

 

(1.21)

 

(0.20)

GAAP net loss per ADS, diluted

(0.48)

 

(2.22)

 

(1.21)

 

(0.20)

               

Non-GAAP net loss per ADS, basic

(0.43)

 

(2.33)

 

(1.21)

 

(0.20)

Non-GAAP net loss per ADS, diluted

(0.43)

 

(2.33)

 

(1.21)

 

(0.20)

               

Number of ADSs used in calculating GAAP / non-GAAP net loss per ADS, basic

14,837

 

14,847

 

14,847

 

14,847

Number of ADSs used in calculating GAAP / non-GAAP net loss per ADS, diluted

14,837

 

14,847

 

14,847

 

14,847

SOURCE IFM Investments Limited

###

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