Century 21 China Real Estate Reports First Quarter 2014 Unaudited Financial Results

BEIJING - May 16, 2014 // 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 franchiser for the CENTURY 21® brand in China, today announced its unaudited financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Highlights[1]

  • Consolidated net revenue was RMB134.9 million (US$21.7 million), a decrease of 33.6% from the fourth quarter of 2013, and a decrease of 48.0% from the first quarter of 2013.
  • Net loss was RMB47.4 million (US$7.6 million), compared to a net loss of RMB46.3 million in the fourth quarter of 2013, and net income of RMB7.7 million in the first quarter of 2013.
  • Net loss attributable to IFM Investments Limited was RMB47.5 million (US$7.6 million) compared to a net loss attributable to IFM Investments Limited of RMB37.4 million in the fourth quarter of 2013, and net income attributable to IFM Investments Limited of RMB5.4 million in the first quarter of 2013.

[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 March 31, 2014, were made at a rate of RMB6.2164 to US$1.00 which is the noon buying rate on March 31,2014 in New York for cable transfers in RMB as certified in the H.10 daily statistical release of the Federal Reserve Board. The Company's functional and reporting currency is the RMB.

"Market conditions were particularly challenging in the first quarter, with transaction volumes remaining low even afterChinese New Year," said Mr. Donald Zhang, chairman and chief executive officer of Century 21 China Real Estate. "In response, we continued to focus on building out our most profitable segments, notably mortgage management and franchise services, both of which posted solid year-over-year growth. Century 21 China Real Estate remains well-positioned to take advantage of any future increase in market activity."

Mr. Harry Lu, vice chairman and president, added, "Our company-owned brokerage and primary segments were negatively impacted by the weak market in the first quarter, which led to a weaker-than-expected top-line performance. However, we have positioned our network to capture future growth while maintaining a low cost base, and we expect the cost-cutting initiatives we introduced late last year to gain further traction in the coming quarters. Combined with our sharpened focus on higher-margin business segments, this gives us confidence that we can produce solid bottom-line results through the rest of the year."

First Quarter 2014 Results

Consolidated net revenue was RMB134.9 million (US$21.7 million), a decrease of 33.6% from RMB203.1 million in the fourth quarter of 2013, and a decrease of 48.0% from RMB259.3 million in the first quarter of 2013. The sequential decrease was primarily due to a seasonal decline in real estate transaction volumes around the Chinese New Year. The year-over-year decrease was a result of lower revenue from company-owned brokerage services and primary and commercial services in the first quarter of 2014, due to the continuing nationwide slowdown in transaction volumes in the secondary and primary property markets, as well as abnormally high demand in the first quarter of 2013, driven by the rush-in effect ahead of the enforcement of capital gains tax regulations in Beijing and Shanghai in April 2013.

  • Revenue from company-owned brokerage services was RMB93.5 million (US$15.0 million), representing a decrease of 38.8% from RMB152.7 million in the fourth quarter of 2013, a decrease of 56.5% from RMB215.0 millionin the same period of 2013, and 69.3% of total net revenue. The sequential and year-over-year decrease was due to weak sales and purchase transaction volumes as a result of the nationwide market slowdown and exceptionally strong demand in the first quarter of 2013, as a result of market anticipation of an enforcement of capital gains tax regulations in April 2013 in Beijing and Shanghai.
  • Revenue from primary and commercial services was RMB26.2 million (US$4.2 million), representing a decrease of 30.5% from RMB37.7 million in the fourth quarter of 2013, a decrease of 22.5% from RMB33.8 million in the same period of 2013, and 19.5% of total net revenue. The sequential decrease was primarily due to lower gross floor area of new properties sold in the first quarter of 2014 as a result of normal seasonality and primary projects delays. The year-over-year decrease was primarily due to the Company's optimization of its primary and commercial services segment, as part of ongoing efforts to streamline its brokerage network.
  • Revenue from mortgage management services was RMB11.5 million (US$1.8 million), representing an increase of 18.6% from RMB9.7 million in the fourth quarter of 2013, an increase of 43.8% from RMB8.0 million in the same period of 2013, and 8.6% of total net revenue. The sequential and year-over-year increase was primarily due to the expansion of our mortgage credit loans business.
  • Revenue from franchise services was RMB3.5 million (US$0.6 million), representing an increase of 16.7% fromRMB3.0 million in the fourth quarter of 2013, an increase of 40.0% from RMB2.5 million in the same period of 2013, and 2.6% of total net revenue. The sequential and year-over-year increase was primarily a result of the Company reaching more agreements with new franchisees in Beijing.

Commissions and other agent-related costs were RMB99.2 million (US$16.0 million), representing a decrease of 26.5% from RMB134.9 million in the fourth quarter of 2013, a decrease of 36.2% from RMB155.6 million in the same period of 2013, and 73.5% of total net revenue. The sequential and year-over-year decrease was primarily due to lower commission expenses as a result of lower revenues from company-owned brokerage services, as well as a decrease in payroll sales due to a reduction in the number of sales offices and sales staff.

Operating costs were RMB39.2 million (US$6.3 million), representing a decrease of 19.7% from RMB48.8 million in the fourth quarter of 2013, a decrease of 7.5% from RMB42.4 million in the same period of 2013, and 29.1% of total net revenue. The sequential decrease was primarily a result of lower costs related to sales office closures. The year-over-year decrease was primarily attributable to a reduction in the number of sales offices in operation in Beijing and Shenzhen.

Selling, general and administrative expenses were RMB51.4 million (US$8.3 million), representing a decrease of 29.7% from RMB73.1 million in the fourth quarter of 2013, a decrease of 4.8% from RMB54.0 million in the same period of 2013, and 38.1% of total net revenue. The sequential decrease was primarily due to a decrease in marketing expenses, professional fee accruals, and salary and benefits for non-sales staff as a result of normal seasonality and a reduction in back-office staff. The year-over-year decrease was primarily due to decreases in professional fees and in provisions for bad debt related to the Company's primary and commercial services segment.

Loss from operations was RMB54.9 million (US$8.8 million), compared to loss from operations of RMB53.5 million in the fourth quarter of 2013, and income from operations of RMB7.2 million in the same period of 2013. Non-GAAP[2] loss from operations was RMB54.9 million (US$8.8 million), compared to non-GAAP loss from operations of RMB53.6 million in the fourth quarter of 2013, and non-GAAP income from operations of RMB7.3 million in the same period of 2013.

Net loss attributable to IFM Investments Limited was RMB47.5 million (US$7.6 million), compared to a net loss attributable to IFM Investments Limited of RMB37.4 million in the fourth quarter of 2013, and net income attributable to IFM Investments Limited of RMB5.4 million in the same period of 2013. Non-GAAP net loss attributable to IFM Investments Limited wasRMB47.4 million (US$7.6 million), compared to a non-GAAP net loss attributable to IFM Investments Limited of RMB37.5 million in the fourth quarter of 2013, and non-GAAP net income attributable to IFM Investments Limited of RMB5.5 million in the same period of 2013.

Basic and diluted net loss per American depositary share ("ADS") were RMB3.19 (US$0.51) and RMB3.19 (US$0.51), respectively. Non-GAAP basic and diluted net loss per ADS were RMB3.19 (US$0.51) and RMB3.19 (US$0.51), respectively. Each of the Company's ADSs represents 45 Class A ordinary shares.

[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.

Cash Flow

As of March 31, 2014, the Company had cash and cash equivalents of RMB100.1 million (US$16.1 million). Net cash used in operating activities in the first quarter 2014 was RMB48.2 million (US$7.8 million), compared to net cash provided by operating activities of RMB6.2 million in the fourth quarter of 2013, and net cash provided by operating activities of RMB9.1 million in the same period of 2013, mainly due to the greater operating loss incurred in the first quarter of 2014. Net cash provided by investing activities was RMB13.5 million (US$2.2 million). This was primarily the result of the net effect of providing and receiving repayments on mortgage credit loans of RMB16.5 million (US$2.7 million), as well as the purchase of property, plant and equipment of RMB2.9 million (US$0.5 million).

Network Update

During the first quarter of 2014, the Company's CENTURY 21® China Real Estate network covered 24 major cities with an average of more than 905 sales offices, including an average of 225 company-owned sales offices in operation. As of March 31, 2014, the Company's CENTURY 21® China Real Estate network employed more than 12,100 sales professionals and maintained approximately 7.9 million property listings.

Business Outlook

The Company currently estimates that its total net revenue for the second quarter of 2014 will be in the range of RMB150 million to RMB160 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 May 16, 2014, at 8 a.m. U.S. Eastern Time (8 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 passcode to join the call. The passcode is "Century 21 China Real Estate Earnings Call."

A live and archived webcast of the conference call will be available until May 23, 2014 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 franchiser 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 franchiser 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. 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
CFO
IFM Investments Limited
Phone: +86-10-6561-7788
E-mail: ir@century21cn.com

Nick Beswick
Brunswick Group
Phone: +86-10-5960-8600
Email: ctc@brunswickgroup.com

In the United States:

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

 

IFM Investments Limited

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 
 

December 31,

    

March 31,

    

March 31,

 

2013

 

2014

 

2014

 

RMB

 

RMB

 

US$

           

ASSETS

         

    Current assets:

         

Cash and cash equivalents

145,610

 

100,147

 

16,110

Restricted cash

13,235

 

17,596

 

2,831

Accounts receivable, net

168,872

 

155,155

 

24,959

Amounts due from related parties

142

 

142

 

23

Loans receivable

121,133

 

136,746

 

21,998

Prepaid expenses and other current assets

44,479

 

40,772

 

6,559

 Deferred tax assets

9,630

 

10,374

 

1,669

Total current assets

503,101

 

460,932

 

74,149

Non-current assets:

         

Investment in associates

15,215

 

15,410

 

2,479

Property and equipment, net

33,434

 

32,346

 

5,203

Intangible assets, net

84,747

 

83,534

 

13,438

Goodwill

83,559

 

83,559

 

13,442

Other non-current assets

18,207

 

18,490

 

2,974

Total assets

738,263

 

694,271

 

111,685

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY

         

Current liabilities:

         

Accounts payable

10,491

 

13,397

 

2,155

Accrued expenses and other current liabilities

328,034

 

324,539

 

52,208

Amounts due to related parties

282

 

7,782

 

1,252

Deferred revenue

19,909

 

16,200

 

2,606

Contingent consideration payable

5,623

 

5,623

 

905

Total current liabilities

364,339

 

367,541

 

59,126

Long-term deposits payable

10,582

 

10,823

 

1,741

Deferred tax liabilities

15,781

 

15,604

 

2,510

Total liabilities

390,702

 

393,968

 

63,377

Redeemable non-controlling interest

67,161

 

67,269

 

10,821

Shareholders' equity:

         

Class A ordinary shares (US$0.001 par value, 3,133,000 and
          3,133,000 shares authorized as of December 31, 2013 and 
          March 31, 2014, respectively; 668,759 and 669,233 shares
          issued and outstanding as of December 31, 2013 and March 
          31, 2014, respectively)

4,946

 

4,949

 

796

Additional paid-in capital

1,036,120

 

1,036,228

 

166,693

Statutory reserves

5,595

 

5,595

 

900

Accumulated deficit

(774,911)

 

(822,369)

 

(132,290)

Total IFM Investments Limited shareholders' equity

271,750

 

224,403

 

36,099

Non-controlling interest

8,650

 

8,631

 

1,388

Total shareholders' equity

280,400

 

233,034

 

37,487

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

738,263

 

694,271

 

111,685

           
 

 

IFM Investments Limited

Unaudited Condensed Consolidated Statements of Operations

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

   
 

For the Three Months Ended

 

March 31,

    

December 31,

    

March 31,

    

March 31,

 

2013

 

2013

 

2014

 

2014

 

RMB

 

RMB

 

RMB

 

US$

               

Net revenue

259,312

 

203,127

 

134,850

 

21,693

Costs and expenses:

             

Commissions and other agent-related costs

(155,612)

 

(134,929)

 

(99,160)

 

(15,951)

Operating costs

(42,440)

 

(48,754)

 

(39,195)

 

(6,305)

Selling, general and administrative expenses

(54,015)

 

(73,053)

 

(51,430)

 

(8,273)

Net change in fair value

-

 

78

 

-

 

-

Total costs and expenses

(252,067)

 

(256,658)

 

(189,785)

 

(30,529)

income (Loss)from operations

7,245

 

(53,531)

 

(54,935)

 

(8,836)

Interest income

1,249

 

736

 

803

 

129

Other income

70

 

333

 

6,536

 

1,051

Foreign currency exchange loss

(15)

 

(43)

 

25

 

4

income (Loss) before income tax and share of associates' income

8,549

 

(52,505)

 

(47,571)

 

(7,652)

Income tax

(1,723)

 

5,932

 

7

 

1

Share of associates' income

852

 

257

 

195

 

31

Net income (loss)

7,678

 

(46,316)

 

(47,369)

 

(7,620)

Net loss (income) attributable to non-controlling interest

(2,307)

 

8,911

 

(89)

 

(14)

Net income (loss) attributable to IFM Investments Limited

5,371

 

(37,405)

 

(47,458)

 

(7,634)

               

Net income (loss)attributable to ordinary shareholders

5,371

 

(37,405)

 

(47,458)

 

(7,634)

               

Net income (loss)per share, basic

0.01

 

(0.06)

 

(0.07)

 

(0.01)

Net income (loss) per share, diluted

0.01

 

(0.06)

 

(0.07)

 

(0.01)

               

Net income (loss) per ADS, basic

0.36

 

(2.52)

 

(3.19)

 

(0.51)

Net income (loss) per ADS, diluted

0.35

 

(2.52)

 

(3.19)

 

(0.51)

               

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

667,943

 

668,626

 

668,823

 

668,823

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

686,206

 

668,626

 

668,823

 

668,823

               

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

14,843

 

14,858

 

14,863

 

14,863

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

15,249

 

14,858

 

14,863

 

14,863

 

IFM Investments Limited

Reconciliations to Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per ADS data)

   
 

For the Three Months Ended

 

March 31,

    

December 31,

    

March 31,

    

March 31,

 

2013

 

2013

 

2014

 

2014

 

RMB

 

RMB

 

RMB

 

US$

GAAP income (loss) from operations

7,245

 

(53,531)

 

(54,935)

 

(8,836)

Plus:

             

Share-based compensation

100

 

12

 

33

 

5

Net change in fair value

-

 

(78)

 

-

 

-

Non-GAAP income (loss) from operations

7,345

 

(53,597)

 

(54,902)

 

(8,831)

               

GAAP net income (loss) attributable to IFM Investments 
Limited

5,371

 

(37,405)

 

(47,458)

 

(7,634)

Plus:

             

Share-based compensation

100

 

12

 

33

 

5

Net change in fair value

-

 

(78)

 

-

 

-

Non-GAAP net income (loss) attributable to IFM Investments Limited

5,471

 

(37,471)

 

(47,425)

 

(7,629)

               

GAAP net income (loss) attributable to ordinary shareholders

5,371

 

(37,405)

 

(47,458)

 

(7,634)

Plus:

             

Share-based compensation

100

 

12

 

33

 

5

Net change in fair value

-

 

(78)

 

-

 

-

Non-GAAP income (loss) attributable to ordinary shareholders

5,471

 

(37,471)

 

(47,425)

 

(7,629)

               

GAAP net income (loss) per ADS, basic

0.36

 

(2.52)

 

(3.19)

 

(0.51)

GAAP net income (loss) per ADS, diluted

0.35

 

(2.52)

 

(3.19)

 

(0.51)

               

Non-GAAP net income (loss) per ADS, basic

0.37

 

(2.52)

 

(3.19)

 

(0.51)

Non-GAAP net income (loss) per ADS, diluted

0.36

 

(2.52)

 

(3.19)

 

(0.51)

               

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

14,843

 

14,858

 

14,863

 

14,863

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

15,249

 

14,858

 

14,863

 

14,863

 

                               IFM Investments Limited                               

Other Financial and Operating Data

 
   

For the Three Months Ended

   

March 31,  2013

 

December 31, 2013

 

March 31, 2014

             

Company-owned brokerage services

           

Net revenues (in thousands of RMB)

 

215,001

 

152,735

 

93,526

Average number of operating sales offices(1)

 

316

 

260

 

225

Average monthly net revenues per operating sales office
        (in thousands of RMB)

 

227

 

196

 

139

Primary and Commercial Services

           

Net revenues (in thousands of RMB)

 

33,815

 

37,705

 

26,244

Aggregate gross floor area of properties sold (in thousand      
        square meters)

 

171

 

109

 

83

Mortgage management services

           

Net revenues (in thousands of RMB)

 

8,031

 

9,730

 

11,532

Amount of referred mortgages and home equity loans 
        (in thousands of RMB)

 

1,019,356

 

784,997

 

711,632

Average entrusted and mortgage credit loan balance outstanding
        (in thousands of RMB)

 

53,001

 

107,430

 

126,822

Franchise services

           

Net revenues (in thousands of RMB)

 

2,465

 

2,957

 

3,548

Number of regional sub-franchisers as of year-end

 

25

 

23

 

23

   

(1) Equals the sum of the number of sales offices in operation that existed at the end of each month in the applicable year, divided by the number of months in such year.

SOURCE Century 21 China Real Estate (IFM Investments Limited)

###

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