What’s new: Country Garden Services Holdings Co. Ltd., China's largest residential property manager, forecasts a drop of more than 30% in net profit for the first half of the year as the real estate downturn continues to erode business.
Country Garden Services expects a slight increase in first-half revenue, projecting it to reach between 20.9 billion yuan and 21.2 billion yuan ($2.9 billion and $2.95 billion), up from 20.7 billion yuan a year ago. However, the company anticipates a significant drop in net profit, estimating it will fall to between 1.36 billion yuan and 1.55 billion yuan, down from last year’s 2.35 billion yuan.
Affected by the property market turmoil, Country Garden Services has seen its net profit narrowed since 2022 despite growing revenues. In 2023, the company posted 3% revenue growth to 42.6 billion yuan while net profit shrank 85% to 292 million yuan.
The context: Most of China’s largest property management companies were spinoffs from real estate companies and often rely on affiliated developers as a significant source of revenues, including management and maintenance services for their projects. As China’s property industry crisis stretches, property managers’ financials are coming under mounting pressure.
Established in 1992, Country Garden Services was previously the property management unit of Country Garden Holdings Co. Ltd., China’s biggest homebuilder. The unit was spun off from the developer in 2018 for an independent listing.
Currently, there is no shareholding relations between Country Garden Services and Country Garden. But both companies are controlled by Yang Huiyan, chair of Country Garden.
“If affiliated real estate companies face financial challenges and are unable to fulfill their financial commitments to property management firms, the likelihood of recovering the money is small,” said Dennis Huang, co-founder of Synergy Solution Management Group.
In 2023, Country Garden Services booked 3.1 billion yuan in impairment provision after Country Garden’s debt crisis deepened.
Contact reporter Han Wei (weihan@caixin.com)
