Redco Properties Group Limited — Interim / Quarterly Report 2021

Aug 27, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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REDCO PROPERTIES GROUP LIMITED 力高地產集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1622)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

FINANCIAL HIGHLIGHTS

• ‧ Contracted sales of properties for the Group’s subsidiaries, associates and joint ventures for the six months ended 30 June 2021 increased by 80.6% to RMB23,510.0 million

• ‧ Revenue for the six months ended 30 June 2021 increased by 36.2% to RMB9,130.9 million

• ‧ Profit for the six months ended 30 June 2021 increased by 78.1% to RMB1,312.5 million

• ‧ Profit attributable to owners of the Company for the six months ended 30 June 2021 increased by 19.9% to RMB533.5 million

• ‧ Basic earnings per share was RMB15.02 cents for the six months ended 30 June 2021 (30 June 2020: RMB12.53 cents)

• ‧ Land bank increased by 1.3% to 23.7 million sq. m. as at 30 June 2021 (31 December 2020: 23.4 million sq.m.)

• ‧ Cash and cash equivalents and restricted cash as at 30 June 2021 amounted to RMB15,383.7 million (31 December 2020: RMB13,806.3 million) and the net debt to equity ratio was 51.1% as at 30 June 2021 (31 December 2020: 48.7%)

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The board (the “ Board ”) of directors (the “ Directors ”) of Redco Properties Group Limited (the “ Company ”) is pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (collectively, the “ Group ”) for the six months ended 30 June 2021, together with comparative figures, as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2021

Note Revenue 4 Cost of sales Gross profit Other gains, net 5 Selling and marketing expenses General and administrative expenses Fair value gain on investment properties Fair value gain on investment properties upon transfer from properties under development for sales Operating profit Finance income 6 Finance costs 6 Finance income, net Share of loss of investments accounted for using the equity method, net Profit before income tax Income tax expense 7 Profit for the period Profit attributable to: Owners of the Company Non-controlling interests Earnings per share for profit attributable to owners of the Company – Basic and diluted (expressed in RMB cents per share) 10

Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 9,130,911 6,702,984 (6,866,226) (5,302,020) 2,264,685 1,400,964 487,227 293,721 (529,342) (247,382) (461,696) (354,113) 15,640 1,635 194,856 — 1,971,370 1,094,825 53,121 62,239 (9,890) (12,499) 43,231 49,740 (27,327) (16,338) 1,987,274 1,128,227 (674,810) (391,491) 1,312,464 736,736 533,521 445,093 778,943 291,643 1,312,464 736,736 15.02 12.53

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CONDENSED CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2021

Profit for the period Other comprehensive income/(loss) Item that may not be reclassified to profit or loss – Currency translation differences Other comprehensive income/(loss) for the period Total comprehensive income for the period Total comprehensive income for the period attributable to: – Owners of the Company – Non-controlling interests Total comprehensive income for the period	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,312,464 736,736 203,921 (141,075) 203,921 (141,075) 1,516,385 595,661 737,100 304,603 779,285 291,058 1,516,385 595,661

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CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2021

Note ASSETS Non-current assets Property, plant and equipment Investment properties Intangible assets Investments accounted for using the equity method Deferred income tax assets Current assets Completed properties held for sale Properties under development for sale Contract assets Trade and other receivables and deposits 8 Prepayments 8 Amounts due from joint ventures Amounts due from associates Amounts due from non-controlling interests Income tax recoverable Restricted cash Cash and cash equivalents Total assets	30 June 2021 RMB’000 (Unaudited) 923,184 1,934,833 358,357 842,230 1,647,814 5,706,418 6,843,969 50,269,669 695,239 4,175,747 3,182,818 511,055 2,208,785 4,911,926 584,791 4,089,130 11,294,539 88,767,668 94,474,086	31 December 2020 RMB’000 (Audited) 264,715 1,027,610 364,031 916,256 1,428,001 4,000,613 6,165,642 50,085,317 695,239 2,838,368 2,376,585 119,718 1,470,072 4,000,464 415,878 4,156,859 9,649,423 81,973,565 85,974,178

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Note EQUITY Equity attributable to owners of the Company Share capital Reserves Non-controlling interests Total equity LIABILITIES Non-current liabilities Borrowings Deferred income tax liabilities Current liabilities Trade and other payables 9 Borrowings Amounts due to non-controlling interests Amounts due to associates Amounts due to joint ventures Contract liabilities Income tax liabilities Total liabilities Total equity and liabilities	30 June 2021 RMB’000 (Unaudited) 139,632 7,229,832 7,369,464 7,474,267 14,843,731 14,370,329 2,198,579 16,568,908 17,297,151 8,592,587 5,842,314 898,820 3,618 27,958,441 2,468,516 63,061,447 79,630,355 94,474,086	31 December 2020 RMB’000 (Audited) 139,632 6,667,423 6,807,055 6,140,620 12,947,675 13,399,808 1,954,477 15,354,285 15,352,054 6,711,546 6,075,226 159,274 50,784 26,815,905 2,507,429 57,672,218 73,026,503 85,974,178

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NOTES:

1 General information

Redco Properties Group Limited (the “ Company ”) was incorporated in the Cayman Islands on 14 July 2008 as an exempted company with limited liability under the Cayman Companies Law. The address of its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company is an investment holding company and its subsidiaries (together with the Company, referred to as the “ Group ”) are principally engaged in property development, property management services, property investment, project management services and healthcare services in the People’s Republic of China (the “ PRC ”). The Company is listed on the Main Board of The Stock Exchange of Hong Kong Limited (“ SEHK ”).

This condensed consolidated financial information is presented in Renminbi (“ RMB ”), unless otherwise stated.

The condensed consolidated financial information has not been audited.

2 Basis of preparation

This condensed consolidated financial information for the six months ended 30 June 2021 has been prepared in accordance with Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”). The condensed consolidated interim financial information should be read in conjunction with the annual financial statements of the Company for the year ended 31 December 2020, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the HKICPA and any public announcements made by the Company during the interim reporting period.

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3 Accounting policies

The accounting policies applied to this condensed consolidated interim financial information are consistent with those of the annual financial statements for the year ended 31 December 2020, as described in those annual financial statements, except for the estimation of income tax using the tax rate that would be applicable to expected total annual earnings and the adoption of amendments to HKFRSs and annual improvement effective for the financial year beginning on or after 1 January 2021.

• (a) The following amendments to standards are mandatory for the first time for the financial year beginning 1 January 2021 and currently relevant to the Group:

Amendments to HKFRS 16 Covid-19 – Related Rent Concessions Amendments to IFRS 9, IAS 39, IFRS 7, Interest Rate Benchmark Reform – Phase 2 IFRS 4 and IFRS 16

The Group has adopted these amendments of standards and the adoption of these amendments of standards do not have significant impacts on the Group’s condensed consolidated interim financial information.

• (b) The following new standards, amendments to existing standards and annual improvement have been issued but are not effective for the financial year beginning 1 January 2021 and have not been early adopted by the Group:

		Effective for
		accounting periods
		beginning on or after
Amendments to HKFRS 3	Update Reference to the Conceptual	1 January 2022
	Framework
Amendments to HKAS 16	Proceeds before Intended Use	1 January 2022
Amendments to HKAS 37	Onerous Contracts - Costs of Fulfilling	1 January 2022
	a Contract
Annual Improvements	Annual Improvements 2018-2020 Cycle	1 January 2022
Project
HKFRS 17	Insurance Contracts	1 January 2023
Amendments to HKAS 1	Classification of Liabilities as Current or	1 January 2023
	Non-current
Amendments to HKFRS 10	Sale or Contribution of Assets between	To be determined
and HKAS 28	an investor and its Associate or
	Joint Venture

The directors of the Group are in the process of assessing the financial impact of the adoption of the above new standards, amendments to existing standards and annual improvements. The Group will adopt the new standards, amendments to existing standards and annual improvements when they become effective.

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4 Revenue and segment information

The Executive Directors have been identified as the chief operating decision-maker. Management determines the operating segments based on the Group’s internal reports, which are submitted to the Executive Directors for performance assessment and resources allocation.

The Executive Directors consider the business from a geographical perspective and assess the performance of property development in five reportable operating segments, namely Greater Western Taiwan Straits Economic Zone, Central and Western Regions, Bohai Economic Rim, Greater Bay Area and Others. The Group’s construction and sea reclamation services are considered together with the property development segments and included in the relevant geographic operating segment. “Others” segment represents provision of design services to group companies, corporate support functions, property management services (services provided to both internal or external customers), rental income and investment holdings business.

The Executive Directors assess the performance of the operating segments based on a measure of segment results. This measurement basis excludes the effects of depreciation, share of loss of investments accounted for using the equity method, net, finance income, finance costs and income tax expense. Other information provided, except as noted below, to the Executive Directors is measured in a manner consistent with that in the condensed consolidated financial statements.

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Greater

Western

Taiwan Central Straits and Bohai Economic Western Economic Greater Zone Regions Rim Bay Area Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Six months ended

30 June 2021 (Unaudited)

30 June 2021 (Unaudited)
Revenue from contracts
– recognised at a point in time	5,177,663	2,657,984	1,097,913	39,746	1,418	8,974,724
– recognised over time	18,255	—	3,173	1,654	220,725	243,807
– others	—	—	—	—	6,997	6,997
Less: Inter-segment revenue	—	—	—	—	(94,617)	(94,617)
Revenue (from external
customers)	5,195,918	2,657,984	1,101,086	41,400	134,523	9,130,911
Segment results	1,371,751	376,951	256,248	(79,518)	65,393	1,990,825
Depreciation and
amortisation	(2,361)	(2,078)	(1,423)	(636)	(12,957)	(19,455)
Operating profit/(loss)	1,369,390	374,873	254,825	(80,154)	52,436	1,971,370
Share of loss of investments
accounted for using
the equity method, net	(13,000)	(4,196)	(5,037)	(3,389)	(1,705)	(27,327)
Finance income	9,254	10,158	13,299	1,847	18,563	53,121
Finance costs	—	—	—	—	(9,890)	(9,890)
Income tax expense	(410,358)	(155,929)	(110,882)	16,953	(14,594)	(674,810)
Profit/(loss) for the period	955,286	224,906	152,205	(64,743)	44,810	1,312,464

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Greater

Western

Western
Taiwan	Central
Straits	and	Bohai
Economic	Western	Economic	Greater
Zone	Regions	Rim	Bay Area	Others	Total
RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000

Six months ended

30 June 2020 (Unaudited)

30 June 2020 (Unaudited)
Revenue from contracts
– recognised at a point in time	2,246,787	3,416,030	705,027	233,770	—	6,601,614
– recognised over time	1,554	—	668	—	143,866	146,088
– others	—	—	—	—	6,061	6,061
Less: Inter-segment revenue	—	—	(650)	—	(50,129)	(50,779)
Revenue (from external
customers)	2,248,341	3,416,030	705,045	233,770	99,798	6,702,984
Segment results	351,839	574,136	118,598	39,281	22,413	1,106,267
Depreciation	(1,854)	(2,615)	(914)	(291)	(5,768)	(11,442)
Operating profit	349,985	571,521	117,684	38,990	16,645	1,094,825
Share of (loss)/profit of
investments accounted for
using the equity method, net	(11,506)	(4,853)	—	(353)	374	(16,338)
Finance income	18,084	16,159	6,619	478	20,899	62,239
Finance costs	—	—	—	—	(12,499)	(12,499)
Income tax expense	(17,101)	(244,759)	(112,977)	(6,454)	(10,200)	(391,491)
Profit for the period	339,462	338,068	11,326	32,661	15,219	736,736

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Greater

	Greater
	Western
	Taiwan Straits	Central and	Bohai
	Economic	Western	Economic	Greater
	Zone	Regions	Rim	Bay Area	Others	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
As at 30 June 2021 (Unaudited)
Total segment assets	28,547,983	30,230,547	19,704,744	8,936,328	6,555,422	93,975,024
Other unallocated corporate assets						499,062
Total assets						94,474,086
Investments accounted for using
the equity method	220,593	329,000	75,806	—	216,831	842,230
Additions to:
Property, plant and equipment	557	1,078	1,255	1,606	17,751	22,247
Investments accounted for using
the equity method	207,920	126,993	—	100	—	335,013
Acquisition of subsidiaries
- Property, plant and equipment	656,988	48	1,998	—	—	659,034
- Investment property	263,592	—	—	—	—	263,592
- Investments accounted for
using the equity method	6,022	—	—	—	—	6,022
Total segment liabilities	(24,948,648)	(21,684,569)	(14,799,901)	(5,425,560)	(12,771,677)	(79,630,355)
At 31 December 2020 (Audited)
Total segment assets	26,673,206	24,470,843	19,557,018	6,039,450	9,072,500	85,813,017
Other unallocated corporate assets						161,161
Total assets						85,974,178
Investments accounting for
using the equity method	223,765	440,235	—	69,044	183,212	916,256
Additions to:
Property, plant and equipment	4,940	4,629	1,228	3,542	34,806	49,145
Investments accounted for
using the equity method	1,225	271,359	—	66,000	3,500	342,084
Acquisition of subsidiaries
– Property, plant and equipment	3,985	—	20	139	—	4,144
– Intangible assets	—	—	—	—	39,260	39,260
Total segment liabilities	(24,597,505)	(17,432,521)	(15,417,286)	(3,327,269)	(12,251,922)	(73,026,503)

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Breakdown of revenue Sales of properties Property management services Project management services Rental income Healthcare service	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 8,973,306 6,601,614 109,338 64,731 40,291 29,006 6,997 6,061 979 1,572 9,130,911 6,702,984

5 Other gains, net

Gains on disposal of subsidiaries Gain on disposal of an associate Gain on disposal of a joint venture Re-measurement gains on interest in investments accounted for using the equity method Gains on disposal of property, plant and equipment Exchange gains Realised gain on foreign exchange forward contracts Others	Six months ended 30 June 2021 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 31,000 — — 46,355 79,097 — 372,288 233,725 684 106 6,234 8,276 — 5,727 (2,076) (468) 487,227 293,721

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6 Finance income and costs

	Six months ended 30 June	Six months ended 30 June
	2021	2020
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
Finance income from bank deposits	45,278	37,538
Finance income from loans to non-controlling interests	7,843	24,701
	53,121	62,239
Finance costs on bank and other borrowings	1,031,624	786,737
Less: Finance costs capitalised in qualifying assets	(1,021,734)	(774,238)
	9,890	12,499
Weighted average interest rate on capitalised borrowings (per annum)	9.60%	8.78%

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7 Income tax expense

Subsidiaries established and operating in the PRC are subject to PRC corporate income tax at the rate of 25% for the six months ended 30 June 2021 (six months ended 30 June 2020: 25%).

No provision has been made for Hong Kong profits tax as the companies in Hong Kong did not generate any assessable profits for the six months ended 30 June 2021 (six months ended 30 June 2020: Nil).

PRC land appreciation tax is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including costs of land and development and construction expenditures.

	Six months ended	Six months ended	30 June
	2021		2020
	RMB’000		RMB’000
	(Unaudited)	(Unaudited)
Current income tax
– PRC corporate income tax	812,483		627,662
– PRC land appreciation tax	148,043		289,443
Deferred income tax	(285,716)		(525,614)
	674,810		391,491

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8 Trade receivables, other receivables, deposits and other prepayments

Trade receivables, other receivables and deposits: Trade receivables (Note a and b) Less: Provision for impairment on trade receivables Other receivables Interest receivables Receivables in relation to the disposal of assets and liabilities held for sales Deposits with local real estate associations Deposits with labour department Deposits with treasury bureau Less: Provision for impairment on other receivables and deposits Prepayments: Prepaid other taxes Prepayments for construction costs Prepayments for acquisition of subsidiaries	30 June 2021 RMB’000 (Unaudited) 142,623 (6,108) 136,515 3,526,804 10,947 261,336 200,011 29,189 98,758 4,127,045 (87,813) 4,039,232 4,175,747 2,907,895 250,623 24,300 3,182,818	31 December 2020 RMB’000 (Audited) 182,013 — 182,013 1,954,771 11,073 150,000 538,804 29,014 60,506 2,744,168 (87,813) 2,656,355 2,838,368 2,080,975 271,310 24,300 2,376,585

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Note:

• (a) Trade receivables mainly arise from sales of properties and provision of property management services.

Proceeds in respect of sales of properties are to be received in accordance with the terms of the related sales and purchase agreements. Credit terms are generally granted to certain customers and the customers are required to settle the receivables according the sales and purchase agreements.

Property management services income are received in accordance with the terms of the relevant services agreements. Service income from property management service is due for payment by the residents upon the issuance of demand note.

Trade receivables from sales of properties are secured by the properties sold. The carrying amounts of trade receivables approximates their fair values and are interest-free.

• (b) The ageing analysis of trade receivables at the balance sheet dates based on revenue recognition date was as follows:

	30 June	31 December
	2021	2020
	RMB’000	RMB’000
	(Unaudited)	(Audited)
0 - 30 days	32,510	124,118
31 - 60 days	3,331	5,040
61 - 90 days	13,980	128
91 – 180 days	40,654	1,933
Over 180 days	52,148	50,794
	142,623	182,013

The Group applies the simplified approach to provide for expected credit losses prescribed by HKFRS 9. A loss allowance of approximately RMB6,108,000 was provided during the six months ended 30 June 2021, mainly attributable to proceeds from property management services. The expected losses rate on proceed from sales of property is minimal, given there is no history of significant defaults from customers and insignificant impact from forward-looking estimates.

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9 Trade and other payables

	30 June	31 December
	2021	2020
	RMB’000	RMB’000
	(Unaudited)	(Audited)
Trade payables (Note a)	4,734,957	4,420,000
Accruals and other payables	8,643,732	9,961,301
Other taxes payables	3,489,735	939,816
Dividend payables	182,494	4,970
Salary payables	15,091	15,983
Interest payables	226,756	2,754
Rental deposits received	4,386	7,230
	17,297,151	15,352,054

Note:

(a) The ageing analysis of the trade payables based on invoice date was as follows:

0 - 30 days 31 - 60 days 61 - 90 days Over 90 days	2021 RMB’000 (Unaudited) 4,267,189 43,483 76,615 347,670 4,734,957	2020 RMB’000 (Audited) 3,911,635 78,210 78,032 352,123 4,420,000

(b) The carrying amounts of the Group’s trade and other payables approximate their fair values due to their short maturities.

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10 Earnings per share

The basic earnings per share for the six months ended 30 June 2021 and 2020 is calculated based on the profit attributable to owners of the Company.

Profit attributable to owners of the Company (RMB’000) Weighted average number of shares in issue Basic earnings per share (RMB cents)	Six months ended 30 June 2021 2020 (Unaudited) (Unaudited) 533,521 445,093 3,551,609,322 3,551,609,322 15.02 12.53

Diluted earnings per share is equal to basic earnings per share as there was no dilutive potential share outstanding for the six months ended 30 June 2021 and 2020.

11 Dividend

The directors did not recommend the declaration and payment of any interim dividends in respect of the six months ended 30 June 2021.

A final dividend of RMB 5 cents per share for the year ended 31 December 2020 were payable to shareholders who were on the register at 2 July 2021. This final dividend, amounting to approximately RMB177,580,000 has been recognised in shareholders’ equity during the six months ended 30 June 2021.

12 Subsequent events

On 6 July 2021, the Company issued 10.5% senior notes due 2023 with an aggregate nominal value of RMB600,000,000 at 99.323% of the principal amount of the Notes (the “ 10.5% Senior Notes due 2023 ”). The interest is payable semi-annually in arrears. The net proceeds, after deducting the direct issuance costs, amounted to approximately RMB591,093,000. The 10.5% Senior Notes due 2023 will mature on 6 January 2023, unless redeemed earlier.

On 27 July 2021, the Company issued 11.0% senior notes due 2022 with an aggregate nominal value of US$100,800,000 at 100.945% of the principal amount of the Notes (the “ 11.0% Senior Notes due 2022 ”). The interest is payable semi-annually in arrears. The net proceeds, after deducting the direct issuance costs, amounted to approximately USD106,387,000. The 11.0% Senior Notes due 2022 will mature on 6 August 2022, unless redeemed earlier.

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BUSINESS OVERVIEW

In the first half of 2021, complementary to the increase in global vaccination, effective control of COVID-19 pandemic and large-scale fiscal stimulus implemented by the world’s major economies, the global economy is gradually recovering. The recovery momentum of the real estate market in the PRC remained strong, and continued to be a strong pillar during the recovery of national economy. In the first half of year, the real estate control policies adhered to the main undertone of “housing is for accommodation but not for speculation” and “localisation of real estate policies”; and continuously stabilised land prices, housing prices and market expectations, leading to tighter overall control policies.

Under the new circumstances, the Group has achieved a stable and quality development with reliance on efficient operation capabilities, stable fiscal strategies, quality products and forward-looking plans for strategic investment. During the interim period, the Group attained revenue of approximately RMB9,130.9 million, a year-on-year increase of 36.2%; gross profit of RMB2,264.7 million, a year-on-year increase of 61.6% and net profit of approximately RMB1,312.5 million, a year-on-year increase of 78.1%.

Continuously cultivating Yangtze River Delta and expanding quality land bank

During the first half of 2021, the Group acquired 16 new pieces of land under its proactive expansion strategy and prudent investment strategy. In recent years, the Group has insisted on the “1+3+N” global strategic layout, with the Yangtze River Delta city cluster as the “1st” core region to be strengthened; the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Midstream City Cluster and the Bohai Economic Rim as the “3” major subregions to be expanded; and the “N” popular city clusters such as the Western Taiwan Straits City Cluster and overseas markets. As of 30 June 2021, the Group’s total land bank amounted to approximately 23.67 million sq.m., providing a solid foundation to the Group’s future development.

Focusing on New Oriental Wellness Architecture and enhancement in overall product quality

The Group always focuses on research and development capabilities of products and rewards its customers with ingenious products. In 2019, with the concept of returning to humanism and upholding the wellness architecture, the Group was dedicated to establishing a new product

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system - New Oriental Wellness Architecture (“ NOWA ”). Currently, NOWA products have now been upgraded to version 2.0. As the “pioneer” in wellness architecture, NOWA 2.0 products are established based on the rigid demand of customers’ wellness, which firmly provided “high quality” healthy housing for the cities.

During the first half of 2021, the Group commercialised its patent technologies and took the lead in developing anti-epidemic products at home and abroad, such as anti-epidemic elevator air purifier, anti-epidemic ventilator and water purifier; and intelligent platform for supervision of healthy environment in living area. Through the intelligent network platform, the “intelligent and healthy” system in term of pandemic prevention, wellness, environment and services, could be achieved continuously among the projects. Meanwhile, the Group has continued to enhance and improve the standard mechanism of wellness architecture, establish a more comprehensive and scientific wellness architecture mechanism with its own intellectual property rights.

Achieving fast-growing contracted sales and hitting record-high

The concept of the Group’s NOWA has been implemented among the national projects and gained widespread attention from peers and consumers in the market, boosting the contract sales of the Group’s various projects during the first half of year. By fully utilizing the opportunities from effective control of pandemic in the PRC and on-going rebound of market, the Group has carried out proactive and effective marketing strategies; and innovative method of sales including but not limited to strengthening the integration of online and offline sales channels while at the same time, the Group has sped up the pace of development of the projects to secure the supply. During the first half of 2021, the Group achieved contracted sales of approximately RMB23,510.0 million and contracted total floor area of approximately 2,677,400 sq.m., representing a year-on-year increase of 80.6% and 58.3%, respectively, and once again achieved a record-high compared to previous reporting period.

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Market recognition to our financial health

The Group is under good and stable financial position. As at the period ended 30 June 2021, the Group had total cash and cash equivalents of approximately RMB15,383.7 million, reflecting our sufficient liquidity; net debt to equity ratio was 51.1%. The Group has actively explored financing channels, enhanced the capital management and improved the efficiency of use of capital. In March 2021, the Group has officially established the Sustainable Development Committee, formulated a Sustainable Finance Framework, and successfully launched the first tranche of sustainable development notes. During the reporting period, the Group has successfully issued US-dollar denominated bonds in an aggregate principal amount US$285 million and entered into a bilateral loan agreement of interest rate of 6.8% per annum with Nanyang Commercial Bank during the first half of 2021.

During the first half of year, Lianhe Global assigned “BB-” to the Group, Fitch Ratings upgraded the rating to “B+”, and S&P maintained the rating of the Group at “B”, with the outlook given as “Stable”. The ratings reflected the recognition from the rating agencies on the long-term development its remarkable growth on scale of the Group while maintaining a healthy financial leverage and a sufficient land bank to support the further growth of the contracted sales.

Promoting diversified businesses and having the listing application of Redco Healthy Living submitted to the SEHK

In recent years, while strengthening the property development business, the Group has been keenly promoting the layout of its diversified businesses in line with the development trend of the industry, in order to extend its value down the line and incubate the closed-

– 21 –

loop of the entire industry chain. The Group’s diversified investment segment has developed and incubated diversified businesses including but not limited to healthcare, commerce, technology, property management, cultural tourism, education from the perspective of the whole life cycle. Among them, the property management segment (the “ UG Property Management ”) of the Group has demonstrated a rapid development with surging number of management service projects. In June 2021, the Group submitted the application to the SEHK for spin-off, listing and trading of shares of Redco Healthy Living Company Limited (“ Redco Healthy Living ”), on the Main Board of the SEHK. Redco Healthy Living is committed to be a “dual bulter” for customers, namely lifestyle bulter and healthcare bulter. Leveraging the intelligent and digitalised technical service platform, the Group continuously improved the operating efficiency and customers experiences.

Advancing with honor and strengthening the brand recognition

In the first half of 2021, the rapid development and outstanding comprehensive strength of the Group has been widely recognised in the industry and abroad. It has won numerous awards and its reputation has grown significantly. The Group has performed well in the ranking lists of various authoritative evaluation institutions. It has been awarded “China’s 100 Best Real Estate Enterprises”, “2021 China’s Best Real Estate Enterprises with Greatest Growing Potential”, “China Excellent Real Estate Corporation Awards 2021”, “2021 China’s 100 Best Listed Real Estate Enterprises”,“Top Ten PRC Listed Real Estate Enterprises in terms of Growth and Development Capability”, “2020 Group Charity Award of the Year”. Royal Redco in Xianyang was rated as the “Best Pre-sale Property of the Year” for the 16th Kinpan Award. UG Property Management, a subsidiary of the Group, was ranked 40th of the “Top 100 Property Management Service Enterprises in the PRC in 2021”, and its managed projects, Redco Visionary in Jinan and Redco Majestic Residence in Hefei were both awarded the “2021 Five-star Property Service Project in the PRC”.

– 22 –

PROPERTY DEVELOPMENT AND INVESTMENT PROJECTS

As at 30 June 2021, the Group’s property portfolio comprised 131 property development and investment projects with an aggregate gross floor area (the “ GFA ”) of 23,665,984.4 square metres under various stages of development remaining unsold in various cities in the PRC. The following table sets forth a summary of our property development and investment projects as at 30 June 2021:

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
JIANGXI REGION
Spain Standard	466,665.3	861,274.2	4,369.3
力高國際城
Riverside International	37,346.0	163,999.9	1,469.3
濱江國際
Bluelake County	135,285.0	286,794.7	14,739.9
瀾湖郡
Riverlake International	68,373.0	168,752.5	4,606.4
濱湖國際
Imperial Mansion	41,993.3	103,594.8	7,470.3
君御華府
Imperial Metropolis	84,093.3	210,142.7	30,711.3
君御都會
Bluelake International	47,151.0	113,323.0	4,105.9
瀾湖國際
The Garden of Spring	30,378.0	15,278.0	11,273.3
十里春風

– 23 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Scenery Bay	51,919.0	177,985.0	50,362.9
麗景灣
Delight Scenery	62,455.0	123,856.6	20,456.8
悅景薹
YONG Lake Scenic Center	132,505.0	412,507.2	295,246.0
雍湖景畔
Life Sunshine Town	33,396.4	50,181.8	50,181.8
生命陽光城
The Phoenix – Phase I	16,295.3	78,177.8	9,998.2
鳳凰新天一期
The Phoenix – Phase II	39,030.5	155,617.8	155,617.8
鳳凰新天二期
Eastern Imperial Garden	49,225.0	165,979.0	165,979.0
東方璽園
Eastern Exquisite	23,209.0	75,630.6	75,630.6
東方玲瓏園
Golden Mansion	92,314.0	240,346.0	240,346.0
金尊府
Royal City	225,296.0	642,093.3	367,593.3
君譽城
Eastern Harmony	31,422.0	97,757.0	97,757.0
東方和園
Eastern Crystal	57,876.0	177,645.0	177,645.0
東方璞園
One Riverside Glory	52,896.0	158,124.3	158,124.3
君譽濱江一期

– 24 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Two Riverside Glory	42,301.0	100,623.2	100,623.2
君譽濱江二期
Eastern Grand	66,667.0	214,244.0	214,244.0
東方博園
Fifth Avenue	107,814.9	642,971.9	505,234.2
贛州第五大道
Leisure’s Mansion	49,335.6	135,797.5	135,797.5
君逸府
Rivera Mansion	101,008.5	311,874.2	311,874.2
雍江府
Mid-Levels Villa	46,415.4	115,473.7	115,473.7
半山墅
Zhonghui Acadany House	61,052.7	159,030.3	159,030.3
中輝學府
Royal Impression	49,780.5	148,609.6	148,609.6
君譽印象
Violet Pavilion	134,667.3	191,973.0	191,973.0
紫雲台
River Forest West Side Phase I	21,326.9	47,016.4	47,016.4
江樾府項目西區一期
River Forest East Side Phase I	32,708.9	75,302.1	75,302.1
江樾府項目東區一期
Royal County	44,137.0	112,713.0	112,713.0
尚郡
Royal River Mansion	23,569.1	45,841.7	45,841.7
御江府

– 25 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
TIANJIN REGION
Sunshine Coast	481,394.0	1,445,893.2	821,690.2
陽光海岸
Land Lot Nos. A1 and A2	69,336.2	55,469.0	55,469.0
A1及A2號地塊
Perfection Ocean	159,465.9	316,654.0	316,654.0
理想海
Luminescence Ocean	68,827.0	130,921.7	130,921.7
拾光海
Eastern Aesthetics	105,115.2	310,991.2	310,991.2
悅麓蘭庭
HUNAN REGION
Changsha Phoenix	18,002.1	128,168.2	128,168.2
長沙鳳凰新天
Yuelu Green Town	215,333.0	753,667.0	753,667.0
岳麓青城
Yuelu Celebrity Town	140,000.0	350,000.0	350,000.0
岳麓名城
Hangao Acadamy Mansion	67,613.7	252,117.1	252,117.1
漢高學士府
Royal Terrace	111,027.5	432,514.0	432,514.0
雍璽台
Yuelu Green Town	241,333.0	675,734.0	675,734.0
岳麓青城
Kingdom Forest	131,773.8	452,380.0	452,380.0
江山樾

– 26 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
ZHEJIANG REGION
Cloud Metropolis	132,701.0	467,684.9	277,635.6
雲都會
Peach Creek Villa	25,475	61,679.8	61,679.8
桃溪雲廬
Glory Joy Palace	78,512.0	241,627.7	241,627.7
耀悅雲庭
Lagoon Palace	82,512.2	113,512.2	113,512.2
潭影雲廬
Hanru Pavilion	30,894.0	98,201.4	98,201.4
翰如府
JIANGSU REGION
Peaceful Sea	56,499.6	108,074.0	22,608.3
靜海府
Riviera One	223,245.0	645,806.7	645,806.7
璟頤灣
Jade Grand Mansion	41,533.0	126,600.9	126,600.9
璞悅新邸
Violet Mist Land	88,043.0	244,037.1	244,037.1
紫雲朗境
Leisure’s Maneion	199,538.0	515,389.9	515,389.9
君逸府
Time Spring Palace	57,962.0	144,394.0	144,394.0
時光氿樾

– 27 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Yanshan Impression	61,021.0	163,483.6	163,483.6
燕山映
Phoenix Isle	102,511.2	185,928.8	185,928.8
鳳嶼山河
Leisure’s Mansion	16,402.8	37,171.5	37,171.5
君逸府
SHANDONG REGION
Bluelake County	68,066.0	256,658.6	1,739.0
瀾湖郡
Royal Family	30,682.0	131,919.7	18,630.1
君御世家
Imperial Mansion	44,966.0	125,742.3	14,238.7
君御華府
Redco Visionary	90,616.9	311,327.2	52,016.4
力高未來城一期
Redco Visionary II	236,992.1	607,995.8	533,062.7
力高未來城二期
Spring Villa	268,113.0	596,669.4	387,415.6
雍泉府
Jiyang II	166,967.4	389,510.0	389,510.0
濟陽大二期
Grand Mansion	60,940.0	175,440.0	175,440.0
君悅首府
Leisure’s Mansion	34,290.0	111,702.9	111,702.9
君逸府

– 28 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Sunshine Coast - Phase I	51,693.7	93,512.7	7,468.3
陽光海岸－第一期
Sunshine Coast - Phase II	21,371.0	34,388.3	1,295.5
陽光海岸－第二期
Sunshine Coast - Phase III	33,142.0	81,358.2	3,005.8
陽光海岸－第三期
Sunshine Coast - Phase IV	63,411.0	213,814.7	98,872.9
陽光海岸－第四期
Sunshine Coast - Phase V	99,194.0	199,574.0	199,574.0
陽光海岸-第五期
Cathay Palace	57,991.0	182,230.0	182,230.0
泰和府
Imperial Mansion	100,511.8	279,024.0	279,024.0
瑞璽公館
Delight Mansion	133,352.0	375,577.5	375,577.5
清悅華府
Visionary B2 Lot	10,734.0	50,489.0	50,489.0
未來城B2部分地塊
Visionary A7 Lot	23,651.0	75,335.0	75,335.0
未來城A7部分地塊
Leisure’s Mansion	39,000.0	74,894.5	74,894.5
君逸府

– 29 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
ANHUI REGION
Mix Kingdom Redco	395,596.4	823,818.0	65,787.5
力高‧共和城
Prince Royal Family	88,025.5	300,887.9	30,824.2
君御世家
Royal International	43,873.0	114,894.0	15,418.1
君御國際
Bluelake City	76,058.8	229,941.8	35,535.2
瀾湖前城
Majestic Residence	67,931.0	198,138.0	74,845.7
天悅府
Huaan Southern City	165,601.7	496,943.5	496,943.5
南華安城
Cloud Terrace	47,925.5	130,636.2	130,636.2
雲湖印
Royal Universe	83,478.3	147,308.9	147,308.9
君御天下
Bauhinia Residence	56,185.5	140,610.5	140,610.5
紫荊府
Virtuous City	363,736.9	880,110.0	395,676.9
毅德城
Leisure’s Mansion	47,098.0	123,142.0	123,142.0
君逸府
Mingbang Golden Age	135,994.1	324,232.2	324,232.2
錦綉年華

– 30 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Prestige Mansion	48,580.8	152,541.0	152,541.0
國賓府
Zhengwu Future	61,873.3	194,654.0	194,654.0
政務未來
HUBEI REGION
Redco Courtyard	100,411.0	112,217.4	91,295.5
雍湖灣
Youthfulness	61,450.2	113,693.4	113,693.4
雍華年
Golden Bridge Horizon	30,364.0	91,046.9	91,046.9
金橋新天地
Redco Majestic Residence	53,392.4	198,071.9	53,887.1
力高天悅府一期
Redco Majestic Residence II	42,512.8	157,435.2	157,435.2
力高天悅府二期
Scenery Mansion	47,012.0	201,516.0	201,516.0
山水華府
Delight Dragon City	158,891.0	556,118.5	556,118.5
悅禧龍城
Royal City - Phase I	69,466.8	205,541.0	7,790.6
御景灣- 第一期
Majestic Mansion	88,319.8	171,000.0	114,871.5
天悅華府
Royal Family	27,588.1	78,431.6	36,370.9
君御世家

– 31 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Royal Redco	46,855.5	90,131.7	90,131.7
力高君樾
Yangxin Causeway Bay Plaza	161,064.9	485,260.3	485,260.3
陽新銅鑼灣廣場
GUANGDONG REGION
Royal International	33,035.3	138,833.9	11,271.4
力高君御花園
Royal Family	30,819.6	95,493.7	3,232.8
君御世家
Bluelake Landmark	28,113.0	69,275.2	15,392.0
瀾湖峯景
Center Mansion	17,428.0	74,617.7	74,617.7
君熙府
Royal Mansion	13,611.1	36,217.4	36,217.4
君譽府
Bluelake Mansion	12,543.8	41,452.0	41,452.0
瀾湖公館
Sky Palace	48,179.0	220,954.9	220,954.9
雲築花園
Sky Terrace	27,820.0	85,791.7	85,791.7
雲峰閣
Huizhou Leisure’s Mansion	24,956.0	100,123.0	100,123.0
惠州君逸府
Blissful Bay	71,946.0	258,947.2	258,947.2
悅璟灣

– 32 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Jiangmen Leisure’s Mansion	65,359.0	228,798.2	228,798.2
江門君逸府
Riverside One	340,175.6	969,560.0	969,560.0
濱湖壹號
Zengcheng Project	29,306.0	153,177.0	153,177.0
增城項目
Eco Garden	51,714.1	193,458.0	193,458.0
頤尚嘉園
Pearl Mira	74,745.9	246,418.0	246,418.0
印玥萬璟
FUJIAN REGION
Putian Causeway Bay Plaza	170,330.7	430,888.8	430,888.8
莆田銅鑼灣廣場
Bayview	18,306.0	53,034.1	3,287.6
觀悅灣
Enjoy Peak	13,336.0	58,647.7	58,647.7
悅峰薹
Leisure’s Mansion	40,279.0	151,406.0	30,614.4
君逸府
Mount Yuelan	186,656	518,725.2	518,725.2
樾瀾山
Royal Central	15,376.0	48,596.1	48,596.1
君譽中央

– 33 –

			Total GFA
			under various
			stages of
			development
			remaining
Project	Site area(1)	Total GFA(2)	unsold(3)
	(sq. m.)	(sq. m.)	(sq. m.)
Tang Dynasty	83,199.0	250,000.0	250,000.0
大唐世家
Royal Glory	28,381.0	117,230.0	117,230.0
雍錦源
Emperor Palace	30,108.0	70,182.2	70,182.2
君樽府
Qianxihui Square	154,359.1	473,504.5	473,504.5
仟喜薈廣場
TOTAL			23,665,984.4

1. Information for “site area” is based on relevant land use rights certificates, land grant contracts, tender documents, or other relevant agreements (as the case may be).

2. “Total GFA” is based on surveying reports, construction works commencement permits and/or construction works planning permits or the relevant land grant contract and/or public tender, listing-for-sale or auction confirmation letter.

3. “Total GFA under various stages of development remaining unsold” includes the GFA of the completed projects remaining unsold, GFA of projects under development and the GFA of projects for future development.

– 34 –

Financial Review

Revenue

Revenue for the six months ended 30 June 2021 increased by 36.2% to RMB9,130.9 million from RMB6,703.0 million for the six months ended 30 June 2020. Such increase was primarily attributable to the increase in our GFA delivered for the residential and commercial properties for Royal City and Yong Lake Scenic Center in Jiangxi, Leisure’s Mansion in Fujian, Sunshine Coast in Tianjian and Cloud Metropolis in Zhejiang. Total GFA delivered increased by 85.96% to 1,154,335 sq.m for the six months ended 30 June 2021 from 620,736 sq. m for the six months ended 30 June 2020. The increase in our total revenue was also counteracted by the decrease in the recognised average selling price (the “ ASP ”) for the properties delivered in the six months ended 30 June 2021. The ASP for properties delivered decreased to RMB7,774 for the six months ended 30 June 2021 from RMB10,635 for the six months ended 30 June 2020, representing a 26.9% decrease which was primarily due to the increase in GFA delivered in Royal City and Yong Lake Scenic Center in Jiangxi, which recognised a relatively lower ASP, as compared with other property development projects of the Group.

– 35 –

The following table sets out a breakdown of the Group’s revenue, GFA delivered and recognised ASP by geographical segments:

		For	the six months ended	the six months ended	30 June
	2021	2020	2021	2020		2021	2020
	Revenue		GFA Delivered			Recognised ASP
	(RMB’000)		(sq. m.)			(RMB per sq. m.)
	(Unaudited)
Greater Western
Taiwan Straits
Economic Zone	5,177,663	2,246,787	657,984	169,043		7,869	13,291
Central and Western
Regions	2,657,984	3,416,030	329,230	314,092		8,073	10,876
Bohai Economic Rim	1,097,913	705,027	152,367	112,312		7,205	6,277
Greater Bay Area	39,746	233,770	14,754	25,289		2,694	9,244
Others
– Healthcare service	979	1,572	—		—	—	—
– Property management
services	109,338	64,731	—		—	—	—
– Project management
services	40,291	29,006	—		—	—	—
– Rental income	6,997	6,061	—		—	—	—
Total	9,130,911	6,702,984	1,154,335	620,736		7,774	10,635

A summary of the segment results set forth below:

• ‧ Greater Western Taiwan Straits Economic Zone: segment revenue for the Greater Western Taiwan Straits Economic Zone increased significantly by 130.4% to RMB5,177.7 million for the six months ended 30 June 2021 from RMB2,246.8 million for the six months ended 30 June 2020. Such increase was primarily attributable to the increase in GFA delivered for Royal City and Yong Lake Scenic Center in Jiangxi.

– 36 –

• ‧ Central and Western Regions: segment revenue for the Central and Western Regions decreased by 22.2% to RMB2,658.0 million for the six months ended 30 June 2021 from RMB3,416.0 million for the six months ended 30 June 2020. Such decrease was primarily attributable to the decrease in the GFA delivered for Bluelake City in Hefei and Peaceful Sea in Jiangsu.

• ‧ Bohai Economic Rim: segment revenue for the Bohai Economic Rim increased by 55.7% to RMB1,097.9 million for the six months ended 30 June 2021 from RMB705.0 million for the six months ended 30 June 2020. Such increase was primarily due to the increase in the GFA delivered in Sunshin Coast in Tianjin.

• ‧ Greater Bay Area: segment revenue for the Greater Bay Area decreased significantly by 83.0% to RMB39.7 million for the six months ended 30 June 2021 compared to RMB233.8 million for the six months ended 30 June 2020. Such decrease was mainly due to the decrease in GFA delivered for Royal Family in Zhongshan.

• ‧ Others: It mainly represents property management services provided by UG Property Management, which is principally engaged in the provision of property management services to the Group’s projects, value-added services to non-property owners and community value-added services. The project management services income mainly refers to the acquisition advisory service and financing service to our joint venture project companies.

Cost of sales

Cost of sales increased by 29.5% to RMB6,866.2 million for the six months ended 30 June 2021 from RMB5,302.0 million for the six months ended 30 June 2020. Such increase was primarily due to the increase in GFA delivered to 1,154,335 sq. m. for the six months ended 30 June 2021 from 620,736 sq. m. for the six months ended 30 June 2020; netted off by the decreased in the average land acquisition cost per sq. m. delivered to RMB2,359 for the six months ended 30 June 2021 from RMB4,522 for the six months ended 30 June 2020. Such decrease in average land acquisition cost per sq. m. delivered was primarily due to the increase in the GFA delivered for Royal City and Yong Lake Scenic Center in Jiangxi, Cloud Metropolis in Zhejiang; and Sunshine Coast in Tianjian with relatively low land acquisition costs.

– 37 –

Gross profit

Gross profit increased by 61.7% to RMB2,264.7 million for the six months ended 30 June 2021 from RMB1,401.0 million for the six months ended 30 June 2020. Our gross profit margin increased to 24.8% for the six months ended 30 June 2021 from 20.9% for the six months ended 30 June 2020. The increase was primarily due to the increase in GFA delivered, decrease in the average land acquisition cost per sq. m. of the GFA delivered during the reporting period; and netted off by the decrease in ASP.

Other gains, net

Other gains, increased by 65.9% to RMB487.2 million for the six months ended 30 June 2021 from RMB293.7 million for the six months ended 30 June 2020. The increase was primarily attributable to the increase of gain on re-measurement gain from RMB233.7 million in six months ended 30 June 2020 to RMB372.3 million for the six months ended 30 June 2021 and increase in gain on disposal of subsidiaries and a joint venture by RMB110.1 million for the six months ended 30 June 2021.

Selling and marketing expenses

Selling and marketing expenses increased by 114.0% to RMB529.3 million for the six months ended 30 June 2021 from RMB247.4 million for the six months ended 30 June 2020. Selling and marketing expenses mainly represent expenses incurred in the promotion of our properties and the sales commission to the sales teams. Such increase was mainly due to the increase in the marketing promotion activities for the projects and the increase in the sales agency fee as there was an increase in the contracted sales during the six months ended 30 June 2021.

– 38 –

General and administrative expenses

General and administrative expenses increased by 30.4% to RMB461.7 million for the six months ended 30 June 2021 from RMB354.1 million for the six months ended 30 June 2020. Such increase was primarily due to the increase in salary expenses, legal and consultancy expenses and office and travelling expenses because of the increase in the number of property development projects located in different cities; and the professional fee incurred for the spinoff of Redco Healthy Living.

Fair value gain on investment properties

The fair value gain on investment properties represents the increase in the value on the commercial portion of the culture park in Tianjin and a portion of the Redco Building in Shenzhen which is held for rental. The fair value gain increased by 856.6% to RMB15.6 million for the six months ended 30 June 2021 from RMB1.6 million for the six months ended 30 June 2020.

Fair value gain on investment properties upon transfer from properties under development for sales

The fair value gain on investment properties upon transfer from properties under development for sales represents the valuation gain for the commercial properties of The Phoenix - Phrase II in Nanchang and Redco Visionary in Jinan when it changed from the properties under development for sales to investment properties. There was no such transfer during the six months ended 30 June 2020.

Operating profit

As a result of the foregoing, operating profit increased by 80.1% to RMB1,971.4 million for the six months ended 30 June 2021 from RMB1,094.8 million for the six months ended 30 June 2020.

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Finance income

Finance income decreased by 14.6% to RMB53.1 million for the six months ended 30 June 2021 from RMB62.2 million for the six months ended 30 June 2020. Such decrease was primarily attributable to the decrease in the interest income from the loan to non-controlling interest due to the repayment of balance by the non-controlling interest in the first half of 2020 and counteracted by the increase in bank deposit interest during the period.

Finance costs

Finance costs decreased by 20.9% to RMB9.9 million for the six months ended 30 June 2021 from RMB12.5 million for the six months ended 30 June 2020. Such decrease was mainly due to the increase in interest expense which is eligible to be capitalised to projects under development.

Share of loss of investments accounted for using the equity method, net

Increase in share of loss of investments accounted for using the equity method, by 67.5% to RMB27.3 million for the six months ended 30 June 2021 from RMB16.3 million for the six months ended 30 June 2020, which was mainly due to the decrease in GFA delivered for Prime in Australia.

Profit before income tax

As a result of the foregoing, profit before income tax for the six months ended 30 June 2021 increased 76.1% to RMB1,987.3 million from RMB1,128.2 million for the six months ended 30 June 2020.

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Income tax expense

Income tax expense increased by 72.4% to RMB674.8 million for the six months ended 30 June 2021 from RMB391.5 million for the six months ended 30 June 2020. Such increase was primarily the increase in PRC corporate income tax (“ CIT ”) by RMB184.8 million as a result of increased profit of the Group during the first half of 2021.

Profit for the six months ended 30 June 2021

As a result of the foregoing, profit for the six months ended 30 June 2021 increased by 78.1% to RMB1,312.5 million from RMB736.7 million for the six months ended 30 June 2020. The profit for the six months ended 30 June 2021 was mainly attributable to the profit in the Greater Western Taiwan Straits Economic Zone of RMB955.3 million, Central and Western Regions of RMB224.9 million, Bohai Economic Rim of RMB152.2 million, the others segment for RMB44.8 million, netted off by the loss in Zhongshan and Shenzhen of Greater Bay Area of RMB64.7 million.

Profit for the six months ended 30 June 2021 attributable to owners of the Company and non-controlling interests

As a result of the foregoing, profit for the six months attributable to owners of the Company increased by 19.9% to RMB533.5 million for the six months ended 30 June 2021 from RMB445.1 million for the six months ended 30 June 2020. Profit attributable to noncontrolling interests increased to RMB778.9 million for the six months ended 30 June 2021 as compared with RMB291.6 million for the six months ended 30 June 2020 which was mainly due to the increase in the profit from property development projects which the Group owns less than 50% of effective interest.

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Liquidity and Capital Resources

Cash Position

The Group had cash and cash equivalents of approximately RMB11,294.5 million (31 December 2020: RMB9,649.4 million) and restricted cash of RMB4,089.1 million (31 December 2020: RMB4,156.9 million) as at 30 June 2021. As at 30 June 2021, the Group’s cash and cash equivalents were mainly denominated in Hong Kong dollar (“ HK$ ”), RMB and United States dollar (“ US$ ”) and Australian Dollar (“ AUD ”).

Borrowings

As at 30 June 2021, the Group had borrowings of approximately RMB22,962.9 million (31 December 2020: RMB20,111.4 million).

Long-term bank borrowings Senior Notes due 2022, 2023 and 2024 Non-current borrowings Short-term bank and other borrowings 8% Senior Notes due 2022 8.5% Senior Notes due 2021 9.875% Senior Notes due 2021 Portion of long-term bank borrowings – due for repayment within one year – due for repayment over one year which contain a repayment on demand clause Current borrowings Total borrowings	30 June 31 December 2021 2020 RMB’000 RMB’000 (Unaudited) (Audited) 10,482,526 9,390,276 3,887,803 4,009,532 14,370,329 13,399,808 4,420,477 3,077,546 1,810,732 — 1,929,803 1,934,289 — 746,814 8,161,012 5,758,649 429,703 952,897 1,872 — 8,592,587 6,711,546 22,962,916 20,111,354

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The amounts based on the scheduled repayment dates set out in the loan agreements and the maturities of the Group’s total borrowings at the respective balance sheet dates (i.e. ignoring the effect of any repayment on demand clause) are shown below:

Amounts of borrowings that are repayable: – Within 1 year – Between 1 and 2 years – Between 2 and 5 years Total borrowings	30 June 2021 31 December 2020 RMB’000 RMB’000 (Unaudited) (Audited) 8,590,715 6,711,546 7,909,790 5,331,643 6,462,411 8,068,165 22,962,916 20,111,354

The carrying amounts of the Group’s bank borrowings approximate their fair values as the impact of discounting is not significant or the borrowings carrying floating rate of interests.

Other performance indicators

Net debt to equity ratio

As at 30 June 2021, the Group’s net debt to equity ratio was 51.1% (31 December 2020: 48.7%). It is calculated as net debt divided by total equity. Net debt is calculated as total borrowing less cash and bank balance (including cash and cash equivalents and restricted cash). Total equity is as shown in the condensed consolidated balance sheet.

Net current assets and current ratio

As at 30 June 2021, the Group’s net current assets amounted to approximately RMB25,706.2 million (31 December 2020: RMB24,301.3 million). The Group’s current ratio, which is calculated as current assets divided by current liabilities, was approximately 1.41 times as at 30 June 2021 (31 December 2020: 1.42 times).

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Cost of borrowings

The Group’s average cost of borrowings (calculated by dividing total interest expenses incurred, including interest capitalised by average borrowings during this period) increased to 9.60% for the six months ended 30 June 2021 from 8.78% for the six months ended 30 June 2020.

Contingent liabilities

The Group had the following contingent liabilities in respect of financial guarantees on mortgage facilities as at the dates below:

	30 June 31 December	30 June 31 December
	2021	2020
	RMB’000	RMB’000
Guarantees in respect of mortgage facilities for
certain purchasers of the Group’s properties	17,274,819	9,694,814

The Group has arranged bank financing for certain purchasers of the Group’s properties and provided guarantees to secure their obligations of such purchasers for repayment. Such guarantees will terminate upon the earlier of (i) the transfer of the real estate ownership certificates to the purchasers which will generally occur with the period ranging from six months to three years from the completion of the guarantee registration; or (ii) the satisfaction of mortgage loans by the purchasers of the properties.

Pursuant to the terms of the guarantees, upon default of mortgage payments by these purchasers, the Group is obliged to repay the outstanding mortgage principal together with accrued interest and penalties owned by the defaulting purchasers to the banks and the Group is entitled to retain the legal title and to take over the possession of the related properties. The Group’s guarantees period starts from the date of grant of mortgage. The Directors consider that the carrying values of the financial guarantees is immaterial.

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There are certain corporate guarantees provided by the Group’s subsidiaries for each other in respect of borrowings as at 30 June 2021 and 31 December 2020. The Directors consider that the subsidiaries are sufficiently financially resourced to fulfil their obligations.

Save as disclosed above, the Group and the Company had no other significant contingent liabilities as at 30 June 2021.

Employees and Remuneration policies

As at 30 June 2021, the Group had approximately 3,780 employees (31 December 2020: 3,247 employees). For the six months ended 30 June 2020, the remuneration of the Group’s employees (including directors’ emoluments) amounted to approximately RMB191.7 million. The remuneration of the Group’s employees includes basic salaries, allowances, bonus and other employee benefits. The Group’s remuneration policy for the Directors and senior management members was based on their experience, level of responsibility and general market conditions. Any discretionary bonus and other merit payments are linked to the profit performance of the Group and the individual performance of the Directors and senior management members. Further, the Group adopted a share option scheme on 14 January 2014. Further information of such share option scheme is available in the interim report of the Company for the six months ended 30 June 2021. The Company provided on-the-job training, induction courses together with other training programmes for the employees at different positions to raise their professionalism during the six months ended 30 June 2021.

Charge on assets

As at 30 June 2021, the Group had aggregate banking facilities of approximately RMB27,630.4 million (31 December 2020: RMB21,762.8 million) for overdrafts and bank loans. The unutilised banking facilities as at 30 June 2021 amounted to RMB4,557.5 million (31 December 2020: RMB1,557.0 million).

As at 30 June 2021 and 31 December 2020, the borrowings of the Group were secured by (i) corporate guarantees of the Company; (ii) certain land and properties under development for sale provided by the Group’s subsidiaries; (iii) an investment property; and (iv) the Group’s equity interests in certain subsidiaries.

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The Group’s senior notes are guaranteed by certain subsidiaries of the Company which are located in the PRC and secured by shares of certain subsidiaries of the Company which are incorporated outside the PRC.

Significant investments held, material acquisitions and disposals of subsidiaries and associated companies

Save as disclosed, no other significant investments held, nor were there any material acquisitions or disposals of subsidiaries and associated companies during the six months ended 30 June 2021.

Future plans for material investments or capital assets

The Company will continue to purchase land located in the strategically selected cities. It is expected that the Group’s internal resources and bank borrowings will be sufficient to meet the necessary funding requirements. Save as disclosed in this announcement, the Company did not have any plans of significant investments or capital assets as at the date of this announcement.

Important event affecting the Group after 30 June 2021

On 6 July 2021, the Company issued 10.5% senior notes due 2023 with an aggregate nominal value of RMB600,000,000 at 99.323% of the principal amount of the Notes (the “ 10.5% Senior Notes due 2023 ”). The interest is payable semi-annually in arrears. The net proceeds, after deducting the direct issuance costs, amounted to approximately RMB591,093,000. The 10.5% Senior Notes due 2023 will mature on 6 January 2023, unless redeemed earlier.

On 27 July 2021, the Company issued 11.0% senior notes due 2022 with an aggregate nominal value of US$100,800,000 at 100.945% of the principal amount of the Notes (the “ 11.0% Senior Notes due 2022 ”). The interest is payable semi-annually in arrears. The net proceeds, after deducting the direct issuance costs, amounted to approximately USD106,387,000. The 11.0% Senior Notes due 2022 will mature on 6 August 2022, unless redeemed earlier.

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Outlook

Currently, the property industry remains as the foundation and stabilizer of China’s economy. Under the keynote of “housing is not for speculation”, the era of favorable land and financial policies has gone, and now reaches an era of stable market and policies. In the second half of 2021, it is expected that “stability” would remain as the main theme of property industry policies while the fundamental idea still being “housing without speculation and tailor implementation of policies”. Regulators will reinforce and implement the control objectives of stabilizing land prices, housing prices and market expectations, with an aim to facilitate continuous healthy and balanced development of the property market. The government increases the construction of rental housing and provides further support to it, while continues to strengthen the supervision of property finance and tighten the property financial policies

Under the background of overall deleveraging of the property industry, it is expected that the general strategies for all property developers would be risk management. Developers will need to actively adapt to new policies and market environment, bolster advantageous areas and geographical exposure, continue to further optimize the landbank structure and improve the efficiency of corporate operation and management in order to achieve sustainable, stable and quality development for the companies.

With the focus on new strategic objectives, positioning and its own quality development, the Group has launched a development theme of “Innovation and Accumulation” in 2021. To achieve the 3-year strategic goal, the Group will continue to expand its quality land reserve, and insist on the “1+3+N” development strategy, with an accent on the Yangtze River Delta city cluster while exploring other premium regions that offer opportunities to continuously drive the Group to quality development and dedicate ourselves to offering healthy living to every city. The Group will also put more effort in market tracking and research on key regions together with precise product positioning, as well as prudent land acquisition in accordance with stringent investment principles.

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For the second half of year 2021, the Group will continue to insist on high-quality development, focusing on the quality and efficiency of business operations, retaining talents, promoting innovation and efficiency. We will also continue to invest in the research and development of wellness architecture and its implementation based on our principle of “hard technology + soft services”, in order to set an industry benchmark, and build up the core competitiveness of our products and entry barrier to protect our enterprise development.

Based on our NOWA products, the Group’s diversified industries investment arm will focus on the development in property management, healthcare, and its core strengths and capabilities in the fields of digitalization, technology research, commercial and cultural tourism and education, in order to set the tone for the industry and create a new strategy of multi vertical business units under the umbrella of property development.

Before the 30th anniversary of the founding of the Group, we are pleased to have continuously created value for shareholders and provided customers with a healthy living environment. Looking forward, we will steadfastly gather the wisdom and strength of our employees, continue to strive for the best without forgetting our intentions, continue to prioritize product quality, and improve our operational competitiveness to achieve stable and solid growth, jointly build the Company as the leader of healthy building and the most valuable comprehensive real estate holding group in China. Meanwhile, the Group adheres to the corporate culture of “hard work, product quality and mutual benefit” and continues to create a better living experience based on craftmanship and cultural heritage. With a stable and longterm development being our foundation and focus, we will thrive together with our vibrant cities and towns and witness a brighter and healthier future together.

THE CORPORATE GOVERNANCE CODE

The Company has complied with all the code provisions of the Corporate Governance Code (the “ Corporate Governance Code ”) contained in Appendix 14 to the Listing Rules for the six months ended 30 June 2021.

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MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted a code of conduct regarding securities transactions by the Directors on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) set out in Appendix 10 to the Listing Rules. On specific enquiries made, all Directors have confirmed that they have complied with the Model Code for the six months ended 30 June 2021.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

On 14 April 2021, the Company issued US$220 million 8.0% senior notes due 2022 (the “ Notes Due 2022 ”). The Notes Due 2022 are listed on the Singapore Exchange Securities Trading Limited. Details of the issue of the Notes Due 2022 were disclosed in the announcements of the Company dated 7 April 2021 and 8 April 2021.

On 14 May 2021, the Company issued US$65 million 8% additional senior notes due 2022 (the “ Additional Notes Due 2022 ”), which was consolidated and formed a single series with The Notes Due 2022. The Additional Notes Due 2022 are listed on the Singapore Exchange Securities Trading Limited. Details of the issue of the Additional Notes Due 2022 were disclosed in the announcements of the Company dated 7 May 2021.

On 28 June 2021, the Company together with certain subsidiary guarantors entered into a purchase agreement with Standard Chartered Bank in relation to the issuance of RMB600,000,000 10.5% senior notes due 2023 (the “ Notes Due 2023 ”). The Notes Due 2023 are listed on the Singapore Exchange Securities Trading Limited. Details of the issue of the Notes Due 2023 were disclosed in the announcement of the Company dated 28 June 2021.

Save as disclosed in this announcement, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities for the six months ended 30 June 2021.

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REVIEW OF FINANCIAL STATEMENTS

The Audit Committee of the Company has reviewed the financial statements of the Company for the six months ended 30 June 2021. PricewaterhouseCoopers as the Company’s auditor has reviewed the unaudited interim results of the Group for the Period under review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.

PUBLICATION OF THE 2021 INTERIM RESULTS ANNOUNCEMENT AND 2021 INTERIM REPORT

This announcement is published on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (www.redco.cn). The interim report of the Company for the six months ended 30 June 2021 containing all the information required by the Listing Rules will be despatched to the shareholders of the Company and published on the respective websites of the Hong Kong Stock Exchange and the Company in due course.

By Order of the Board Redco Properties Group Limited Wong Yeuk Hung Chairman

Hong Kong, 27 August 2021

As at the date of this announcement, the executive Directors are Mr. Wong Yeuk Hung JP, Mr. Huang Ruoqing and Mr. Tang Chengyong and the independent non-executive Directors are Mr. Chau On Ta Yuen SBS, BBS, Dr. Tam Kam Kan GBS, SBS, JP and Mr. Yip Tai Him.

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