Wanwu Cloud: Further Reducing Transactions with Vanke in H2

"All Things Cloud (2602.HK) is a child nurtured by Vanke (000002.SZ), and the two are inseparable like water and milk, a relationship that is hard to cut and even harder to untangle. It is not possible to simply sever ties today. People have emotions, and business is inevitably intertwined. Although the business volume between the two parties has indeed decreased, the accounts receivable have increased significantly. We hope to maintain the relative independence of the business, but emotionally, it is difficult to achieve the clean break that investors talk about."

Regarding the impact on developers and the handling of relationships, on August 23rd, Zhu Baoquan, the chairman of All Things Cloud, stated this to media reporters at the 2024 interim performance meeting. The performance announcement showed that in the first half of the year, All Things Cloud's revenue related to developers accounted for 12.6%, a year-on-year decrease of 5 percentage points. If all developer-related businesses are excluded, the company's revenue for the first half of the year was approximately 15.36 billion yuan, a year-on-year increase of 16.2%; gross profit was about 2 billion yuan, a year-on-year increase of 12.8%.

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In recent years, the proportion of related transactions between All Things Cloud and Vanke has continued to decline, with 19.2% in 2021, 16% in 2022, and 13.5% in 2023. This figure further decreased to 10.1% in the first half of this year.

The management of All Things Cloud stated at the performance meeting that in the second half of the year, the company will further proactively reduce related transactions with Vanke and discuss with Vanke the method of using operational assets to offset debts to reduce accounts receivable. The impact of the decline in developer-related businesses will be compensated as much as possible by the better development of non-developer main businesses, ultimately maintaining positive revenue growth.

The proportion of cyclical business revenue is about 85%.

"Investors are rational, but running a business is emotional," Zhu Baoquan stated at the performance meeting.

The performance announcement shows that in the first half of the year, All Things Cloud's main business grew strongly, but developer-related businesses declined significantly. During the reporting period, All Things Cloud's revenue mainly came from community space living consumption services, business and urban space comprehensive services, as well as AIoT and BPaaS solution services.

In the first half of the year, All Things Cloud's cyclical business (i.e., main business/non-developer business, including residential property services, property and facility management services, BPaaS solution services) revenue was about 14.9 billion yuan, a year-on-year increase of 16.7%, accounting for 84.9% of the revenue, with a gross profit of about 1.94 billion yuan, a year-on-year increase of 16.8%. Among them, residential property service revenue was about 9.32 billion yuan, a year-on-year increase of 14.2%; property and facility management service revenue was about 4.8 billion yuan, a year-on-year increase of 20.8%; BPaaS solution revenue was about 790 million yuan, a year-on-year increase of 22%.

During the reporting period, All Things Cloud's revenue structure further transformed, with developer value-added service revenue of about 920 million yuan, a year-on-year decrease of 33.8%, and gross profit of about 0.02 billion yuan, a year-on-year decrease of 98.9%. Zhu Baoquan stated that the company's proportion of transactions with related parties in the first half of the year decreased faster than expected, but it will continue to decrease in the second half of the year, while hoping that through the team's efforts, the main business based on the company's strategy will be strengthened.

The performance report shows that All Things Cloud's cyclical business is based on three strategies: Diecheng, diverse customers, and technology. In the first half of the year, the number of All Things Cloud's Diecheng bases increased to 642, including 202 standard Diecheng, 180 main attack Diecheng, and 260 target Diecheng. During the reporting period, All Things Cloud newly obtained 221 residential market contracts, involving an amount of about 1.276 billion yuan. According to All Things Cloud's internal bidding statistics, the company's winning rate for existing projects within Diecheng in the first half of the year reached 74%. As of June 30, 2024, All Things Cloud has completed the process transformation acceptance of 200 Diecheng, involving 13,337 residential property projects. The company plans to continue the process transformation of no less than 50 Diecheng in the second half of this year.Core net profit is fully used for dividends

At the beginning of the performance meeting, Zhu Baoquan stated that Wanyun Cloud was recently officially included in the Hang Seng Composite Index, which is a very important moment for the company and investors. Therefore, the company's board of directors decided to add a special dividend on the basis of the interim dividend to celebrate the company's inclusion in the Hang Seng Composite Index.

During the reporting period, Wanyun Cloud's attributable earnings per share for shareholders were 0.66 yuan, and the board of directors suggested using 100% of the core net profit as the total dividend payment, with 55% as the interim dividend and 45% as the special dividend. The interim dividend per share was 0.562 yuan, and the special dividend per share was 0.46 yuan, totaling a dividend payment of 1.022 yuan per share to shareholders.

Wanyun Cloud's management stated at the performance meeting that in 2024, the company will continue to adhere to a basic guideline of paying dividends at no less than 55% of the core net profit, in order to provide shareholders with continuous and stable returns. At the same time, the company will actively promote share buybacks to further enhance the company's value.

It is worth noting that Wanyun Cloud's core net profit in the first half of the year has declined, with a year-on-year decrease of 2.7% to approximately 1.202 billion yuan during the reporting period. The company explained that this was mainly due to the decline in other income and gains.

The performance announcement shows that during the reporting period, Wanyun Cloud's other income and gains decreased by 81% year-on-year, mainly due to the increase in the fair value of financial liabilities measured at fair value and their changes recognized in the current period's profit or loss last year, as well as changes in the value of equity investments held by the company during the reporting period, and the expiration of the value-added tax credit policy in China. In the first half of the year, the company's gross margin was 13.6%, a year-on-year decrease of 1.5%.

As of June 30, 2024, Wanyun Cloud held cash and cash equivalents of approximately 12.197 billion yuan, a decrease of about 3.375 billion yuan from the end of 2023, and the company had no bank loans or borrowings.