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Our reporter Huang Yongxu reports from Beijing

Recently, listed real estate companies have ushered in the "mid-year report season", and real estate companies have successively disclosed performance forecasts or semi-annual reports. Overall, in the first half of the year, the real estate industry is still in the process of bottoming out, and the performance of real estate companies is generally under pressure, but some of them have turned losses into profits.

Recently, Xinhualian Culture and Tourism Development Co., Ltd. (hereinafter referred to as "Xinhualian", 000620.SZ) disclosed its 2024 semi-annual report. The financial report shows that in the first half of 2024, the company's operating income was 1.575 billion yuan, and its net profit attributable to the parent company was 48.5087 million yuan, an increase of 1.27 billion yuan over the same period last year, achieving a year-on-year turnaround from loss to profit.

Xinhualian said in an interview with a reporter from China Business News that the gross profit of the real estate projects carried forward by the company during the reporting period was higher than that of the same period last year, and the company completed judicial reorganization at the end of 2023, with a significant decrease in interest-bearing liabilities and a significant decrease in financial expenses compared with the same period last year. Therefore, Xinhualian achieved a year-on-year turnaround.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that the case of Macron's turnaround shows that even under unfavorable market conditions, real estate companies can still achieve improved performance through effective strategic adjustments and management optimization. Other real estate companies can learn from Macron's experience, combine their own conditions, promote business diversification, and formulate appropriate development strategies.

Turned from loss to profit year-on-year

Once upon a time, Xinhualian was a listed company that integrated cultural and tourism scenic spot development and operation, real estate project development and construction, general contracting, commercial management, hotel management, property services, tourism services and other businesses, and had the ability to develop multiple business formats comprehensively.

However, it was learned from Xinhualian’s financial report that from 2020 to 2022, Xinhualian’s performance continued to suffer huge losses, its asset-liability ratio continued to soar, and it was even insolvent at one point. It was not until the judicial reorganization in 2023 that the company’s development strategy was adjusted. Therefore, this semi-annual report is the first mid-year report after Xinhualian’s successful reorganization. The report shows that in the first half of 2024, the company’s operating income was 1.575 billion yuan, and its net profit attributable to the parent was 48.5087 million yuan, an increase of 1.27 billion yuan over the same period last year, achieving a year-on-year turnaround from loss to profit.

How can the company turn losses into profits in the first half of the year against the backdrop of deep industry adjustments and corporate restructuring?

Xinhualian said that the gross profit of the real estate projects carried forward by the company during the reporting period was higher than the same period last year, and the company completed judicial reorganization at the end of 2023, its interest-bearing liabilities dropped significantly, and its financial expenses dropped significantly compared with the same period last year.

According to the semi-annual report, in the first half of the year, Macrolink's commercial housing sales revenue reached 921 million yuan, accounting for 58.47% of its operating income; its gross profit margin reached 39.71%, an increase of 24.26% year-on-year. Real estate business is still the main source of the company's income and profit.

In this regard, Xinhualian said that in the first half of 2024, the real estate market is still in the process of adjustment and transformation. All regions and departments have adapted to the new situation of major changes in the supply and demand relationship in the real estate market, implemented policies based on the city, actively adjusted and optimized real estate policies, and did a solid job in ensuring the delivery of houses, supporting rigid and improved housing demand. The policy effect has been gradually released, and the market activity has increased.

Moreover, the company adopts a diversified management approach, strengthening support and control over sales prices, team commissions, online marketing, etc., keeping a close eye on changes in the overall real estate market and regional markets, formulating policies for implementation, paying attention to the recovery of accounts receivable, and increasing investment in online marketing and commercial investment, providing strong support for sales.

Transformation to cultural tourism

This year, the national demand for cultural tourism consumption has been accelerated, and the supply and demand sides have exerted their strength, and the cultural tourism market has recovered rapidly. The tourism market during important festivals has continued to be hot, and the number of tourists from all over the country has hit a new historical high during the Spring Festival, Qingming Festival, May Day, and Dragon Boat Festival.

After the reorganization, Xinhualian has targeted the cultural tourism market and determined the development strategy of focusing on cultural tourism. In the first half of the year, the company adhered to its main responsibilities and business, refined cultural tourism operations, and focused on the experience of tourists, creating excellent cultural tourism projects that integrate sightseeing, experience, entertainment, leisure and vacation.

However, semi-annual report data showed that Xinhualian’s cultural tourism business achieved operating income of 355 million yuan, accounting for 22.54% of operating income, a decrease of 42.36% from the same period last year; the gross profit margin was -10.78%, an increase of 2.98% from the same period last year.

Given that Xinhualian's cultural and tourism business performance is not ideal, and both total revenue and revenue share have declined, Xinhualian responded to reporters that the above situation is mainly due to the company completing judicial reorganization at the end of 2023 and removing two cultural and tourism projects from the balance sheet during the reorganization process.

In addition, in the semi-annual report, Xinhualian also stated: "With the strong recovery of the domestic tourism market, tourists' consumption experience needs continue to increase, and folk experience, entertainment performances, cultural and historical sites and other scenic spots are becoming more popular. The cultural and tourism market in which the company is located is facing a situation where rapid development and fierce competition coexist. Multi-faceted homogeneous competition has posed certain challenges to the company's operation and management."

Xinhualian said that according to the general characteristics of the cultural and tourism scenic spot industry, it takes a certain period of cultivation from the opening to maturity of the scenic spot.

The company's Tongguan Kiln Scenic Area encountered certain force majeure after its opening, which extended the cultivation period. In the future, the company will continue to focus on the main business of cultural tourism, improve cultural tourism operations, and focus on the experience of tourists to create excellent cultural tourism projects that integrate sightseeing, experience, entertainment, leisure, and vacation. At the same time, it will carry out the work of strengthening, optimizing, stabilizing, and supplementing the chain, and further expand the scale and benefits of cultural tourism business through management output, low-cost mergers and acquisitions, and technological empowerment, so as to build the core competitiveness of cultural tourism.

(Editor: Wang Jinlong Reviewer: Tong Haihua Proofreader: Peng Yufeng Intern Proofreader: Gu Sisi)