SOHO China's net current liabilities are close to 10 billion yuan, and the auditor pointed out that there are major doubts about its ability to continue operations
2024-08-24
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On August 22, SOHO China Limited (SOHO China, 00410.HK) announced its 2024 interim results.
During the reporting period, SOHO China's operating income was approximately RMB 799 million, a year-on-year decrease of 2.67%; the gross profit margin of the leasing business was approximately 82%, and the gross profit was approximately RMB 648 million, a year-on-year decrease of approximately 4.39%; the net loss attributable to the parent company's shareholders was approximately RMB 108 million.
As of June 30, 2024, the average occupancy rate of SOHO China's investment properties was approximately 76%; the net asset-liability ratio was approximately 41%, and the average borrowing cost was approximately 4.5%. Net current liabilities were RMB 9.923293 billion. The group's total borrowings totaled approximately RMB 15.691 billion, of which approximately RMB 7.749 billion was due within one year and approximately RMB 7.942 billion was due over one year. The above loans were secured by investment properties held by the group with a book value of RMB 53.891775 billion. As of June 30, 2024, the group had unrestricted cash and cash equivalents of RMB 768.14 million.
According to the financial report, SOHO China's subsidiary Beijing Wangjing Sohou Real Estate Co., Ltd. received a tax payment notice from the local tax authorities in August 2022, requiring it to pay the relevant land value-added tax of RMB 1,733,334 million for Tower 1 and Tower 2 of the Wangjing SOHO project before September 1, 2022, and to charge a late payment fee of 0.05% of the overdue tax per day from the date of overdue payment. As of June 30, 2024, RMB 144.6 million of land value-added tax had been paid, and RMB 2,169,813 million of land value-added tax and related late payment fees had not been paid.
SOHO China stated that the arrears in land value-added tax may lead to cross-default of its bank loans totaling RMB 4.187351 billion on June 30, 2024. The principal of the cross-default loans is RMB 4.174 billion, and the interest is RMB 13.351 million, including loans due after June 30, 2025 as agreed in the original contract. As they may be required to be repaid immediately by their respective borrowers, they will be reclassified as current liabilities on June 30, 2024.
The financial report shows that the condensed consolidated interim results for the six months ending June 30, 2024 have not been audited, but have been reviewed by the company's auditor, PricewaterhouseCoopers. PricewaterhouseCoopers said that the above events or circumstances, together with other matters, indicate significant uncertainties that may cast significant doubts on SOHO China's ability to continue operations.
Judging from the rental income and occupancy rate of SOHO China's major investment property projects, in the first half of this year, among the five property projects located in Beijing, Lize SOHO had the highest occupancy rate of 89%, with an income of 87.491 million yuan; Wangjing SOHO had the highest rental income, with an income of 99.084 million yuan in the first half of the year and an occupancy rate of 57%. The occupancy rates of the four projects in Shanghai were between 79% and 91%, among which Gubei SOHO had a occupancy rate of 91% and earned 120 million yuan in rental income.
Looking back at the office and commercial leasing market in the first half of this year, SOHO China said that in terms of supply, new supply has slowed down, and the supply and demand of commercial office land has reached a low point in recent years; in terms of demand, weak market demand has become the main factor restricting the market recovery, and leasing demand is mainly for relocation and renewal. The rental level is in a downward channel. Although the rent of shops has increased slightly, the increase has tended to narrow. Therefore, the leasing strategy continues to "exchange price for volume" to maintain market activity.
Looking at the market in the second half of this year, according to DTZ's analysis, Beijing and Shanghai's Grade A office markets will see new supply of approximately 425,000 square meters and 709,000 square meters respectively. With low market demand and a large amount of new supply entering the market, the vacancy rate will continue to rise, putting pressure on the leasing market.
The Paper reporter Liu Chang and Li Xiaoqing
(This article is from The Paper. For more original information, please download the "The Paper" APP)
