On March 10, Beijing time, shell (NYSE: BEKE) announced its financial results for the whole year and the fourth quarter of 2021. On the one hand, the income and total transaction volume (GTV) of shell continued to grow; On the other hand, the shell once again generated a net loss.
In 2021, the real estate brokerage company drew a complex curve. In the face of uncertainty in 2022, it remains to be seen whether the “one body and two wings” strategy launched by shell will work.
New housing business “drag”
The difficulties of the real estate industry in 2021 are needless to say, but in many core data, shell still achieved good growth.
According to the financial report, the operating revenue of shell in 2021 increased by 14.6% year-on-year to 80.8 billion yuan (RMB, the same below), and the total GTV increased by 10.1% year-on-year to 3.85 trillion yuan. Meanwhile, at the end of the fourth quarter of 2021, the number of shell online stores exceeded 51000, with a year-on-year increase of 8.7%; The number of active stores exceeded 45000, with a year-on-year increase of 4.4%.
Peng Yongdong, chairman and CEO of shell, said, “our bottom judgment of the housing industry has not changed, that is, digital driven industry transformation, service providers are indispensable, and quality service can cross the cycle to build customer trust.”
Before that, Peng Yongdong admitted the difficulties encountered by shell. He said: “in 2021, the internal and external environment faced by the company has changed one after another. Shell chooses to rise to the difficulties and change in the change.”
It can be found from the financial report that in 2021, the profitability of shell is declining, the operating cost is rising, and the loss also appears again. In 2021, the net loss of shell was 525 million yuan, and the adjusted net profit was 2.294 billion yuan.
In 2021, the operating cost of shells increased by 21.1% year-on-year to 64.9 billion yuan, compared with 53.6 billion yuan in 2020. Meanwhile, the gross profit decreased by 6.2% year-on-year to 15.8 billion yuan and 16.9 billion yuan in 2020; The gross profit margin decreased to 19.6% and 23.9% in 2020.
Operating expenses increased by 22.5% year-on-year to 17.2 billion yuan in 2021, compared with 14 billion yuan in 2020. Shell listed in detail where to spend money: 8.9 billion yuan in management fees, 4.3 billion yuan in marketing and promotion, 3.2 billion yuan in research and development, and 747 million yuan in impairment of goodwill, intangible assets and other long-term assets.
The performance of shell annual report is closely related to the new housing business.
From the financial report data, the new housing business and second-hand housing business have increased to a certain extent. In 2021, the operating revenue of shell stock housing trading services increased by 4.5% year-on-year to 31.9 billion yuan; The operating revenue of new house trading services increased by 22.5% year-on-year to 46.5 billion yuan, compared with 37.9 billion yuan in 2020.
For the reasons for the decline in gross profit margin, shell explained that “the proportion of new house trading services with low profit margin in the income structure continues to increase”, “the expansion of sales teams focusing on new houses brings about an increase in fixed costs”, etc.
Therefore, although it has contributed more than half of the GTV, the new housing business in the eyes of shell is an important reason to drag down the performance.
In addition, among the management fees, there is also an “increase in bad debt loss during the market downturn”, while the second-hand housing business is faced with individual customers, with few bad debts, so what we are talking about here is also the negative effect of the new housing market.
“Turning difficulties into opportunities”
If the annual data of shells in 2021 is mixed, the performance in the fourth quarter of 2021 is not satisfactory.
In the fourth quarter of 2021, the transaction volume of shell (GTV) was 732.4 billion yuan, a year-on-year decrease of 34.6%; Gtv354.6 billion yuan was traded in stock houses, a year-on-year decrease of 39.4%; The new house transaction gtv356.8 billion yuan, a year-on-year decrease of 24.0%; Emerging and other services gtv21 billion yuan, down 68.2%; The operating revenue was 17.8 billion yuan, a year-on-year decrease of 21.5%; The loss was 1.184 billion yuan (1.267 billion yuan in the same period of last year), and the adjusted operating loss was 398 million yuan (2.231 billion yuan in the same period of last year).
The bad debt problem also plagued the performance of shell in the fourth quarter of 2021. The financial report showed that “the management expense in the fourth quarter of 2021 was 2.202 billion yuan, compared with 1.884 billion yuan in the same period last year, mainly due to the increase of bad debt loss.”
Xu Tao, executive director and chief financial officer of shell, judged the market as “the market fell sharply in the second half of last year” and “as the development of the real estate industry began to shift to long-term and sustainable, we made timely adjustments to effectively turn difficulties into opportunities through operation optimization and strategic upgrading.”
For the performance of the first quarter of 2022, shell is not optimistic. “The company expects the operating revenue in the first quarter of 2022 to be between 11.5 billion yuan and 12.5 billion yuan, a decrease of about 39.6% to 44.4% compared with the same period in 2021.”
In fact, since this year, the performance of real estate enterprises has continued to extend the downward trend in the second half of last year. According to the data of China Index Research Institute, from January to February 2022, the average sales of top 100 real estate enterprises was 10.3 billion yuan, a year-on-year decrease of 34.0%, and the performance of real estate enterprises in different camps decreased significantly.
It is worth noting that as of December 31, 2021, the number of shell brokers was 454504, down 7.8% from the end of 2020; Among them, the number of active brokers was 406794, down 8.7% from the end of 2020. In addition, the average monthly active users (MAU) of the mobile terminal is 37.37 million, compared with 48.18 million in the same period in 2020.
Peng Yongdong said, “it is expected that the number of platform stores and brokers will reach the bottom in the first quarter in 2022, and the number of active stores and brokers at the end of 2022 will increase by the first digit compared with the end of the first quarter.”
Force home decoration and rental
Shell itself has a clear understanding of its current situation, so “one body and two wings” is what Peng Yongdong repeatedly mentioned in his annual report. “One” refers to our main business, i.e. stock housing and new housing brokerage and trading services, while the ‘two wings’ are the packaged large home business group and Pratt & Whitney housing business group respectively, “he explained
Peng Yongdong even said, “we will fully activate the layout in the field of residential services, which will have an important impact on our financial performance in fiscal year 2022 and in the future.”
It is worth noting that the shell has gradually started the action of “two wings”.
On July 6, 2021, shell announced that it would acquire 100% equity of Shengdu home decoration, with a total consideration of no more than 8 billion yuan. It is expected that all delivery will be completed in the first half of 2022. In shell’s view, the home decoration market is similar to the stock housing trading market that has been digitally transformed. The space is huge and highly dispersed. Although it has maintained a relatively high-speed growth trend for a long time, there is still much room to improve the user experience. It is urgent to do it again with the “emphasis” thinking of the industrial Internet.
Peng Youdong said, “we have the ability to do it. We have the ability to do it, including past practice, understanding of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) , management of large teams and standardization of processes.”
However, at present, there is no absolute giant in the home decoration industry, and Peng Yongdong is also aware of the current situation of the home decoration market. “The core of the home decoration industry is the biggest industry suspense, that is, whether there is a business model of more than 10 billion in the decoration field.
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In addition, at the end of 2021, shell Huiju business group was established and “shell rental” was launched. On February 10 this year, shell announced that its first youth apartment project invested and jointly built was launched in Xuhui District, Shanghai. The apartment covers an area of nearly 40000 square meters and is transformed from old factories, with a total of 2978 apartments.
But at present, there are few enterprises that can really make money in the leasing industry. “The nature of our industry determines that we are low profit,” a long-term apartment practitioner told the daily economic news
Especially in 2021, the eggshell apartment, which once expanded wildly, disappeared overnight due to the sudden epidemic of high rent and leverage. In January this year, the “first share of long-term rental apartment” Qingke apartment also went into bankruptcy liquidation after huge losses. The real estate enterprises that competed to enter the field of long-term rental apartments have gradually lost their voice.
Shell’s complex mood about new business may be read from Xu Tao’s speech. “We will boldly try and carefully verify and invest more resources in the home decoration and home furnishing and Pratt & Whitney housing service business in the field of ‘good living’. Although the necessary investment in the initial stage of the new business will have a certain impact on the profitability of the group in 2022, we still firmly believe that we will bring more full scene high-quality service experience around ‘living’ to consumers.”
