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-Total Revenue and Automobile Sales Revenue Increased 20.4% and 21.7%, Profit Attributable to Owners of the Parent Grew 34.5%
-Sales as the Carrier, After-Sales as the Main Business and Value-Added as Breakthrough Point
-Taking Effort to Promote Business Transformation and Construct a New Profit Model
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HONG KONG, Mar 30, 2017 - (ACN Newswire) - China Rundong Auto Group Limited ("Rundong Aut" or the "Company", together with its subsidiaries, the "Group"; 1365.HK), one of the largest luxury automobile dealership groups in affluent coastal regions of Eastern China, announced its annual results for the year ended 31 December 2016 (the "year under review") today.
During the year under review, Rundong Auto set up and operated under the management philosophy of "sales as the carrier, after-sales as the main business, and value-added as the breakthrough point", making effort to promote business transformation and construct a new profit model, resulting in satisfactory growth for the Group. During the year under review, the Group recorded operation revenue of approximately RMB17,973.0 million, representing a year-on-year (YOY) increase of 20.4%. Gross profit was RMB1,622.5 million, representing an increase of 16.7%; gross profit margin stood at 9.0%, a slight drop of 0.3 percentage points compared to that of 2015. Profit from operation before tax was RMB427.2 million, showing a 31.8% growth compared to that of 2015; operating profit margin was 2.4%, an increment of 0.2 percentage points compared to that of 2015.
Profit for the year amounted to RMB281.4 million, an increase of 34.7% compared to that of 2015; net profit margin for the year was 1.6%, a growth of 0.2 percentage points compared to that of 2015. Profit attributable to owners of the parent was RMB273.52 million, showing a great increment of 34.5% compared to that of 2015; basic earnings per share was RMB 0.29, while the diluted earnings per share was RMB 0.17. The Board does not recommend the payment of a final dividend to the shareholders of the Company for the year ended December 31, 2016.
Mr. YANG Peng, Executive Director, Chairman and President of China Rundong Auto Group Limited, said, "The Group achieved satisfactory results in the 2016 due to the Group?s accurate anticipation of the automobile market and the management was able to anticipate and overcome the challenges faced by the Group. While the business model is well-established, the business structure has been envisaged and built for the sustainable development strategy. Reasonable adjustment, optimization and segmentation of related business segment, profit structure and capital allocation also contributed to the business structure.
The Group believes that automobile consumption consists of follow-up repair and maintenance services which require manual support, and there are unparalleled advantages in service hardware, service standards and professional skills for 4S store model, thus traditional 4S store business model will still occupy the industry mainstream. Therefore, the Group set up the management concept, ?sales as the carrier, after-sales as the main business and value-added as the breakthrough point?, and made every effort to promote the business transformation of the Group and the construction of a new profit model."
-Growth Recovery in Sales of New Automobiles
The Group optimized its wholesale and retail structure through various measures such as pushing forward the pace of sales, utilizing the manufacturers' sales policies, and formulating the management methods of vehicle models classification. The Group practiced effective price management on key vehicle models to promote regional resources sharing, optimize inventory structure, and enhance integrated sales operation capacity. The Group also made full use of the CRM system, enhancing customer base through accurate sales and marketing of services by analyzing valid customer information, thus ensuring growth in new car sales and effective control on inventory level. During the year under review, sales of new automobiles had recovered and showed growth. Revenue from sales of new automobiles was RMB15,787.6 million, showing an increase of 21.7% YOY. Revenue from sales of luxury and ultra-luxury automobiles amounted to RMB11,464.7 million, representing a 23.7% increase, accounting for 72.6% of revenue from sales of new automobile. Gross profit margin from sales of new automobile was 4.2%, which is the same as that of the year before.
-Continuous Growth in Revenue and Further Increase in Gross Profit Margin from After-sales Services
Based on current market and industry developments as well as forecasts for the future, the Group implemented the operation philosophy of using the sales of new automobiles as carrier to push forward the after-sales and value-added businesses. With regard to resource sharing in the after-sales business, the Group utilized the advantage of its relatively intensive regional network, and enhanced resource sharing and cooperation with other aspects of the operation, such as the procurement of spare parts and automobile accessories. For customer service, the Group strengthened its research into the life cycle of customers' automobiles, continuing to develop services and products suitable for customers, and improve service quality and customer satisfaction.
The Group also make full use of a CRM system, analyzing and sieving through customer data to generate market guidelines based on customer data and targets, so as to increase the success rate of customer appointment and utilization rate of working positions. The Group also used the same information to transform disassociated customers, recover lost customers, and enhance customer retention. By executing central procurement and allocation of regional parts, the Group was able to lower the cost of parts. This act allowed the Group to provide services to customers at a reasonable price while stabilizing the gross profit margin of after-sales services. During the year under review, revenue from after-sales services increased by 12.0% YOY to RMB2,185.3 million, accounting for 12.2% of the Group's total revenue. Gross profit of after-sales services increased by 13.8% YOY to RMB965.2 million. The gross profit margin of after-sales services was 44.2%, which was 0.7 percentage points higher than that of the same period of the previous year.
-Active Expansion of the Value-added Business to Transform the Profitability Model
During the year under review, the Group actively expanded its value-added business to increase its revenue. With regard to the automobile financing services, the Group evaluated the financing cooperation channels in various areas to ensure the implementation of multi-channel financial products in various areas, and established business communication mechanism with the financial departments of strategic car brands manufacturers to obtain the support of manufacturers. The Group also capitalized on the commercial policies to allow a full play of manufacturer's outstanding financial products, so as to improve the financing penetration rate while obtaining more financial rebates. Regarding the agency business, penetration rate of the Group's automobile financing agency business increased from 25.0% in 2015 to 35.5% during the year under review. Revenue from the financing agency service was RMB113.9 million, representing an increase of 38% compared to that of 2015.
Rundong Auto attached great importance to its insurance agency business, and hence sorted insurance cooperation resources, enhanced the overall planning for insurance resources, and adopted the "Headquarter-to-Headquarter" and "Branch-to-Branch" cooperative models for the Group and regions respectively, to maximize damaged car resources while obtaining a reasonable insurance commission; the Group developed products with extended warranty independently to further retain customers while obtaining profits by portfolio marketing, making active attempts on maintenance services in respect of glasses, lacquered surface and so on through overall insurance rate reform in order to improve insurance penetration rate and explore profit growth points. During the year under review, revenue from the Group?s insurance agency services amounted to RMB178.7 million, representing an increase of 28% compared to that of 2015.
-Active Layout of Second-hand Vehicle Business
During the year under review, the Group formed a second-hand vehicle business team to develop and implement a standard system for second-hand vehicle business operations, established an ERP second-hand vehicle management system, and introduced a professional second-hand car auction platform. The team also launched the second-hand vehicle inventory financing. The Group's second-hand vehicle business developed rapidly, and the next step will be the active development of the dealership certification business for second-hand vehicles. For this purpose, the Group will develop a licensed certification system through technological cooperation and introduction of advanced experience. During the year under review, revenue from the second-hand car agency service amounted to RMB15.8 million, representing an increase of 404% as compared with that of 2015.
-Continuous Optimization of the Network Layout
As a luxury car dealer in Eastern China, the Group's business is mainly focused on prosperous coastal areas of Eastern China, including Jiangsu province, Shandong province, Shanghai, and Zhejiang province, covering the largest luxury and ultra-luxury automobile markets in China. The Group also established a high density dealership network to enhance operating efficiency and service capabilities. During the year under review, the Group opened two Maserati 3S stores in the Jiangsu province and Shandong province, and combined the Jinan Maserati Exhibition Hall and Repair Center, upgrading it to a 3S store. The Group closed down a BMW repair store, but upgraded and transformed part of the BMW stores, expanding them to cover electric vehicle and second-hand vehicles businesses.
The Group obtained brand licensing of the luxury brands Alfa Romeo and Maserati. The Group planned to sell Alfa Romeo products at the five existing Maserati stores, and to open three new Alfa Romeo & Maserati 3S stores. In the year under review, the Group acquired the entire equity interest of Yangzhou Huawei Automobile Investment Management Co., Ltd ("Huawei Automobile"). Huawei Automobile has three Audi stores and 11 FAW-Volkswagen stores in Eastern China. As the Group focuses its business in Eastern China, the completion of the acquisition will further expand the Group's original dealership network in those regions, providing a larger platform to serve customers, and thus further enhance the market share of the Company in Eastern China.
Anticipating the future, in the global automobile market, China outshines other markets not only in terms of volume growth, but also the introduction of new automobile products. This attracts automobile manufacturers, spare parts suppliers and automobile service trading businesses to migrate to China, laying a solid foundation for the next stage of development for China's automobiles. The ceaseless urbanization process of China is the main driving force supporting the demand for individual purchase, which will bring about a new development opportunity for the automobile market in 2017. The Company anticipates that the market share of luxury car in China will continue to expand in 2017; an even more intense competition among different brands will emerge. The Company also expects the total volumes of sales of passenger vehicles to continue its growth, and the individual purchase market to further expand.
Mr. YANG Peng concluded, "In this new round of competition between luxury brands, only those which can capture the consumption trend of young persons will gain market recognition, and continue to grow in China's automobile market. The Group will, as always, pay close attention to the development trend of the automobile industry. While developing the existing business in a steady and healthy pace, the Group will also focus on building an integrated automobile service platform, comprising a one-stop industrial chain system covering new car sales, after-sales services, finance and car replacement by integrating channel resource to fulfill business upgrade and perfection of synergy between sections, so as to realize a richer profit model and better operating results."
Topic: Earnings
Source: China Rundong Auto Group Limited
Sectors: Daily Finance, Automotive
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From the Asia Corporate News Network
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