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Century 21 China Real Estate Reports Third Quarter 2012 Unaudited Financial Results

Bottom-Line Performance Continues to Improve Year on Year;

BEIJING, Nov. 16, 2012 /PRNewswire-FirstCall/ -- IFM Investments Limited (NYSE: CTC) ("Century 21 China Real Estate" or the "Company"), a leading comprehensive real estate services provider and the exclusive franchisor for the CENTURY 21® brand in China, today announced its unaudited financial results for the third quarter ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20101228/CN22319LOGO )

Third Quarter 2012 Highlights[1]                                                                               

  • Consolidated net revenue in the third quarter of 2012 was RMB190.6 million (US$30.3 million), a decrease of 4.8% from the second quarter of 2012, and an increase of 21.8% from the third quarter of 2011.
  • Revenue from the company-owned brokerage services segment in the third quarter of 2012 was RMB164.5 million (US$26.2 million), a decrease of 5.2% from the second quarter of 2012, and an increase of 21.2% from the third quarter of 2011.
  • Net loss in the third quarter of 2012 was RMB7.1 million (US$1.1 million), compared to net income of RMB2.3 million in the second quarter of 2012 and a net loss of RMB92.9 million in the third quarter of 2011.
  • Net loss attributable to IFM Investments Limited in the third quarter of 2012 was RMB7.1 million (US$1.1 million), compared to net income attributable to IFM Investments Limited of RMB0.8 million in the second quarter of 2012, and a net loss attributable to IFM Investments Limited of RMB91.7 million in the third quarter of 2011.
  • Non-GAAP[2] net loss attributable to IFM Investments Limited in the third quarter of 2012 was RMB6.3 million (US$1.0 million), compared to non-GAAP net income attributable to IFM Investments Limited of RMB1.6 million in the second quarter of 2012, and a non-GAAP net loss attributable to IFM Investments Limited of RMB91.0 million in the third quarter of 2011.

[1] This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollar ("US$") amounts at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from RMB amounts into US$ as of and for the quarter ended September 30, 2012, were made at a rate of RMB6.2848 to US$1.00 which is the noon buying rate on September 28, 2012, in New York for cable transfers in RMB as certified in the H.10 weekly statistical release of the Federal Reserve Board. The Company's functional and reporting currency is the RMB.

[2] Explanation of the Company's non-GAAP financial measures and related reconciliations to GAAP financial measures is included in the "Non-GAAP Financial Measures" and "Reconciliations to Unaudited Condensed Consolidated Statements of Operations" in the accompanying condensed financial information included with this press release.

"We posted a healthy performance with revenue growing 22% year on year, despite a difficult operating environment," said Mr. Donald Zhang, chairman and chief executive officer of Century 21 China Real Estate. "While the market showed a slight downward trend in transaction volumes during the quarter, Century 21 China's streamlined store network continued to perform efficiently and we once again generated positive operating cash flow for the quarter."

Mr. Harry Lu, vice chairman and president, added, "Strength across Century 21 China's various business segments and impressive per-store efficiency once again helped to drive encouraging results. We are making progress in developing scalable business lines centered around Century 21 China's core brokerage business, and our online capability continues to drive superior sales performance. Going forward, we will further leverage our existing store network to create diversified revenue streams to help ensure consistent growth for the long term."

Third Quarter 2012 Results

The Company's total consolidated net revenue in the third quarter of 2012 was RMB190.6 million (US$30.3 million), representing a decrease of 4.8% from RMB200.3 million in the second quarter of 2012, and an increase of 21.8% from RMB156.5 million in the third quarter of 2011. The sequential decrease and the year-over-year increase were primarily due to changes in revenue from company-owned brokerage services.

Revenue from the company-owned brokerage services segment in the third quarter of 2012 was RMB164.5 million (US$26.2 million), representing 86.3% of total net revenue, a decrease of 5.2% from RMB173.5 million in the second quarter of 2012, and an increase of 21.2% from RMB135.7 million in the third quarter of 2011. The sequential decrease was primarily due to fewer homes sales through our company-owned sales offices in Shanghai and Shenzhen as compared to the second quarter of 2012. The year-over-year increase was mainly due to significantly higher sales and purchase transaction volumes of secondary homes following the improvement in the Beijing and Shanghai real estate markets in the third quarter of 2012 compared with the third quarter of 2011.

Revenue from the primary and commercial services segment in the third quarter of 2012 was RMB15.4 million (US$2.5 million), representing 8.1% of total net revenue, a decrease of 19.4% from RMB19.1 million in the second quarter of 2012, and an increase of 18.5% from RMB13.0 million in the third quarter of 2011. The sequential decrease was primarily due to lower weighted average commission rates realized on sales in the third quarter of 2012 compared with those in the second quarter of 2012, despite higher overall sales volumes from the Company's SG International Investments Limited ("Shanggu") business unit. The year-over-year increase was primarily due to greater gross floor area of new properties sold in the third quarter of 2012. One-third of revenue from these sales was attributable to new office building sales.

Revenue from the mortgage management services segment in the third quarter of 2012 was RMB8.2 million (US$1.3 million), representing 4.3% of total net revenue, an increase of 32.3% from RMB6.2 million in the second quarter of 2012, and an increase of 74.5% from RMB4.7 million in the third quarter of 2011. These increases were primarily due to an increase in both traditional home mortgage loans and home equity loans brokered by the Company as a result of the overall improvement in the real estate market in China since early 2012.

Revenue from the franchise services segment in the third quarter of 2012 was RMB2.5 million (US$0.4 million), representing 1.3% of total net revenue, an increase of 66.7% from RMB1.5 million in the second quarter of 2012, and a decrease of 19.4% from RMB3.1 million in the third quarter of 2011. The sequential increase was primarily due to higher renewed franchise fees earned from the Chengdu region.

Commissions and other agent-related costs in the third quarter of 2012 were RMB117.0 million (US$18.6 million), representing 61.4% of total net revenue, an increase of 1.5% from RMB115.3 million in the second quarter of 2012, and an increase of 6.9% from RMB109.4 million in the third quarter of 2011. The sequential increase was primarily due to an increase in the number of sales professionals. The year-over-year increase was attributable to higher commission expenses in the third quarter of 2012 as a result of higher revenue from company-owned brokerage services and primary and commercial services, and was partially offset by a decrease in payroll-sales as a result of a decrease in the number of sales professionals employed.

Operating costs in the third quarter of 2012 were RMB40.8 million (US$6.5 million), representing 21.4% of total net revenue, a similar amount to the RMB41.0 million recorded in the second quarter of 2012, and a decrease of 49.8% from RMB81.2 million in the third quarter of 2011. The year-over-year decrease in operating costs was primarily attributable to a reduction in the number of sales offices in operation, as well as significantly lower sales office closure-related costs as the Company's major sales office network optimization was completed by the beginning of second quarter of 2012.

Selling, general and administrative expenses in the third quarter of 2012 were RMB48.4 million (US$7.7 million), representing 25.4% of total net revenue, an increase of 12.8% from RMB42.9 million in the second quarter of 2012, and a decrease of 15.8% from RMB57.5 million in the third quarter of 2011. The sequential increase in selling, general and administrative expenses was attributable to an increase in share-based compensation, marketing expenses and professional fees. The year-over-year decrease was mainly due to a reduction in marketing expenses as marketing activities declined due to a decrease in the number of company-owned sales offices.

Loss from operations in the third quarter of 2012 was RMB14.0 million (US$2.2 million), compared to income from operations of RMB0.7 million in the second quarter of 2012 and a loss from operations of RMB91.7 million in the third quarter of 2011. Non-GAAP loss from operations in the third quarter of 2012 was RMB13.2 million (US$2.1 million), compared to non-GAAP income from operations of RMB1.5 million in the second quarter of 2012, and a non-GAAP loss from operations of RMB91.0 million in the third quarter of 2011.

Net loss attributable to IFM Investments Limited in the third quarter of 2012 was RMB7.1 million (US$1.1 million), compared to net income of RMB0.8 million attributable to IFM Investments Limited in the second quarter of 2012, and a net loss attributable to IFM Investments Limited of RMB91.7 million in the third quarter of 2011. Non-GAAP net loss attributable to IFM Investments Limited in the third quarter of 2012 was RMB6.3 million (US$1.0 million), compared to non-GAAP net income attributable to IFM Investments Limited of RMB1.6 million in the second quarter of 2012, and a non-GAAP net loss attributable to IFM Investments Limited of RMB91.0 million in the third quarter of 2011.

Basic and diluted net loss per ADS in the third quarter of 2012 was RMB0.48 (US$0.08). Non-GAAP basic and diluted net loss per ADS in the third quarter of 2012 was RMB0.43 (US$0.07). Each of the Company's ADSs represents 45 of the Company's ordinary shares.

Net cash provided by operating activities in the third quarter of 2012 was RMB1.0 million (US$0.2 million), mainly due to cash collection from receivables, compared to net cash provided by operating activities of RMB4.3 million in the second quarter of 2012, and net cash used in operating activities of RMB76.6 million in the third quarter of 2011. Net cash provided by investing activities in the third quarter of 2012 was RMB9.4 million (US$1.5 million), mainly comprised of the net effect of providing and receiving repayment on consumer credit loans of RMB10.7 million (US$1.7 million) and the purchase of property, plant and equipment of RMB1.8 million (US$0.3 million), compared to net cash used in investing activities of RMB0.4 million in the second quarter of 2012, and net cash used in investing activities of RMB12.1 million in the third quarter of 2011.

Net change in fair value in the third quarter of 2012 was RMB1.5 million (US$0.2 million), as a result of the decline in the fair value of a financial liability, which was related to the share options of a non-employee.

During the third quarter of 2012, the Company's CENTURY 21® China Real Estate network covered 27 major cities with an average of 968 sales offices, including an average of 320 company-owned sales offices in operation and five temporarily closed company-owned sales offices. As of September 30, 2012, the Company's CENTURY 21® China Real Estate network employed more than 12,450 sales professionals and maintained more than 7.9 million property listings.

Business Outlook

The Company currently estimates that its total net revenue for the fourth quarter of 2012 will be in the range of RMB197 million to RMB205 million. This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Century 21 China Real Estate's management will host an earnings conference call today, November 16, 2012, at 7:30 a.m. U.S. Eastern Time (8:30 p.m. Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

U.S. Toll / International:

+1-718-354-1231

United States Toll Free:

+1-866-519-4004

Hong Kong:

+852-2475-0994

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "Century 21 China Real Estate Earnings Call."

A live and archived webcast of the conference call will be available until November 23, 2012 at http://ir.century21cn.com.

About Century 21 China Real Estate

IFM Investments Limited ("Century 21 China Real Estate" or "CTC") is a leading comprehensive real estate services provider and the exclusive franchisor for the CENTURY 21® brand in China. CTC primarily focuses on China's fast-growing and highly fragmented secondary real estate market, providing company-owned brokerage services, franchise services, mortgage management services, primary services, commercial services and fund management services. CTC has experienced substantial growth since it commenced operations in 2000, and received numerous awards and recognition as franchisor and real estate services provider for its service quality and business achievements. Century 21 China Real Estate became a public company in January 2010 and its ADSs, each of which represents 45 ordinary shares of CTC, currently trade on the New York Stock Exchange under the symbol "CTC." For more information about CTC, please visit http://www.century21cn.com/english.

Safe Harbor: Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as "aim," "anticipate," "believe," "confident," "continue," "estimate," "expect," "future," "intend," "is currently reviewing," "it is possible," "likely," "may," "plan," "potential," "will" or other similar expressions or the negative of these words or expressions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Among other things, the Business Outlook section and quotations from management in this press release, as well as the Company's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed or furnished with the U.S. Securities and Exchange Commission, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements and are subject to change, and such change may be material and may have a material adverse effect on the Company's financial condition and results of operations for one or more periods. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained, either expressly or impliedly, in any of the forward-looking statements in this press release. Potential risks and uncertainties include, but are not limited to, the risks outlined in the company's Annual Report on Form 20-F and other documents filed with the U.S. Securities and Exchange Commission. Unless otherwise specified, all information provided in this press release and in the attachments is as of the date of this press release, and the Company does not undertake any obligation to update any such information, except as required under applicable law.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release includes non-GAAP financial measures of adjusted income (loss) from operations, adjusted net income (loss) attributable to IFM Investments Limited and adjusted earnings per ADS, each of which is adjusted to exclude share-based compensation, impairment of goodwill and net change in fair value. The Company believes these non-GAAP financial measures are important to help investors understand the Company's current financial performance and future prospects, compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the accompanying condensed financial information included with this press release. One limitation of using non-GAAP financial measures as described above is that these expense charges have been and will continue to be significant recurring expenses in the Company's business for the foreseeable future. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies. Management compensates for this limitation by providing specific information regarding the GAAP amount excluded from the non-GAAP measure.

For investor and media inquiries, please contact:

In China:

Lulu Li
Vice President
IFM Investments Limited
Phone: +86-10-6561-7188
E-mail: ir@century21cn.com

Josh Gartner
Brunswick Group
Phone: +86-10-5960-8600
Email: ctc@brunswickgroup.com

In the United States:

Patricia Graue
Brunswick Group
Phone: +1-415-671-7676
Email: ctc@brunswickgroup.com

 

Century 21 China Real Estate Reports Third Quarter 2012 Unaudited Financial Results

IFM Investments Limited

Unaudited Condensed Consolidated Balance Sheets

(in thousands)


December 31,


September 30,


September 30,


2011


2012


2012


RMB


RMB


US$







ASSETS






Current assets:






Cash and cash equivalents

235,450


187,533


29,839

Restricted cash

10,997


15,620


2,485

Accounts receivable, net

97,090


144,637


23,014

Amounts due from related parties

71


78


12

Loans receivable

37,511


28,697


4,566

Prepaid expenses and other current assets

37,369


47,539


7,564

Total current assets

418,488


424,104


67,480

Non-current assets:






Investment in associates

10,595


12,455


1,982

Property and equipment, net

62,513


43,599


6,937

Intangible assets, net

95,827


91,646


14,582

Goodwill

114,698


103,943


16,539

Other non-current assets

22,941


20,126


3,202

Total assets

725,062


695,873


110,722

LIABILITIES, REDEEMABLE NON-CONTROLLING INTREST AND
    SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable                                                                      

11,220


10,350


1,647

Accrued expenses and other current liabilities

150,502


185,418


29,502

Amounts due to related parties

266


272


43

Deferred revenue

7,773


7,889


1,255

Total current liabilities

169,761


203,929


32,447

Long-term deposits payable

12,180


10,717


1,705

Contingent consideration payable

44,227


33,774


5,374

Deferred tax liabilities

17,543


16,875


2,685

Total liabilities

243,711


265,295


42,211

Redeemable non-controlling interest

66,181


67,180


10,689

Shareholders' equity:






Class A ordinary shares (US$0.001 par value, 3,133,000
        and 3,133,000 shares authorized as of December 31,
        2011 and September 30, 2012, respectively; 667,672
        and 667,672 shares issued and outstanding as of
        December 31, 2011 and September 30, 2012,
        respectively)

4,939


4,939


786

Additional paid-in capital

1,033,892


1,035,345


164,738

Statutory reserves

5,595


5,595


890

Accumulated deficit

(638,380)


(690,499)


(109,868)

Total IFM Investments Limited shareholders' equity

406,046


355,380


56,546

Non-controlling interest

9,124


8,018


1,276

Total shareholders' equity

415,170


363,398


57,822

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY

725,062


695,873


110,722













 

IFM Investments Limited                

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share and per ADS data)


For the Three Months Ended


September 30,


June 30,


September 30,


September 30,


2011


2012


2012


2012


RMB


RMB


RMB


US$









Net revenue                                                                                    

156,453


200,258


190,596


30,327

Costs and expenses:








Commissions and other agent-related costs

(109,371)


(115,294)


(117,017)


(18,619)

Operating costs

(81,217)


(41,010)


(40,763)


(6,486)

Selling, general and administrative expenses

(57,540)


(42,906)


(48,360)


(7,694)

Goodwill impairment losses

-


(10,755)


-


-

  Net change in fair value

-


10,453


1,536


244

Total costs and expenses

(248,128)


(199,512)


(204,604)


(32,555)

(Loss) income from operations

(91,675)


746


(14,008)


(2,228)

Interest income

1,341


375


667


106

Other income

-


-


5,352


852

Foreign currency exchange (loss) gain

(1,547)


75


(22)


(4)

(Loss) income before income tax and share of
    associates'
income

(91,881)


1,196


(8,011)


(1,274)

Income tax

(1,682)


175


293


47

Share of associates' income

657


910


601


96

Net (loss) income

(92,906)


2,281


(7,117)


(1,131)

Net loss (income) attributable to non-controlling interest

1,249


(1,448)


21


3

Net (loss) income attributable to IFM Investments Limited

(91,657)


833


(7,096)


(1,128)









Net (loss) income attributable to ordinary shareholders

(91,657)


833


(7,096)


(1,128)









Net (loss) income per share, basic

(0.14)


0.00


(0.01)


(0.00)

Net (loss) income per share, diluted

(0.14)


0.00


(0.01)


(0.00)









Net (loss) income per ADS, basic

(6.18)


0.06


(0.48)


(0.08)

Net (loss) income per ADS, diluted

(6.18)


0.06


(0.48)


(0.08)









Number of shares used in calculating net loss per share, basic

667,672


667,672


667,672


667,672

Number of shares used in calculating net loss per share, diluted

667,672


667,672


667,672


667,672









Number of ADSs used in calculating net loss per ADS, basic

14,837


14,837


14,837


14,837

Number of ADSs used in calculating net loss per ADS, diluted

14,837


14,837


14,837


14,837

 

 

IFM Investments Limited

Reconciliations to Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per ADS data)




For the Three Months Ended


September 30,


June 30,


September 30,


September 30,


2011


2012


2012


2012


RMB


RMB


RMB


US$

GAAP (loss) income from operations

(91,675)


746


(14,008)


(2,228)

Plus:                                                                         








Share-based compensation

676


439


2,325


370

Goodwill impairment losses

-


10,755


-


-

Net change in fair value

-


(10,453)


(1,536)


(244)

Non-GAAP (loss) income from operations

(90,999)


1,487


(13,219)


(2,102)









GAAP net (loss) income attributable to IFM
    Investments Limited

(91,657)


833


(7,096)


(1,128)

Plus:








Share-based compensation

676


439


2,325


370

Goodwill impairment losses

-


10,755


-


-

Net change in fair value

-


(10,453)


(1,536)


(244)

Non-GAAP net (loss) income attributable to
    IFM Investments Limited

(90,981)


1,574


(6,307)


(1,002)









GAAP net (loss) income attributable to
    ordinary shareholders

(91,657)


833


(7,096)


(1,128)

Plus:








Share-based compensation

676


439


2,325


370

Goodwill impairment losses

-


10,755


-


-

Net change in fair value

-


(10,453)


(1,536)


(244)

Non-GAAP (loss) income attributable to
    ordinary shareholders

(90,981)


1,574


(6,307)


(1,002)









GAAP net (loss) income per ADS, basic

(6.18)


0.06


(0.48)


(0.08)

GAAP net (loss) income per ADS, diluted

(6.18)


0.06


(0.48)


(0.08)









Non-GAAP net (loss) income per ADS, basic

(6.13)


0.11


(0.43 )


(0.07)

Non-GAAP net (loss) income per ADS, diluted

(6.13)


0.11


(0.43)


(0.07)









Number of ADSs used in calculating GAAP / non-
    GAAP net loss per ADS, basic

14,837


14,837


14,837


14,837

Number of ADSs used in calculating GAAP / non-
    GAAP net loss per ADS, diluted

14,837


14,837


14,837


14,837

 

SOURCE IFM Investments Limited

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