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DFH Announces 2016 Annual Results Turnover and Profit Reach New Highs Up 61% and 35% Respectively

Addtime:2017-03-29   Author:

(Hong Kong, 28 March 2017) – Differ Group Holding Company Limited (“DFH” or the“Group”) (stock code: 6878), a leading provider of short- to medium-termfinancing and financing-related solutions in the PRC, has announced another successful year for the Group, with satisfactoryannual results for the financial year ended 31 December 2016 (the Year”). Turnover surged by 61.0% YoY to approximately RMB294.9 million and profit attributable to shareholders soared by 30.6% YoY to approximately RMB135.5 million. Basicearnings per share amounted to approximately RMB3.20 cents,representing a YoY increase of 25.0%. Thegrowth was mainly attributed to exceptional income growth from asset management, finance lease and entrusted loan businesses. The Group has been devoting efforts to expanding its finance lease and asset management businesses and recorded outstanding results in the Year.


 


The Group maintained a healthy financial positionwith a 28.2% gearing ratio. As at 31 December 2016, it had total cash and bank balances (including restrictedbank deposits) of approximately RMB143.8 million. In the Year, provision of bad debts was RMB28.0 million (2015: RMB6.7 million).

 

To provide incentives to the employees, the Groupgranted an aggregate of 84,108,000 share options. The equity-settledshare-based payments were RMB12.00 million. To capture the industryopportunities, the Group issued a convertible bond of US$30 million during theYear. Imputed interests expenses and fair value gain on change of derivativefinancial instruments were approximately RMB12.7 million and RMB14.0 millionrespectively. If taking off the above one-off items, profit for the yearreached RMB153.2 million, representing a substantial growth of 45.1%.

 

Mr. Hong Mingxian,Chairman and Executive Director of DFH, said, “The year 2016 was a challenging time forthe Group. Since the Chinese economy entered the ‘New Norm’, more prudentcredit policies have given rise to new development opportunities. The Group hasactively reviewed and adjusted its business development focus and placed moreeffort on expanding businesses with higher profitability and sustainability,especially asset management and finance lease businesses. Finance leasebusiness can affect a healthy leverage from banks, which means scalability.”


Business Review

Finance Lease Services

Following the acquisition of Jiashi InternationalFinancial Limited and its subsidiaries (“Jiashi Group”) in late October 2015,the Group further developed its finance lease business. The acquisition has addedmomentum to the Group’s finance lease business through Jiashi Group’s extensivenetwork and experience in the agricultural industry, such as distant marine fisheries, agricultural drones, and personalconsumption, specifically, tourism and car leasing to individuals businesses. Agriculturalindustry has been going through structural change in recent years and theupgrading of the sector requires financing with strong support from thegovernment. Personal consumption sector has been going through a long period ofexpansion caused by the continuousincrease in personalincome and improvement of personal lifestyle. The effect is a constantlyincrease demand for financing. In addition, the Group has started its financelease business for properties in late 2016 and the hard work has begun to bearfruit. Income increased by 92.5% YoY to approximately RMB41.4 million.

 

Asset Management Services

The Group has placed greater effort on expandingasset management business in order to capture opportunities presented by the abundant assets inFujian Province during the Year. It is actively looking for good-qualityassets that offer potentially high-percentage returns. Income from asset management services increased by 343.9% YoY to approximately RMB93.2 million, mainly due to the disposal offour properties in 2016 as compared with the disposal of only two properties in 2015. Besides, certain obligors of non-performing loanshave settled the debts according to the terms set out in the relevant contracts.

 

Express Loan Services

In light of tightened credit controls by PRC banksand the strong demand for financing services by SMEs, the Group continued toexpand the proprietary lending business (“PLB”, also known as “entrusted loan”)in the PRC. By effective management of its financial resources, the Group wasable to generate more interest income. The Group’s express loan services incomeincreased sharply by 60.4% YoY to approximately RMB108.0 million, mainly due tothe increase in average entrusted loan receivables.

 

The Group commenced its Hong Kong money lendingbusiness in the second half of 2015 and continued to expand the business in2016. Income from the Hong Kong money lending business increased sharply by 252.9%YoY to approximately RMB7.0 million. In addition, due to the strong demandfor financing by SMEs, the Group has provided more short-term financing tocustomers in the PRC and recorded interest income of approximately RMB19.6million in 2016 as compared with only approximately RMB0.9 million in 2015.

 

Pawn loan service income decreased by 45.1% YoY to approximately RMB7.7 million in 2016. The Group disposed of this business in late June. The proceeds from thedisposal enabled the Group to have more capital to focus on other scalablebusiness activities that generate higher profits.

 

Financial Services

The Group mainly focused on financial services thatcharge customers based on certain percentage of the amount of financing obtainedas a result of consultation. Due to the macro economic environment of the PRCeconomy in 2016, banks across the country tightened their credit approvalprocess. Although the Group’s customer base has remained stable, the amount offinancing obtained from banks became more modest, thus resulting in a declinein income from financial services. Consequently, income from financialconsultation services decreased by 24.9% YoY to approximately RMB42.6 million.

 

Financial Guarantee Services

In 2016, the macro economic environment led tomore prominent credit risks. The Group has taken a more prudent approachtowards vetting potential customers’ applications. As a result, the number andincome from guarantee services decreased accordingly. Income declined by 41.8% YoY to approximately RMB9.6 million.

 

Outlook

DFH has always been exploring opportunities todevelop new businesses and broaden income streams. In 2016, the Group has issued convertible bonds and corporate bonds, so as toenhance its capital base and accelerate its development, especially the assetmanagement business.

 

The Group considers the finance lease business asanother key growth driver. The launching of a free-trade zone in Fujian, the issue of policies on theOne Belt, One Road” initiative and the National 13th Five-Year Plan are all leading to substantial businessopportunities forthe financial leaseindustry. The Group has expanded its finance leasing business to encompass industries,such as agriculture and personal spending that are sustainable, fast growingand encouraged by the government policies, in order to capture more businessopportunities.

 

In addition, the Group has entered into an investment cooperationagreement to form a joint venture with three well-known enterprises (with two as state-owned enterprises)[1] in providing commercialfactoring services in the PRC. Driven by favourable state policies and a market that has over RMB20 trillion in account receivables, it is believed that commercial factoring has immense potential for development. The close ties forged via the joint venture canhelp to broaden the customer base, bolster the competitiveness and also expandthe geographical coverage of the Group’s business. This business can also beleveraged and can help the scaling up of the overall loan book of the Group.

 

Mr. Hong concluded, “Going forward, we believe that strong development ofthe asset management and finance lease businesses will strengthen the Group’s leading position inthe finance service business. Moreover, the joint venture on commercial factoring related servicescan further diversify the Group’s business portfolio and create synergies with its existing businesses. Wewill continue to actively capture opportunities presented by the rapidly changing economicenvironment in the PRC and maintain our leading position as the preferred choice of comprehensive short- to medium-term financing solutions by SMEs.”



[1] Including Xiamen CCRE Investment Company Limited (廈門海翼投資有限公司),
Xiamen CEFC Petroleum Holdings Limited (
廈門華信石油控股有限公司) and
Xiamen Software Industry Investment Development Company Limited (
廈門軟件產業投資發展有限公司).