Significant goodwill impairments have resulted from historical acquisitions and mergers.
At the performance briefing held on March 27, Xu Binhui, Executive Director and President of CG SERVICES (6098.HK), stated, "At the beginning of 2025, we set a development goal of 'seeking progress while maintaining stability, balancing short-term and long-term considerations.' On one hand, we focus on ensuring the company's healthy and stable growth for 2025, and on the other hand, we are preparing for the long-term development of CG SERVICES." He mentioned that in terms of revenue, core business, and cash flow, the company "basically achieved the targets set by the group at the beginning of the year."
Financial reports show that in 2025, CG SERVICES achieved a total revenue of approximately 48.35 billion yuan, a year-on-year increase of 9.9%. Gross profit was about 8.46 billion yuan, a slight increase of 0.7% compared to the previous year. The gross profit margin decreased from 19.1% last year to 17.5%. Net cash inflow from operating activities was 2.51 billion yuan, essentially matching the core net profit, with a cash coverage ratio reaching 100%.
Specifically, the major property segment, which consists of property management services, community value-added services, and non-property owner value-added services and serves as the core business of CG SERVICES, contributed 33.11 billion yuan in revenue, a year-on-year increase of 6.2%, maintaining its proportion of total revenue at around 70%. Additionally, the "Three Supplies and One Industry" business achieved revenue of 11.27 billion yuan, a significant increase of 38.1% year-on-year, accounting for 23.3% of total revenue. The environmental services and commercial operation businesses generated revenues of 3.36 billion yuan and 620 million yuan, respectively, representing declines of 17% and 1.1%.
However, CG SERVICES faced evident pressure on its profit side. The financial report indicates that in 2025, the company realized a profit attributable to shareholders of approximately 601 million yuan, a sharp decrease of 66.7% compared to the previous year. This was mainly due to non-operational impacts, including amortization costs of intangible assets and impairments of goodwill and other intangible assets arising from historical acquisitions and mergers. Specifically, a full impairment provision of approximately 969 million yuan was made for the remaining carrying amount of goodwill related to the subsidiary, Manguo Environment.
Furthermore, after excluding the impact of non-operational factors such as impairments of various intangible assets from historical acquisitions and mergers, the core net profit attributable to owners achieved by CG SERVICES was approximately 2.52 billion yuan, also representing a decrease of 17.1% year-on-year. Regarding this, Tiantian, Chief Financial Officer of CG SERVICES, stated at the performance briefing that the year-on-year decline in core net profit attributable to owners was primarily due to the proactive disposal of certain risk items, including the active clearance of long-aged trade receivables, which created a drag of approximately 667 million yuan.
Thus, "the company's profit is under temporary pressure, mainly due to some financial clearance actions," Tiantian further explained. It is estimated that the risk of further impairment of the remaining goodwill balance from past acquisitions and mergers is controllable. After clearing some risk items, "in 2026, we believe the downward trend in core net profit will be reversed, and the overall profit situation will stop declining and begin to recover."
However, during its ongoing expansion, challenges commonly faced by the industry, such as high vacancy rates in new homes and low property management fees in old residential communities, are also present for CG SERVICES.
The management of CG SERVICES stated that on one hand, they aim to enhance and optimize services through refined management methods, digital operation systems, and their own scale advantages to gain recognition from property owners. Regarding old residential communities with low property management fees, the company has launched its own brand, providing essential services such as security, fire protection, and elevator maintenance. By implementing area-based management to reduce costs, they continuously revitalize idle resources in old communities, develop value-added services, and expand revenue streams. Batch projects have already been implemented in cities like Shanghai, Beijing, Shenzhen, and Wuhan.
It is worth noting that against the backdrop of continuous and profound adjustments in the real estate industry, the related-party transactions and risk exposure between CG SERVICES and Country Garden have consistently been a focus of market attention. After several years of effort, the proportion of revenue from related parties for CG SERVICES has decreased from 20.3% in 2018 to 1.1% in 2025.
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