China’s third-richest man is about to add RMB 14.6 billion ($2.1 billion) to his personal fortune after China Evergrande Group proposed its dividend for the 2018 financial year in an announcement on the Hong Kong stock exchange on Sunday.
The mainland’s second-largest developer by sales proposes to pay out half of its 2018 profits, which totalled RMB 37.4 billion, as dividends to shareholders and with chairman Xu Jiayin holding a 78 percent stake in the Shenzhen-headquartered developer the billionaire is set for a windfall.
The payout comes after China Evergrande’s group revenues rose to RMB 466.2 billion in 2018 – a nearly 50 percent increase over the previous year – with profit attributable to shareholders jumping over 53 percent last year from 2017’s RMB 24.4 billion after home sales income boomed in the first half of 2018.
Dividend Up for Vote in January
In a meeting held in Hong Kong on Sunday Evergrande’s board resolved to pay shareholders a dividend of RMB 1.419 (HK$1.578) for the financial year which ended 31 December 2018, according to the exchange announcement. During last year the developer had posted basic earnings per share of RMB 2.849, according to its annual report.
The proposed payout of RMB 18.7 billion is in line with Evergrande’s tradition of distributing half of its annual profit to shareholders via dividends, with the board proposal subject to approval from shareholders at an extraordinary general meeting to be held 15 January next year.
The announcement of Evergrande’s 2018 dividend had been delayed twice this year as the company continues to pursue a domestic listing in mainland China.
The Hong Kong-listed firm had proposed its dividends for the 2016 and 2017 financial years simultaneously in August last year, paying out RMB 1.13 per share for each year after posting earnings per share of RMB 0.372 in 2016 and RMB 1.833 in 2017.
2019 Performance Dampens Hopes for Future Dividends
The dividend news was welcomed by investors with shares in Evergrande rising from HK$19.98 at the start of trading in Hong Kong today to reach as high as HK$20.45 in morning trading. Prices slid in the afternoon, however, to finish the day up 0.2 percent over Friday’s close of HK$19.70 at HK$19.74 per share.
The boost in stock price may have been dampened by the challenges that Evergrande has faced this year as home sales have slowed and the company has poured capital into chairman Xu Jiayin’s quest to create a world-leading electric car company.
In its interim financial report published in late August Evergrande announced that during the first half of 2019 its net profit had almost halved to RMB 27 billion from RMB 53 billion for the corresponding period last year. Those falling profits were in line with Evergrande’s revenue which slid 24 percent to RMB 227 billion for the reporting period, down from RMB 300 billion in the first six months of 2018.
The group’s 2019 performance has also been hit by losses at its Evergrande Health division, which is home to its electric car initiatives.
During the first half of this year Evergrande Health incurred a net loss of RMB 2 billion, after showing a profit of RMB 200 million during the January through June period of 2018.
In a statement to the Hong Kong exchange the Evergrande division attributed its losses to its new energy vehicle operation, which it said, “is in its early investment stage and resulted in an increase in research and development and other related costs and interest payments’.
China Evergrande Group has spent in excess of $1 billion this year in an attempt to become a top player in the electric vehicle market after it set a goal of manufacturing between 500,000 to 1 million electric vehicles annually within three years’ time.
Even the company’s league leading football team has faced adversity with coach Fabio Cannavaro having been sent down for some reported re-education sessions in October after the Guangzhou Evergrande squad’s lead in the Chinese Super League fell to just one point over rivals Shanghai SIPG. Cannavaro was reinstated in early November before finally leading Evergrande to the Super League title last week.