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Unaudited Third Quarter And Nine Month Financial Statements And Dividend Announcement For The Financial Period Ended 30 September 2017

Financials Archive

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Profit & Loss

Consolidated Statement of Comprehensive Income

A statement of financial position

* $245.9 million (31 December 2016: $314.0 million) relates to the Group’s pre-sold development properties as at 30 September 2017.

Review of Performance

(i) Operating Segments

n/m: not meaningful

(ii) Geographical segments

Revenue and gross profit analysis

(i) Revenue

The Group achieved revenue of $203.5 million in 9M2017, 30% lower than $292.3 million in 9M2016. For 3Q2017, the Group achieved revenue of $60.3 million, 34% lower than $90.9 million in 3Q2016. This was mainly due to lower revenue from the Property Development and Hotel Ownership segments.

(a) Property Development

Revenue from the Property Development segment, which made up 80% of the Group’s turnover in 9M2017, decreased 35% to $162.0 million in 9M2017 from $248.0 million in 9M2016. For 3Q2017, revenue from the Property Development segment which contributed 77% of the Group’s turnover, decreased 39% to $46.5 million from $76.2 million in 3Q2016. The decrease was largely due to lower revenue recognition from Jade Residences, Whitehaven, LIV on Wilkie and an absence of revenue recognition from LIV on Sophia following the completion of these projects in 4Q2016 and early 2017. The decrease was partially offset by higher revenue recognition on construction progress of Trilive. Although the Group has made good progress in the sales and construction of its projects in Australia, unlike in Singapore, it cannot progressively recognise the revenue as the completed contract method in accounting is adopted for these projects.

(b) Hotel Ownership and Property Investment

The Hotel Ownership segment, which contributed 16% to the Group’s turnover in 9M2017, registered $32.3 million in revenue as compared to $35.0 million in 9M2016. For 3Q2017, the Hotel Ownership segment contributed that 18% to the Group’s turnover, registered $10.9 million in revenue as compared to $11.5 million in 3Q2016. The decrease was mainly due to lower revenue per available room (“RevPar”) from the Grand Mercure Singapore Roxy hotel as a result of subdued corporate activity caused by continued global economic uncertainty in certain sectors such as the Offshore & Marine and pricing competition from new hotel supply.

Revenue from the Property Investment segment constituted the balance of 4% of the Group’s turnover and contributed $9.2 million in 9M2017 as compared to $9.3 million in 9M2016. For 3Q2017, revenue from Property Investment segment contributed $2.9 million as compared to $3.2 million in 3Q2016

(ii) Cost of sales and gross profit

In line with the decrease in revenue, cost of sales decreased by 33% to $155.9 million in 9M2017 from $231.2 million in 9M2016. In 3Q2017, cost of sales decreased by 41% to $42.7 million from $72.5 million in 3Q2016.

Gross profit from the Property Development segment contributed $23.7 million or 50% of the Group’s total gross profit in 9M2017, while the remaining 50% or $23.9 million was contributed by the Hotel Ownership and Property Investment segments. Gross profit margin from the Property Development segment was 15% in 9M2017, as compared to 14% in 9M2016. The gross profit margin of the Hotel Ownership segment decreased 5 percentage points to 54% in 9M2017 mainly due to lower RevPar from Grand Mercure Roxy Hotel (“GMRH”) in 9M2017. Gross profit margin of the Property Investment segment decreased marginally by 2 percentage points to 70% in 9M2017.

In 3Q2017, gross profit from the Property Development segment contributed $9.8 million or 56% of the Group’s total gross profit, while the remaining 44% or $7.8 million was contributed by the Hotel Ownership and Property Investment segments. Gross profit margin from the Property Development segment was 21% in 3Q2017, as compared to 13% in 3Q2016. This was mainly due to write-back of an over-provision of development cost relating to certain projects completed in prior periods. The gross profit margin of the Hotel Ownership segment decreased 4 percentage points to 53% in 3Q2017 as compared to 57% in 3Q2016 mainly due to lower RevPar from GMRH in 3Q2017. Gross profit margin of the Property Investment segment decreased 1 percentage point to 70% in 3Q2017 from 71% in 3Q2016.

The Group’s overall gross profit margin in 9M2017 was 23%, higher than the 21% recorded in 9M2016. For 3Q2017, the Group’s overall gross profit margin was 29%, compared with 20% in 3Q2016 due to higher margin from Property Development segment.

Commentary

Based on advanced estimates from the Ministry of Trade and Industry Singapore1 , the Singapore economy grew by 4.6% year-on-year in the third quarter of 2017, higher than the 2.9% growth in 2Q2017. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew by 6.3%, an improvement from the 2.4% growth in the second quarter.

Australia’s economy also posted positive growth of 0.8% on a year-on-year seasonally adjusted basis for the quarter ended June 2017. The Reserve Bank of Australia had projected that the country’s GDP will grow between 2.5% and 3.5% for the year ended December 20172.

Property Development

Singapore

Latest real estate statistics from the Urban Redevelopment Authority3 showed that prices of private residential properties increased by 0.7% in 3Q2017, compared to a 0.1% decline in 2Q2017, rising for the first time in nearly four years. Buying sentiments have improved, as demonstrated in the 60.1% surge in developers’ sales in the first nine months of the year, on a year-on-year basis.

Ahead of the property market’s gradual recovery, the Group has prudently replenished its land bank with predominantly freehold sites in Singapore at reasonable prices to maximise the yield potential of these projects. The Group looks forward to the upcoming launch of its 48-unit Navian freehold apartment development in Jalan Eunos and will continue to monitor the market closely to seize growth opportunities.

Australia

In Australia, residential property prices rose 1.9% for the June 2017 quarter, contributing to the 10.2% growth seen through the year to the June 2017 quarter. Key cities where the Group’s properties are located in registered healthy growth – Sydney posted a 2.3% rise, Melbourne registered a 3.0% growth, and Brisbane grew 0.6%4.

The Group’s latest project in Australia, West End Glebe – The Foundry, which was launched in April 2017 has received warm reception and is since 85% sold. It is expected to contribute positively to the Group’s profits upon its completion in 2019.

1 Ministry of Trade and Industry Singapore, October 13, 2017 – Singapore’s GDP grew by 4.6 per cent in the third quarter of 2017
2 Reserve Bank of Australia, September 6, 2017 – Australian National Accounts: National Income, Expenditure and Product, Jun 2017
3 Urban Redevelopment Authority, October 27, 2017 – URA releases 3rd Quarter 2017 real estate statistics
4 Australian Bureau of Statistics, September 19, 2017 – Residential Property Price Indexes: Eight Capital Cities, Jun 2017

As at 17 October 2017, based on units sold from the following ongoing development projects, the Group has total attributable pre-sale revenue of $465.6 million. The profits from the Singapore residential projects will be progressively recognised from 4Q2017 to FY2020.

In addition, the Group has the following development land bank in Singapore:

The Group remain focused to launch these newly acquired lands for sale this year and in FY2018.

Hotel Ownership

Singapore’s tourism sector saw a 4% year-on-year increase in International Visitor Arrivals in the first quarter of 2017, receiving 4.3 million visitors, while tourism receipts grew 15% to reach S$6.4 billion. While Average Occupancy Rate grew 1.3%, gazetted hotel room revenue and Revenue Per Available Room (RevPAR) declined 1.3% and 1.2% year-on-year5.

The Singapore Tourism Board maintains a conservative outlook for 2017, forecasting international visitor arrivals to grow between 0% and 2%6. Additionally, Singapore emerged as Asia-Pacific’s second most visited destination by international visitors in 2016 and top in terms of amount spent by visitors in the MasterCard Global Destination Cities Index released in September 2017 – a testament of Singapore’s position as a key tourism destination in Asia.

Following the launch of Roxy-Pacific’s first internally-managed hotel in Kyoto, Japan under the new Noku Roxy brand, the Group plans to launch its second self-managed hospitality asset in Maldives in 4Q2017 with the Phuket resort to follow in 2019. The Group has completed the purchase of Tenmabashi Grand Hotel in Osaka, Japan on 17 October 2017 and intends to re-brand the hotel under Noku Roxy brand.

Outlook

Barring any unforeseen circumstances, the directors expect the Group to be profitable in 2017.

Property Investment

The Group has completed the sale of its office building at 59 Goulburn Street on 16 October 2017. To maintain its recurring income streams, the Group has recycled capital from the sale by entering into agreements to acquire two commercial buildings in Auckland, New Zealand. The first property at 205 Queen Street is a Grade A office building that is 50%-owned by the Group, while the second commercial office building, known as NZI Centre, is strategically located on the western side of Auckland’s Central Business District. The Group will continue to explore such yield accretive opportunities to strengthen its income streams and enhance shareholder value.

5 Singapore Tourism Board, July 31, 2017 – STB Q1 2017 Tourism Sector Performance
6 Singapore Tourism Board, February 14, 2017 – Singapore achieves record tourism sector performance in 2016

Outlook

Barring any unforeseen circumstances, the directors expect the Group to be profitable in 2017