Financials

Unaudited First Quarter Financial Statement For The Financial Period Ended 31 March 2012

Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Profit & Loss

Balance Sheet

Review of Performance

Breakdown of Performance by Segments

1Q2012 vs 1Q2011

(i) Revenue

The Group recorded a 24% decrease in revenue to $38.1 million in 1Q2012 from $50.4 million in 1Q2011. The decrease in turnover was mainly due to lower revenue contribution from Property Development segment as a result of completion of several projects in 2011 and the gap in revenue recognition until the commencement of construction of newer projects. On the other hand, the Hotel Ownership segment reported a 12% year-on-year increase in revenue as a result of higher hotel room rate and occupancy rate.

(a) Property Development

Revenue from the Group's Property Development segment which made up of 65% of turnover declined 35% from $37.9 million in 1Q2011 to $24.6 million in 1Q2012. This decrease was largely due to the absence of revenue recognised from four development projects, namely The Florentine, The Azzuro, Nova 48 and The Lucent that were completed in 2011.

The Group recognised revenue from six development projects namely, The Verte, Nova 88, Studios@Tembeling, Straits Residences, Spottiswoode 18 and Space@Kovan. It has obtained TOP for The Verte in January 2012.

(b) Hotel Ownership and Property Investment

The remaining 35% of the Group's turnover in 1Q2012 was attributable to the Group's Hotel Ownership and Property Investment segments. Revenue from the Hotel Ownership segment increased 12% to $13.1 million in 1Q2012 from $11.7 million in 1Q2011. The hotel's average occupancy rate ("AOR") grew from 91.6% in 1Q2011 to 92.8% in 1Q2012. Its average room rate ("ARR") was also up 8.3% to $201.5 in 1Q2012 as compared to $185.9 in 1Q2011. Overall, the Group's revenue per available room ("RevPar") increased by 9.8% from $170.3 in 1Q2011 to $187.0 in the current quarter.

Revenue from the Group's Property Investment segment, which constituted 1% of the Group's turnover, was lower at $0.4 million in 1Q2012 as compared to $0.8 million in 1Q2011 as a result of the redevelopment of Kovan Centre.

(ii) Cost of sales and gross profit

In line with the decrease in revenue, direct cost of total revenue also decreased by $12.7 million or 37% from $34.2 million in 1Q2011 to $21.5 million in 1Q2012.

During the quarter, gross profit from the Property Development segment contributed $7.2 million or 43% of the total gross profit of the Group, with the balance 57% or $9.4 million contributed by the Hotel Ownership and Property Investment segments. The gross profit margin for the Property Development segment improved from 20% in 1Q2011 to 29% in 1Q2012. The increase was mainly due to the recognition of profits from development projects with higher profit margin as compared to those developments projects recognised in 1Q2011. The gross profit margin of the Hotel Ownership segment also improved by 1 percentage point from 69% in 1Q2011 to 70% in the current quarter due to higher RevPar of the hotel. Gross profit margin of the Property Investment segment also increased by 1 percentage point from 71% in 1Q2011 to 72% in current quarter.

As a result of an increase in the gross profit margins in all segments as well as higher percentage revenue contribution from the Hotel Ownership segment which has a higher gross profit margin, the Group's overall gross profit margin in 1Q2012 increased by 12 percentage points from 32% in 1Q2011 to 44% in 1Q2012.

(iii) Profit for the period

The Group's other operating income increased by $0.2 million to $0.6 million in 1Q2012 mainly due to forfeiture of booking fees for pre-sale of properties, rental income from development properties and increase in interest income due to the increase in placement of fixed deposits.

Distribution and selling expenses increased from $0.5 million in 1Q2011 to $0.6 million in 1Q2012 mainly due to increase in marketing expenses, which is in line with the increase in hotel's turnover.

Other operating expenses increased from $2.7 million in 1Q2011 to $3.3 million in 1Q2012 mainly due to the increase in depreciation expense as a result of the completion of hotel upgrading work.

Finance costs decreased from $1.2 million in 1Q2011 to $0.9 million in 1Q2012 mainly due to capitalisation of borrowing costs upon the commencement of the redevelopment of Kovan Centre in 31 Aug 2011.

The Group's share of profits of associates was lower in 1Q2012 by 36% mainly due to lower revenue recognised on a percentage of completion basis from Haig 162 project as compared to the same period last year.

In the current quarter, the Group's pre-tax profit decreased by 1% from $11.3 million in 1Q2011 to $11.1 million.

The Group's effective tax rates in 1Q2012 and 1Q2011 were 18% and 11% respectively. The effective tax rate in 1Q2011 was lower than the applicable tax rate of 17% mainly due to overprovision of tax in respect of prior year.

Profit after taxation decreased by $1 million or 10% to $9 million in the current quarter ended 31 March 2012.

(iv) Cashflow, working capital and Balance Sheet

The Group's non-current assets comprise property, plant and equipment, investment properties, investments in associates and goodwill. As at 31 March 2012, this amounted to $149.9 million and represented 21% of the total assets.

The Group's current assets comprise mainly properties for sale under development, trade and other receivables and cash and bank balances. As at 31 March 2012, this amounted to $564.5 million and represented 79% of the total assets. Properties for sale under development accounted for $295.5 million or 52% of total current assets as at 31 March 2012. The decrease in properties for sale under development from $329.9 million as at 31 December 2011 to $295.5 million as at 31 March 2012 was mainly due to TOP obtained for The Verte in January 2012.

Trade receivables amounted to $26.7 million as at 31 March 2012 and comprise mainly progress payments receivable from purchasers for projects under construction and the unbilled revenue portion of the recognised sales from the completed projects. The decrease in trade receivables from $38.0 million as at 31 December 2011 to $26.7 million as at 31 March 2012 was mainly due to collections from purchasers of Nova 48 project in 1Q2012.

Other receivables comprise mainly deposits, prepayments and other receivables. The increase in other receivables from $1.7 million to $2.9 million was mainly due to increase in prepayment of property tax.

As at 31 March 2012, project accounts, fixed deposits and cash and bank equivalents amounted to $237.7 million.

The Group recorded net cash inflows from operating activities of $53.2 million for the current quarter, as compared with net cash inflows of $34.8 million in the corresponding period last year. The increase in cash flows from operating activities was mainly due to the decrease in the properties for sale under development as mentioned above.

As at 31 March 2012, the Group recorded net cash outflows from investing activities of $0.6 million, mainly due to advances to one of the associates for working capital during the current quarter. As at 31 March 2012, the net cash outflows from financing activities were mainly due to repayment of land and construction loans during the period.

The Group's current liabilities comprise trade payables, other payables, provision for taxation and short term borrowings. As at 31 March 2012, this amounted to $389.3 million and represented 79% of the total liabilities. The decrease in trade payables from $9.4 million as at 31 December 2011 to $8.2 million as at 31 March 2012 was mainly due to payment to contractors for the projects during the current period. Other payables comprise mainly accruals for construction costs for completed projects, accrual of unbilled progress claims from contractors, hotel management fees and directors' performance incentive and staff bonuses. The decrease in other payables from $22.3 million as at 31 December 2011 to $19.5 million as at 31 March 2012 was mainly due to payment of hotel management fee and staff bonus and lower accrual of unbilled progress claims from contractors.

As at 31 March 2012, the Group's total borrowings amounted to $440.0 million with $125.3 million repayable within one year and $314.7 million repayable after one year. Of the $125.3 million borrowings repayable within one year, $76.5 million relates to the sold development properties and is expected to be fully repaid by 31 March 2013 upon obtaining TOP and collections from purchasers. The decrease in the total borrowings as at 31 March 2012 as compared to the balance as at 31 December 2011 was due to the repayment of land and construction loans during the period.

Commentary On Current Year Prospects

Property Development

According to advance estimates by Ministry of Trade and Industry Singapore ("MTI"), the Singapore economy grew by 1.6 per cent on a year-on-year basis in 1Q2012, compared to 3.6% in 4Q2011, and is forecast to grow between 1.0% and 3.0% in 2012.

In addition, based on latest real estate statistics released by Urban Redevelopment Authority on 27 April 2012, the overall prices of private residential properties in 1Q2012 fell marginally by 0.1% compared with the 0.2% increase in the quarter before, confirming a trend of stabilising prices over the past 9 consecutive quarters.

However, housing demand has remained strong in 1Q2012 partly due to high liquidity, low mortgage interest rates as well as the record number of projects launched in 1Q2012.

As of 2nd May 2012, the Group has a balance amount of attributable progress billings of approximately $778.9 million from the following projects, of which the profits will be progressively recognised from 2Q2012 to FY2016. This is more than five times the property development revenue of $132.6 million recorded in FY2011.

In addition, the Group has the following plots of land with a total attributable gross floor area of approximately 158,784 square foot for development:

The MKZ, a 42-unit residential project located on a freehold site in District 10, is expected to launch by 1H2012.

The Group will continue to exercise prudence as it explores future suitable opportunities in the residential, commercial and mixed-use developments segments.

Hotel Ownership

The latest tourism statistics released by the Singapore Tourism Board on 23 March 2012 show a forecast of $23 to $24 billion in tourism receipts and 13.5 to 14.5 million visitor arrivals for 2012.

The Group believes that demand for the hotel rooms should continue to be strong in 2012 due to the strong economy and continual high visitors' arrivals to Singapore.

Outlook

Barring any unforeseen circumstances, the directors expect the Group to be profitable in 2012.