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Financials

Unaudited Second Quarter And Half Year Financial Statements And Dividend Announcement For The Financial Period Ended 30 June 2017

Financials Archive

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Profit & Loss

Consolidated Statement of Comprehensive Income

Balance Sheet

* $227.0 million (31 December 2016: $314.0 million) relates to the Group’s pre-sold development properties as at 30 June 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 $143.3 million in 1H2017, 29% lower than $201.4 million in 1H2016. For 2Q2017, the Group achieved revenue of $77.8 million, 21% lower than $98.4 million in 2Q2016. 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 81% of the Group’s turnover in 1H2017, decreased 33% to $115.5 million in 1H2017 from $171.8 million in 1H2016. For 2Q2017, revenue from the Property Development segment made up 82% of the Group’s turnover, decreased 24% to $63.8 million from $83.5 million in 2Q2016. The decrease was largely due to lower revenue recognition from Jade Residences, Whitehaven and 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.

(b) Hotel Ownership and Property Investment

The Hotel Ownership segment, which contributed 15% to the Group’s turnover in 1H2017, registered $21.4 million in revenue as compared to $23.6 million in 1H2016. For 2Q2017, Hotel Ownership segment contributed 14% to the Group’s turnover, registered $10.9 million in revenue as compared to $11.9 million in 2Q2016. The decrease was mainly due to lower revenue per available room (“RevPar”) from Grand Mercure Singapore Roxy.

Revenue from the Property Investment segment constituted the balance of 4% of the Group’s turnover and contributed $6.3 million in 1H2017 as compared to $6.0 million in 1H2016. For 2Q2017, revenue from Property Investment segment contributed $3.1 million as compared to $3.0 million in 2Q2016. The increase was mainly from higher rental rate of office units at 59 Goulburn Street as compared to 1Q2016 & 1H2016.

(ii) Cost of sales and gross profit

In line with the decrease in revenue, cost of sales decreased by 29% to $113.2 million in 1H2017 from $158.8 million in 1H2016. In 2Q2017, cost of sales decreased by 19% to $64.1 million from $78.9 million in 2Q2016.

Gross profit from the Property Development segment contributed $14.0 million or 45% of the Group’s total gross profit in 1H2017, with the remaining 55% or $16.1 million contributed by the Hotel Ownership and Property Investment segments. Gross profit margin from the Property Development segment was 12% in 1H2017, as compare to 14% in 1H2016. The gross profit margin of the Hotel Ownership segment decreased 5 percentage points to 54% in 1H2017 mainly due to lower RevPar from Grand Mercure Singapore Roxy (“GMRH”) in 1H2017. Gross profit margin of the Property Investment segment decreased marginally by 1 percentage point to 71% in 1H2017.

In 2Q2017, gross profit from the Property Development segment contributed $5.6 million or 40% of the Group’s total gross profit, with the remaining 60% or $8.2 million contributed by the Hotel Ownership and Property Investment segments. Gross profit margin from the Property Development segment was 9% in 2Q2017, as compare to 12% in 2Q2016. The gross profit margin of the Hotel Ownership segment decreased 5 percentage points to 55% in 2Q2017 as compared to 60% in 2Q2016 mainly due to lower RevPar from GMRH in 2Q2017. Gross profit margin of the Property Investment segment decreased 2 percentage points to 70% in 2Q2017 from 72% in 2Q2016.

The Group’s overall gross profit margin in 1H2017 was 21%, which is consistent with 1H2016. For 2Q2017, the Group’s overall gross profit margin was 18%, compared with 20% in 2Q2016.

Commentary

Property Development

Advanced estimates from the Ministry of Trade and Industry Singapore1 showed that the Singapore economy grew 2.5% year-on-year in 2Q2017, the same pace of growth as 1Q2017. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew 0.4%, in contrast to the 1.9% contraction in the preceding quarter.

Australia’s economy also posted positive growth of 1.7% on a year-on-year seasonally adjusted basis for the quarter ended in March 20172. The Reserve Bank of Australia had projected that the country’s GDP will grow between 2.5% and 3.5% for the year ending December 20173.

Singapore

Latest statistics from Urban Redevelopment Authority showed that prices of residential properties decreased by 0.1% in 2Q2017, compared with the 0.4% decline in the preceding quarter4. Buying sentiments have improved, as demonstrated in the 53% year-on-year growth in developer sales to 820 units in June 2017 compared to 536 units sold last year5.

The Group’s most recent project launch, Straits Mansions, received warm reception from buyers and is currently 100%-sold. Additionally, to replenish its land bank in Singapore, the Group completed new development site acquisitions for 120 Grange road and 211-223A Pasir Panjang Road in Singapore during 1Q2017.

Australia

In Australia, residential property prices rose 2.2% for the March quarter in 2017, led by growth in Sydney and Melbourne of 3.0% and 3.1%, respectively6.

The Group’s latest project in Australia, West End Glebe – Block 1 (The Foundry), has received overwhelming response since sales launch and is currently 84% sold. Block 2 (The Art House) is planned for launch in 2H2017. Together with Octavia and The Hensley which are more than 90% sold, the development projects in Australia is expected to contribute positively to the Group’s profits upon their completions from 2018.

Subsequent to 2Q2017, the Group announced on July 14, 2017 that it has entered into a definitive sale and purchase agreement to sell 59 Goulburn Street for AUD158 million.

1 Ministry of Trade and Industry Singapore, July 14, 2017 – Singapore’s GDP grew by 2.5 per cent in the second quarter of 2017
2 Australian Bureau of Statistics, July 6, 2017 – Australian National Accounts: National Income, Expenditure and Product, Mar 2017
3 Reserve Bank of Australia, May 2017 – Statement on Monetary Policy, Table 6.1: Output Growth and Inflation Forecasts
4 Urban Redevelopment Authority, July 28, 2017 – URA releases of 2nd Quarter 2017 real estate statistics
5 Business Times, July 17, 2017 – Developers’ sales fall to 820 units in June from 1,039units in May: URA
6 Australian Bureau of Statistics, June 20, 2017 – Residential Property Price Indexes: Eight Capital Cities Mar 2017

As at 20 July 2017, based on units sold from the following ongoing development projects, the Group has total attributable pre-sale revenue of $469.3 million. The profits from the Singapore residential projects will be progressively recognised from 3Q2017 to FY2020.

In addition, the Group has the following portfolio of properties:

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

Hotel Ownership

For the hospitality sector, Singapore received a record number of tourists in 2016, a 7.7% growth from 2015, while tourism receipts rose 13.9%. The Singapore Tourism Board maintains a conservative outlook for 2017, forecasting international visitor arrivals to grow between 0% and 2%.

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 by end-2017 with the Phuket resort to follow in 2019.

Outlook

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

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