City Developments (CDL) saw its earnings plummet 99.1% to $3.1 million for 1H20 ended June, from the $362.0 million posted a year ago. The drag on earnings is primarily due to its hotel operations segment, which saw a pre-tax loss of $208.2 million, which included $33.9 million of impairment losses due to the ongoing pandemic.
On a fully diluted basis, this translates to a loss per share of -0.4 cents for the half-year compared to the 38 cents a year ago. The loss per share includes the preference dividends of $6.4 million (1.94 cents per preference share), which was paid on June 30.
1H20 revenue fell 32.8% y-o-y to $1.07 billion, due to the decline across all business segments. The hotel operations segment alone accounted for 82% of the drop in revenue due to the global pandemic.
The investment properties segment also registered lower revenue due to rental rebates granted to CDL’s Singapore and China tenants. Hotels under master lease arrangements, held primarily under CDL Hospitality Trusts, generated lower rental income as well.
1H20 revenue from CDL’s property development segment included contributions largely from The Tapestry, Whistler Grand and Amber Park, which were recognised progressively based on their stages of construction of sold units, and balance units for completed projects including Gramercy Park and Hongqiao Royal Lake in Shanghai.
In Singapore, the group registered lower sales volume due to closure of all six operating sales galleries during the first phase of the circuit breaker measures. Construction works were also delayed during the same period.
In constant currency, CDL’s global hotel revenue per available room (RevPAR) fell 56.6% y-o-y to $60.3. Global occupancy dropped to 39.4% from 72.2% in 1H19.
As at June 30, 28% of the group’s 152 hotels worldwide were temporarily closed and those that remained open were operating at much lower occupancies than before.
Other income fell 40.9% y-o-y to $95.5 million, which comprised mainly divestment gains from the disposal of Millennium Hotel Cincinnati of $26.4 million and equity stake in Sceptre Hospitality Resources (SHR) of $23.5 million. Other income also registered negative goodwill of $43.2 million on acquisition of an effective 51.01% joint controlling interest in Chinese real estate developer Sincere Property Group in 1H20.
Administrative expenses fell 8.1% y-o-y to $259.3 million, which is largely due to lower hotel administrative expenses and salaries expenses, in tandem with lower revenue generated from hotel operations, cost containment measures undertaken by hotels and wage support received from local governments.
The decrease was partially offset by higher depreciation contributed by investment properties added to the group’s portfolio in 2H19 which included the acquisition of W Singapore – Sentosa Cove and Quayside Isle in April 2019.
As at June 30, cash and cash equivalents stood at $2.39 billion.
“Under these precarious circumstances, we have prioritised cost-containment measures under an interim crisis management mode. Cash preservation, prudent capital management and business optimisation are enforced to enhance liquidity. These efforts will help to fortify the Group’s balance sheet,” says Kwek Leng Beng, executive chairman of CDL.
“Over CDL’s 57-year history and track record, we have survived numerous challenging times, each one more difficult than the last. Armed with our strong balance sheet and globally diversified portfolio, we remain confident in navigating through and tiding over this storm,” he adds.
“The strategic investment into Sincere Property Group this year marks a transformative move for the Group in China. We have commenced with the gradual integration of Sincere and will put in place sound capital management and portfolio recalibration initiatives to strengthen Sincere’s financial position. In addition, we are focusing hard on driving sales and optimising operational efficiency. These efforts should start to bear fruit over time,” says Sherman Kwek, group CEO of CDL.
“During this unprecedented global crisis, we are also reviewing strategies, reinforcing frameworks and futureproofing our business. We will continue to focus on our Growth, Enhancement and Transformation (G-E-T) strategy. This includes progressing our plans for portfolio rejuvenation for Fuji Xerox Towers and Central Mall. For our hotels segment, a thorough review is ongoing and we are keeping a close watch for signs of improvement in the global travel sentiment. We are also actively looking into asset divestment for both non-core hotels as well as some of the investment properties held by Sincere,” he adds.
As at 9.09am, shares in CDL are trading flat at $8.34.
