SINGAPORE (Aug 6): Far East Orchard posted earnings of $2.4 million for the 2Q19 ended June, some 53.7% higher than earnings of $1.6 million a year ago.
Earnings per share (EPS) rose to 0.55 cent in 2Q19, compared to 0.37 cent in 2Q18.
2Q19 revenue rose 3.8% to $37.3 million, from $35.9 million a year ago.
The increase was mainly attributable to higher sales from the group’s existing student accommodation business in the UK as well as the acquisition in March 2019.
This was partially offset by the lower sales from its hospitality business in Australia and Malaysia due to the weak market conditions.
Gross profit jumped 39.6% to $16.3 million, mainly due to higher gross profit contribution from its student accommodation business in the UK, as cost of sales fell 13.4% to $21.0 million.
Finance expenses quadrupled to $4.3 million in 2Q19, from $1.1 million a year ago, on the back of borrowings to finance the acquisition.
Share of profit of joint ventures climbed to $1.5 million during the quarter, compared to a share of loss of $0.3 million a year ago.
This was mainly due to higher contributions from the strong performance of the hotels in Germany and the reversal of provision for an onerous hospitality lease agreement in Melbourne by the group’s hospitality joint ventures during the quarter.
As at end June, cash and cash equivalents stood at $239.6 million.
Looking ahead, the group says it expects to open its third hotel under management at Sentosa, The Barracks Hotel Sentosa, later this year.
In Australia, performance of hotels in major cities is expected to soften further as new room supply outpaces demand, while growing demand for serviced apartments in Germany bodes well for the group’s existing and pipeline properties.
On the property development front, the group says it continues to actively market its Woods Square integrated office development project, which is expected to be completed this year.
Meanwhile, it anticipates a delay in completion of its Westminster Fire Station residential development in the UK, which will be pushed back from the end of this year to 2020.
Despite prolonged uncertainty due to Brexit and other macroeconomic challenges, the group says it remains confident about the long-term fundamentals of the UK property market in prime residential locations and will continue to be prudent in its investment decisions.
It adds that it will continue to seek real estate development or investment opportunities that fit its strategy as a diversified real estate group.
Shares in Far East Orchard closed 1 cent lower at $1.17 on Tuesday before the results announcement.
