SINGAPORE (Aug 2): Property group Far East Orchard posted a 97.3% fall in 2Q17 earnings to $1 million from $37 million in 2Q16.
Sales for 2Q17 were 19.4% lower at $36 million compared to 2Q16. The decline was mainly due to completion of certain onerous lease agreements in Australia and New Zealand in late 2016 and weaker performance from the two hospitality assets in Perth, Australia. This was partially offset by higher revenue contribution from Oasia Suites Kuala Lumpur which ramped up operations following its opening in April 2016.
The group’s gross profit for 2Q17 was $11.3 million, or 6.1% lower than 2Q16. This was in line with lower total revenue reported in the quarter. The two hospitality assets in Perth, Australia also recorded lower profits in the quarter due to the challenging operating environment. However, the decrease in gross profit was partially offset by a decrease in amortisation expenses of lower carrying value of intangible assets after the recognition of an impairment charge in 2016.
The group’s share of results of joint ventures decreased by 99.8% to $57,000 from $36.7 million a year ago mainly due to the absence of a one-time recognition of profits in 2Q16 from the sale of units in a joint venture property development project, SBF Center, which obtained its Temporary Occupation Permit in June 2016.
Far East Orchard says outlook for the hospitality sector in Singapore is likely to remain weak with a challenging operating environment over the next 12 months. Revenue per Available Room (RevPAR) continues to be impacted by a further increase in hotel room supply in 2017, particularly in the mid-tier category, strength of the Singapore dollar and weak corporate demand.
In Australia, outlook for the hospitality industry remains positive, underpinned by an increase in international visitors and increase in household spending capacity. However, the pace of growth is expected to vary among the different cities that the group operates in.
Shares in Far East Orchard closed 2 cents lower at $1.56.
