Far East Orchard has reversed into the black with earnings of $8.0 million in the 1HFY2022 ended June, compared to the loss of $1.9 million in the same period the year before.
Far East Orchard is part of the Far East Organization group, which owns 33% of Far East Hospitality Trust's manager.
Revenue was up by 15.9% y-o-y to $63.7 million due to higher revenue from the hospitality and student accommodation (PBSA) segments. The higher hospitality revenue was due to the reopening of borders and pickup in global travel. The higher revenue for the PBSA segment was also due to the higher occupancy for the academic year 2021/2022, which commenced in September 2021.
The PBSA segment achieved a healthy occupancy rate of over 85% for the academic year.
Gross profit increased by 31.0% y-o-y to $32.9 million due to the higher revenue.
Other income fell to $0.3 million from $2.2 million in the year before mainly due to the lower wage subsidies from the government.
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Other losses increased by $2.3 million to $5.5 million due to higher unrealised currency translation loss as a result of the weakening of the AUD and the GBP against the SGD, partly offset by the recognition of a $1.8 million gain from the sale of reversionary interest in a hospitality property.
Share of profit of joint ventures surged to $10.1 million from the $4.4 million loss in the same period the year before. The higher share of profits recognised from the Australia and Europe hospitality joint ventures was mainly from the gain from the derecognition of lease liabilities of $7.6 million, recognition of government grants in Germany and improved operating performance. The improvement in the operating performance of the hospitality joint ventures was due to the opening of the borders in the second quarter in Australia, New Zealand and Europe.
In the prior period, the hospitality joint ventures were adversely affected by the ongoing Covid-19 pandemic which resulted in constant state of lockdowns and borders closure in Australia, New Zealand and varying extent of restrictions in Europe.
Cash and cash equivalents as at June 30 stood at $200.9 million.
Earnings per share (EPS) for the period stood at 1.73 cents per share.
No dividend was declared for the 1HFY2022.
Looking ahead, the group sees pent-up demand as supporting its growth in the near term, although it remains cautious about the recovery momentum of the tourism industry in the second half of 2022, due to rising costs and global economic uncertainties.
The group’s UK PBSA business will also be impacted by rising costs and interest rates, even though the sector outlook remains positive with the continuing demand from domestic and international students.
“We have seen encouraging results in the second quarter as international travel recovery picked up. However, as optimism builds, we remain cautious and are prepared to tackle the increased global macro-economic challenges and uncertainties that could affect our business. We will continue to adopt prudent financial management and evaluate strategic options that will best drive long-term sustainable growth that capitalises on our strengths and fundamentals in the hospitality and PBSA segments,” says group CEO Alan Tang.
Shares in Far East Orchard closed flat at $1.06 on Aug 10.
