Far East Orchard’s losses deepened to $1.9 million in 1HFY21 ended June, from the $0.9 million registered in the previous year.
On a fully diluted basis, this translates to losses per share of 0.41 cents in 1HFY21, compared to 0.19 cents in the previous year.
With this, the group’s net asset value edged down to $2.70, from $2.72 on Dec 31.
Revenue for the first six months of the year was down 15.4% to $54.9 million, as the group’s hospitality business continued to be impacted by the ongoing lockdowns and border closures.
Income from the group’s hospitality operations was down to $21.9 million in 1HFY21, from $30.5 million in the previous year. Declines were seen in all countries. However, the group says its Singapore operations took a lighter blow due to the demand for accommodation facilities for isolation and from companies for the housing of their foreign workers.
Meanwhile, a further decline in overall revenue was partially offset by higher takings from its purpose-built student accommodation (PBSA) in the United Kingdom which includes the full contribution of an asset that was acquired in November.
Cost of sales for 1HFY21 was down 22.9% to $29.8 million, in line with the drop in revenue.
Even so, gross profit edged down by 4.3% to $25.1 million, mainly due to lower gross profit from the hospitality business. However, the group says this was partially offset by the higher gross profit contribution from the PBSA segment.
Far East Orchard’s total expenses was up by $0.9 million to $28.4 million in 1HFY21, mainly due to the higher operating expenses incurred from the PBSA property acquired in 2020.
The group says this increase was partially offset by lower finance expenses due to lower bank borrowings interest rate as well as lower marketing and promotional spending by the hospitality segment.
Other income – which includes interest income from bank deposits and grant income – edged down to $2.9 million in 1HFY21, from $2.7 million in the preceding year. This follows lower interest income following lower bank deposit rates as well as lower wage subsidies from the Singapore and Australian government compared to the year before.
The group’s share of losses from its joint ventures came in at $4.4 million in 1HFY21, down from the $7.0 million in the previous year. It reports that the share of losses from its hospitality joint ventures in Australia and Europe would have been higher, had it not been for the government grants.
It adds that the share results of joint ventures for 1HFY20 also had a lift from the inclusion of sales of commercial units from the TOP of its Woods Square in February 2020.
As at end June, Far East Orchard’s cash and cash equivalents stood at $234.1 million, up marginally from $232.96 million in the previous year.
The group has not declared a half-year dividend and says that any recommendation will be only be made after considering its full-year results.
CEO Alan Tang acknowledges that the “return to normalisation is an arduous journey”.
“Numerous efforts were made to cushion the impact on our hospitality business, which would have otherwise been much dire. We have worked hard in the first half of the year with tenacity and will persevere on with this momentum amid the challenging macroeconomic landscape, alongside our stakeholders,” he adds.
Despite the drag from the pandemic, the group opened three new hotels in Asia: the 324-key The Clan Hotel in Singapore, the 241-key Quincy Hotel in Melbourne and the 227-key Far East Village Hotel Yokohama in Japan.
Its Australian joint venture, TFE Hotels debuted the “A by Adina” hotel brand in February with the opening of a hotel in Canberra. Later in April, it completed and opened a 194-key hotel in Sydney.
Far East Orchard is looking to open the 191-key Oasia Resort Sentosa in 2HFY21. This will be its fourth hotel in Sentosa.
Meanwhile, the group’s PBSA portfolio in UK maintained occupancy levels of over 80% as at June 30. It is expecting a pick up in the pace of booking following the easing of restrictions there as well as “record high university applications”.
In spite of the uncertainities ahead, Tang remains hopeful that “global tourism will, slowly but surely improve as vaccination rollout progresses globally”.
Shares in Far East Orchard closed flat at $1.13, before its results announcement.
Cover photo: file image
