SINGAPORE (May 8): In a growing trend, the managers of Frasers Hospitality Trust (FHT) have joined many other REIT managers in holding back distribution, in anticipation of tougher operating challenges caused by the Covid-19 outbreak.
For 2QFY2020 ended March 2020, FHT has declared a distribution per stapled security (DPS) of 0.3137 cents, down 68.1% y-o-y. This brings FHT’s DPS for 1HFY2020 to 1.6438 cents, down 26.6% y-o-y.
The big drop in DPS was because FHT has set aside some $25.3 million, or 80% of its distributable income for 1HFY2020, in anticipation of “continued weak operating performance”, commitments relating to health, safety and regulatory compliance, as well as to support Novotel Melbourne on Collins which has no third-party master lease protection.
As a result, income available for distribution dived 67.2% y-o-y to $6.1 million for 2QFY2020.
To better manage its cash, FHT has put on hold $5.6 million of non-essential capital expenditure. In addition, FHT has made a pre-emptive drawdown of a $30 million revolving credit facility to augment FHT’s liquidity position.
The impact of the Covid-19 outbreak was already keenly felt during 2Q, with gross revenue down 41.5% y-o-y to $20.2 million, as travellers’ bookings and events to be held at FHT’s properties across Australia, the UK, Singapore, Japan, Malaysia, and Germany were cancelled.
On the other hand, FHT managed to reduce property expenses by 13.4% y-o-y to $8.1 million, via temporary closure of rooms and floors, cutting back on F&B service and so on.
Consequently, net property income (NPI) fell 52% y-o-y to $12.1 million for the quarter, and for 1HFY2020, fell 19.6% y-o-y to $45.3 million.
FHT predicts a “challenging” few months ahead due to disruptions caused by the outbreak. The manager of the trust is also looking at “moderating” the eventual distribution of the $25.3 million that has been retained, depending on the available distributable income based on this financial year.
“We started FY2020 on a firm footing with the entire portfolio recording healthy growth in the first quarter,” says Colin Low, CEO of FHT’s manager.
“However, the speed and scale of transmission of COVID-19 has cast a shadow over our performance not just for 2Q FY2020 but also for the remaining FY2020,” he says.
“As the situation is rapidly evolving, and the duration and severity of the outbreak impact remain uncertain, it is only prudent for us to conserve cash in unprecedented times like this,” he adds.
Units at Frasers Hospitality Trust closed flat at 48 cents on Friday, prior to the announcement.
