SINGAPORE (Feb 13): Real estate and healthcare company Perennial Real Estate Holdings (PREH) saw its earnings fall 42.0% to $16.0 million for the 4Q18 ended December, from $27.6 million a year ago.
This brings full-year earnings for FY18 to $78.1 million, some 22.2% lower than earnings of $100.3 million a year ago.
The decline was mainly due to the absence of divestment gain, higher finance costs arising from the consolidation of Capitol Singapore’s debt post-acquisition of the 50% stake to take full ownership of the asset, new loans to fund investments, higher interest rate, and the non-capitalisation of interest expenses for Perennial International Health and Medical Hub (PIHMH) in Chengdu upon its completion of works.
4Q18 revenue jumped 43.6% to $23.0 million, from $16.0 million a year ago.
The increase was mainly attributable to revenue from Capitol and PIHMH, which started contributing since 2Q18, as well as higher management fee.
However, cost of sales more than doubled to $17.6 million during the quarter, from $7.0 million a year ago, due to the inclusion of operational costs of Capitol Singapore and PIHMH.
Consequently, gross profit fell 40.3% to $5.3 million in 4Q18, from $9.0 million a year ago.
Administrative expenses rose 47.5% to $10.8 million, mainly attributable to the higher depreciation charge of Capitol Kempinski Hotel, which commenced operations in October 2018.
Finance income was halved to $3.3 million in 4Q18, due to the absence of interest income from a joint venture as the loan has been repaid since May 2018.
Finance costs surged 63.9% to $29.1 million, mainly due to increased interest rate and increased borrowings as the group consolidated Capitol Singapore’s debt and took on additional loans to fund investments.
In addition, finance costs previously capitalised for the construction of PIHMH were expensed off following the completion of the project.
As at end December, the group’s Net Debt to Equity Ratio was 0.72 times, compared to 0.57 times in FY17.
As at end December, cash and cash equivalents stood at $76.9 million.
Perennial has proposed a first and final dividend of 0.4 cent per share for FY18, 60% lower than the first and final dividend of 1.0 cent per share a year ago.
“FY2018 marked a new and exciting chapter on many fronts ranging from the launch of PIHMH, acquisition of two new HSR (high speed rail) projects in Tianjin and Kunming by the Perennial-led healthcare joint venture, to the acquisition of the remaining 50% stake in Capitol Singapore to take full ownership of the prime property,” says Pua Seck Guan, chief executive officer of Perennial.
Moving ahead, Pua says Perennial will actively explore capital recycling opportunities to maximise returns in China and Singapore.
“Our integrated real estate and healthcare business strategy… not only facilitates the creation of multiple income streams to deliver recurrent income but will also drive the creation of value of our real estate and businesses over time,” he adds.
Shares in Perennial closed flat at 65.5 cents on Tuesday.
