CapitaLand H1 profit plunges 89% to S$96.6m on Covid-19 restrictions, tenant support

CAPITALAND posted an 89 per cent drop in net profit to S$96.6 million for the six months ended June 30, 2020 from S$875.4 million a year ago.

This was mainly due to the impact of Covid-19 measures on its residential, retail and lodging businesses, the real estate giant said in a regulatory filing on Friday.

CapitaLand's residential sales offices were forced to close, non-essential retail trades were unable to operate, and the occupancy of its lodging assets fell due to travel restrictions, it said. Tenant support measures in various markets, including government-mandated landlord obligations and the group's own initiatives, were also a factor.

Earnings per share stood at 1.9 Singapore cents for the half year, down from 21 cents a year ago.

Revenue for H1 fell 4.9 per cent to S$2.03 billion, from S$2.13 billion a year ago. This was mainly due to about S$158.6 million in rent rebates granted by landlords to tenants in Singapore, China and Malaysia, and lower contributions from the group's malls, residential projects and lodging businesses amid the pandemic.

The decrease was partially mitigated by consolidation of the Raffles City Chongqing project, and contributions from the Ascendas and Singbridge portfolio CapitaLand acquired in June 2019 - which contributed S$341.5 million to group revenue for H1.

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CapitaLand's group chief executive Lee Chee Koon said the company's balance sheet "remains in a strong position" and its long-term growth strategy is "intact".

"We are on an active lookout for counter cyclical opportunities that will strategically uplift CapitaLand's growth trajectory," he said.

Asset recycling remains a key driver for the company's return on equity, and it will look to opportunistically divest non-core assets and businesses, Mr Lee added. Its S$3 billion annual capital recycling target remains unchanged, although progress slowed in 1H2020 due to the pandemic.

In response to a question on how demand for office space might shift post-Covid, Mr Lee said in a virtual webcast on Friday that he expects offices to remain relevant, although there could be some changes stemming from safe-distancing efforts and work from home (WFH) arragements. He added: "Big companies may reduce space by 5 to 10 per cent to cater to some WFH arrangement but at this point in time it's hard to tell."

No dividend was declared for the half year, unchanged from a year ago. CapitaLand pays only first and final dividends.

With the ongoing headwinds, CapitaLand is deferring unnecessary capital expenditure and is taking efforts to watch staff costs quite significantly, Mr Lee highlighted. Since April 1, its board members and senior management have taken cuts of 5 to 15 per cent in their board fees and base salary respectively, while staff at managerial level and above have seen their wages frozen.

He said: "The company's philosophy is that in times of crisis, we cut costs to save jobs and not cut jobs to save costs. Having said that, we need to run a competitive company. Reorganising ourselves to make sure we are competitive and relevant for the future is something we will do in both good and bad times. It's not just dealing with the crisis. it's preparing the company for the future." He added that this could include considering whether to outsource certain functions and looking at employee performance, something that it does regularly.

CapitaLand shares ended Thursday at S$2.74, down 0.73 per cent or S$0.020.