Lower fair-value gains from units dent Metro's Q4 profit

Singapore

LOWER fair-value gains on investment properties of associates and joint ventures - coupled with lower gross profit and an impairment - pulled Metro Holdings' net profit down by a near 83 per cent to S$7.59 million for the fourth quarter ended March 31 (Q4FY15).

This was despite a 19 per cent increase in Q4 revenue to S$41.72 million on the back of higher turnover from the retail division as its new store at Centrepoint started operations in Q3FY15. Gross profit dropped 39 per cent to S$3.61 million. The S$8.8 million impairment of property, plant and equipment for the quarter was due to a writedown of the costs for Metro Centrepoint.

Reflecting lower fair-value gains on investment properties of associates and joint ventures, the combined share of their results fell to S$6.33 million from S$45.58 million.

Disregarding the associates and joint ventures, the group registered a fair-value gain on investment properties of S$2.58 million, against a loss of S$4.81 million previously. Also, other income rose to S$9.6 million from S$3.75 million mainly because of exchange differences on bank balances.

At a briefing on Thursday, Metro's management highlighted that the retail environment remains challenging, thanks to high operating costs such as rent, the tight labour market, the rising popularity of online shopping as well as flagging tourist arrivals. Meanwhile, its store in Sengkang will cease operations in Q2FY16 after its lease expires, which will affect its retail division, while the performance of its Metro store at Centrepoint is expected to be impacted by scheduled asset enhancement works at the shopping centre.

The group's retail segment contributed to the bulk of topline in the fourth quarter, but ended up running a pre-tax operating loss of around S$6.4 million versus a profit of S$3.2 million a year ago. Higher operating costs and overhead expenses - largely from the new Metro Centrepoint store - contributed to this.

The loss racked up by its retail division offset the pre-tax operating profits from its property division, which had amounted to S$13.5 million. However, overall profits for the property division declined year-on-year due to fair-value adjustments.

For the full year, net profit rose nearly 34 per cent to S$142.87 million, helped by a negative goodwill of S$57.4 million on recognition of Hong Kong-listed Top Spring International becoming an associated company, as well as from Top Spring's results of S$17.7 million which was equity accounted for in FY15. Meanwhile, revenue was up nearly 5 per cent to S$145.83 million, thanks to the new Metro store as well as the appreciation of the renminbi against the Singapore dollar.

Earnings per share for the year came to 17.3 Singapore cents, versus 12.9 cents previously.

For its property division, overall rental income is expected to remain steady, while the divestment of EC Mall in Beijing will deliver an estimated gain of around S$36.8 million, to be recognised in the first quarter of FY16.

Metro's chairman Winston Choo said: "With the proceeds (from the divestment), we will build on our presence and investment in the region through selective positioning, working closely with reputable partners."

The board has recommended a final dividend of two cents and a special dividend of four cents, unchanged from a year ago.

The counter closed at S$1.03 on Thursday, down one cent.