Metro H1 profit falls 51.5% to S$8.2 million; group to acquire 20% stake in VisionCrest Commercial

METRO reported a net profit of S$8.2 million for the first half of the financial year ended Sep 30, 2023, down 51.5 per cent year on year from S$16.9 million.

This was mainly due to a lower gross profit from its retail division, as well as a share of associate’s fair value loss adjustment on its UK investment properties, said the property player on Tuesday (Nov 14).

Earnings per share stood at S$0.01, down from S$0.02 in the same period a year earlier.

No dividend was declared for the period. Metro usually declares dividends at the end of its financial year.

Revenue for the half-year declined 6.9 per cent to S$50.2 million, from S$53.9 million previously, as the group reported lower revenue contributions across all its business segments.

Revenue from the retail division fell 3.6 per cent to S$45.6 million from S$47.3 million a year earlier. This was due to lower sales from the group’s two department stores in Singapore – Metro Paragon and Metro Causeway Point.

Revenue contributions from the property division decreased as well. This came on the back of lower income from the sale of property rights of Metro’s residential developments in Bekasi and Bintaro, Jakarta.

The group’s share of profit of associates for the half-year fell 62.4 per cent to S$3.2 million, from S$8.6 million a year prior.

This was mainly due to a share of fair value loss on investment properties in the UK, versus a fair value gain in the previous year, along with lower share of an associate’s operating profit mainly from its Australia and UK properties, due to rising interest costs.

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Overall finance costs for the half-year rose 39.1 per cent to S$15.4 million, from S$11 million in the year-ago period. This came on the back of rising interest rates from bank borrowings, and was mitigated in part by lower bank borrowings from the partial repayment of short-term borrowings and higher interest income.

Metro said it expects the markets in which it operates to remain “subject to the heightened economic volatility and currencies’ fluctuations against the Singapore dollar”.

The group’s chairman, Winston Choo, said: “Amid macro headwinds, it is imperative that Metro maintains a diversified, quality portfolio in resilient sectors and in markets where we have strong familiarity and networks with experienced and reputable partners.”

On the same day, the group also announced it was acquiring VisionCrest Commercial – an 11-storey Grade A office building in the Orchard Road area – through its joint venture with an affiliate of real estate investment management company TE Capital Partners.

The deal will result in Metro owning an effective 20 per cent stake in the property, which is understood to be changing hands for close to S$460 million.

The group’s estimated capital commitment amounts to S$40 million, after accounting for its share of the property’s acquisition price of S$33 million, inclusive of stamp duty and other expenses, and a further S$7 million for working capital requirements.

Metro intends to fund the transaction from internal cash sources and external borrowings.

The group said its investment would provide “an exceptional opportunity to own a unique en bloc freehold strata-titled commercial asset” as it noted that “good quality, freehold strata-titled offices with full floor plates are limited” in the area.

“The property is also nearly fully let, thus providing an immediate rental income,” it added.

Metro does not expect its investment to have any significant effect on the group’s consolidated net tangible assets per share and earnings per share for the current financial year.

Located at 103 Penang Road, VisionCrest Commercial is part of a mixed-use development that also includes VisionCrest Residence and the House of Tan Yeok Nee.

Earlier this year in July, German asset manager Union Investment reportedly put the property on the market at a guide price of more than S$470 million. CBRE and JLL were appointed exclusive joint advisers to market VisionCrest Commercial for sale via an expression of interest exercise.

VisionCrest Commercial comprises 148,854 square feet of net lettable area with 99.7 per cent occupancy, and a weighted average lease expiry of 2.2 years as at end-September 2023.

Its key tenants include Manulife Financial Advisers, Puma Sports Sea Trading and The Coffee Bean & Tea Leaf.

Other features of the building include a commercial retail podium on the ground floor, and 114 car parking spaces across two basement levels.

Metro said its investment in VisionCrest Commercial is in line with the group’s intention to “build its presence and investment in the region through selective positioning, new investments in quality properties, and strategic alliances with a view to broadening the revenue stream of the Metro group and facilitating sustained profitability for the Metro group moving forward”.

Shares of Metro closed 6 per cent or S$0.03 higher at S$0.53 on Tuesday, after the news.