UOL's H1 reverses to S$82.1m net loss due to Covid-19 impact

Singapore

PROPERTY company UOL reversed to a net loss of S$82.1 million for its first half ended June 30, compared to a profit of S$267.7 million in the same period last year.

This was due mainly to fair value losses on its investment properties, including retail malls and serviced suites which were severely affected by Covid-19, it said. Expectations of rentals and revenue per available room (revpar) at these properties were lowered by appraisers as a result, although capitalisation rates stayed constant.

Excluding fair value losses, the group's operations remained in the black, with group pre-tax profit totalling S$196.8 million, down 30 per cent from S$282.8 million in H1 2019.

The group's investment properties were independently valued at S$11.3 billion in total as at end-June, representing a S$263.8 million or two per cent decline from the value as at end-December 2019.

The decline in value was observed across all the group's commercial properties and serviced suites, and reflected the impact of the Covid-19 pandemic on the performance of these properties, it said.

The earnings decline also came on the back of a 28 per cent drop in revenue to S$908.2 million, with the biggest hit seen in its hotel ownership and operations segment, where revenue fell 57 per cent to S$136.8 million.

This was due to the group's hotels being affected by the lockdowns and travel restrictions imposed by governments around the world, with the Singapore and Australia hotels seeing the largest decline, it said.

In the past few months, Parkroyal Kitchener, Pan Pacific Singapore and Parkroyal Collection Pickering were fully used for quarantine, albeit at half the rates of what they used to earn, while its other hospitality assets such as Parkroyal on Beach Road and Pan Pacific Suites Beach Road have seen 90-plus per cent occupancies after staycations were allowed. Its serviced suites, catered to long-stay guests, are averaging occupancies of 70 per cent.

Revpar for its Singapore portfolio more than halved to S$102 for the six months, from a high base of S$225 a year ago.

Revenue from its hotel segment was also compounded by the closure of Parkroyal Collection Marina Bay and Parkroyal Kuala Lumpur for major refurbishments and the absence of revenue from Pan Pacific Suzhou which was sold last December.

Revenue from property development was 29 per cent lower as the revenue from Park Eleven in Shanghai for the first half of 2019 was significantly higher due to the large number of units handed over in Q1 2019.

Revenue from property investments fell by 14 per cent due mainly to rental rebates of S$26.3 million extended to tenants affected by the Covid-19 pandemic.

Describing the business climate, UOL chief Liam Wee Sin said: "The hospitality and retail businesses have been more impacted. Global travel remains largely at a standstill due to tight travel restrictions and retail spending remains cautious, notwithstanding the gradual opening of businesses.

"On the residential front, resumption of construction activities have been carefully paced. This, together with safe management measures, has however delayed progress of work on main construction sites and marketing suites.

"On top of that, social distancing requirements have limited the number of visitors in showflats and thereby affecting pace of sales. As such, a further extension of additional buyer's stamp duty (ABSD) deadlines may need to be considered as the impact of the crisis has not been fully felt yet."

In May, the Singapore government announced that it is giving a six-month time extension for property developers affected by construction schedules and sales of housing units that are disrupted because of the pandemic.

On Thursday, Mr Liam said developers are grateful for it, but it will likely not be sufficient, as social distancing and other safety measures will affect the productivity of on-site construction work.

Shares of UOL added half a cent or 0.8 per cent to S$6.64 on Thursday.