Fragrance Group posts Q1 net loss of S$3.7m after City Gate's completion

THE recent completion of a major Singapore project dampened results for Fragrance Group in its first quarter, the company said on Monday.

It added that there may be some negative results in some quarters this fiscal year.

For the three months ended March 31, Fragrance fell into the red with a net loss of S$3.7 million compared with a net profit of S$8.5 million in the previous year.

Revenue fell 78 per cent to S$14.5 million from the preceding year. This was led by the property development segment which fell from S$51.3 million to S$2 million. The group's main revenue contributor City Gate obtained its temporary occupation permit in November 2018, and the S$2 million in Q1 came from sales of two additional units.

Revenue from commercial investment fell 5.7 per cent to S$5.5 million. While there was an improvement in occupancy, redevelopment plans for Tower 15 are in progress. Hotel operations revenue was flat at S$6.2 million from full-quarter hotel operations revenue from ibis Styles Hobart in Australia and The Imperial Hotel in the UK.

Gross profit fell 54.8 per cent to S$10.6 million. While other operating expenses decreased by 18.1 per cent to S$6.8 million, finance costs increased 86.2 per cent to S$7.3 million. That happened mostly because of additional loans drawn down and issuance of new debt notes and a general increase in average interest rates across the floating rate borrowings in 1Q 2019.

Fragrance made a loss per share of 0.05 Singapore cent from earnings per share of 0.13 cent in the previous year. 

"The group expects the overall market for residential properties to remain competitive with developers launching more projects in 2019, giving more options to home buyers. Take-up rates for private residential units (excluding executive condominiums) increased marginally by 0.1 per cent in 1Q 2019 as compared with the previous quarter," the group said. 

It is working on its sales launch of 31 Jervois Road and 205 Jalan Eunos for the second half of the year. Besides these pre-launch projects, it does not have any ongoing development projects here after City Gate's completion.

For its key Australian projects Premier Tower and NV Apartments, they are about 41.5 per cent and 78.3 per cent completed respectively, and sales are continuing for the remaining units. These will only have revenue recognised upon completion.

"This may cause the group to report negative results for certain quarters in FY2019," Fragrance said, though it added that it expects development works at NV Apartments in Perth to be completed in the second half of 2019 which "may contribute positively to the results of the group in FY2019".

Fragrance added that four factors will affect its results: the sales and progress of Singapore development projects, fair-value changes in the investment properties, performance of the hotel properties, and the prevailing exchange rates of the Australian dollar and the British pound against the Singapore dollar.

The counter closed at S$0.125 on Monday, S$0.003 or 2.3 per cent down before the results announcement.