LHN posts 23.4% drop in 1HFY2024 earnings to $13.0 mil despite revenue growth

LHN posts drop in earnings but is upbeat on future prospects (Photo: LHN)

SINGAPORE (THE EDGE SINGAPORE) - Co-living operator LHN announced that its 1HFY2024 ended March earnings have declined by 23.4% y-o-y to $13.0 million from $16.9 million a year ago.

The group’s profit before tax declined 25.0% y-o-y to $15.3 million. Further removing the effect of fair value loss, gain on disposal of associate and discontinued operations from the logistics group, the group would have recorded a 13.7% yo-y growth in 1HFY2024 adjusted profit before tax to $17.7 million, compared to $15.6 million in 1HFY2023.

However, revenue has gained 27.2% y-o-y to $57.5 million from $42.9 million last year. The increase was primarily attributed to a significant increase in revenue from the co-living business in its Space Optimisation Business as well as the Facilities Management Business.

Revenue grew by 34.1% y-o-y to $35.9 million, primarily driven by stronger top-line contributions from the co-living properties, and partially offset by weaker results from the industrial and commercial properties. Excluding net fair value gains/losses associated with the group’s investment properties and the investment properties of its joint ventures, the Space Optimisation Business witnessed a 6.5% rise in adjusted profit before taxation.

During 1HFY2024, the Space Optimisation Business successfully renewed the master leases for its commercial properties at Phoenix Park and 200 Pandan Gardens, industrial property at 34 Boon Leat Terrace and residential property at Keramat Road.

The group’s residential properties, driven primarily by Coliwoo’s co-living business achieved 2,534 keys under management as at March 2024. Under the Coliwoo co-living brand, the group successfully acquired properties at 99 Rangoon Road and 288 River Valley Road.

Notably, in February, the group obtained Outline Planning Permission from the Urban Redevelopment Authority (URA) to change the use of the third to sixth levels of the GSM building at 141 Middle Road, Singapore from “commercial” to “serviced apartment”.

Lastly, the Group entered into a lodging facility contract with MOH Holdings to design, retrofit and operate two designated lodging facilities for healthcare professionals at 100 Ulu Pandan Road and 60 Boundary Close. Both lodging facilities are scheduled to start operations in the second half of 2024 and will provide accommodation for approximately 700 healthcare professionals.

Meanwhile, the group’s facilities management business saw revenue improved 13.6% y-o-y to $17.2 million. The cleaning and related services (ICFM) and car park management businesses generated higher revenue. Core profits for the segment declined by 32.1% y-o-y due to recent new car park projects secured in Hong Kong, which need time to build up the utilisation of the car parks.

Revenue in the group's Energy Business increased by 209.0% y-o-y from to $0.8 million. This business focuses on providing renewable energy services, including electricity retailing, electric vehicle (EV) charging stations and solar power system installation, primarily for industrial clients. By the end of 1HFY2024, the group had secured nine solar energy contracts with a combined capacity of approximately 2.0 megawatts of renewable energy. The Energy Business’s core profit increased by 79.4% y-o-y to $0.3 million in 1HFY2024.

The group has also declared an interim DPS of 1.0 cent, unchanged from the previous year.

On the outlook, Singapore's residential rental market is anticipated to moderate amidst stable economic growth and a rise in housing supply. Despite the influx of over 28,000 new units over the past two years, intensifying competition and flattening rental prices, the group’s Space Optimisation Business has demonstrated resilience, maintaining high occupancy rates above 90% for its co-living assets.

This success is attributed to the strategic positioning of its properties and a focus on high demand centrally located, flexible and sustainable living options, which continue to attract tenants even as the broader market softens. While higher interest rates and cooling measures may deter property purchases, these factors are likely to boost rental demand, further benefiting the group.

Against this backdrop, Coliwoo's co-living properties are forecasted to drive the group's residential segment forward, supported by a pipeline of new projects, recent tender win and acquisition plan.

For the Property Development Business, the construction works for the group’s nine-storey industrial development property at 55 Tuas South is currently underway. The property has a saleable area of 112,000 sq ft and the Temporary Occupation Permit for the property is expected to be issued in 4QFY2024.

The car park business under the Facilities Management Business will continue to build up its market share with the intelligent use of cutting-edge technology and a fully equipped operations team.

As Singapore aims to achieve its goal of having 80% green buildings by 2030, LHN's Energy Business is well-positioned to meet growing demand for sustainable workspaces through innovative solutions that comply with new green building standards.