Roxy-Pacific posts full-year loss of $29.5 mil as revenue falls 55%

By Valerie Kor

/ EdgeProp Singapore |

February 22, 2021 5:30 PM SGT

SINGAPORE (EDGEPROP) - Listed property and hospitality group Roxy-Pacific Holdings has reported revenue of $198.4 million for FY2020 ended December 2020, a 55% decrease from $444 million in FY2019.

The net loss attributable to equity-holders for FY2020 was $29.5 million, compared to a net profit of $30.3 million in FY2019. This was due to impairment of hotel assets and properties resulting from the global pandemic and additional tax expense for its divested investment in Hong Kong, which amounted to $34.6 million. The impairment charges were non-cash items. This did not affect the group’s cash flow from operations, which remained at $84.4 million in FY2020.

In FY2021, the group will focus on broadening recurring income streams, such as achieving and maintaining high occupancy rates in freehold commercial properties in Melbourne, Australia, and Auckland, New Zealand.

Property development

The property development segment reported revenue of $165.8 million in FY2020, lower than the $385.9 million reported in FY2019. This was mainly due to the absence of revenue recognition from The Navian, as well as The Hensley and West End Glebe (Sydney) where most of the units’ settlement occurred in 2019. Delays in construction due to Covid-19 also contributed to a lower recognition of revenue.

The gross profit for the property development segment was 77% lower at $17.4 million, while gross profit margin fell nine percentage points to 10% in FY2020, as there were lower profit margins for some projects in Singapore as well as unexpected project cost escalation for Octavia Killara, a 43-apartment project in Sydney.

“We have successfully launched all the sites in our land bank and will place priority on the sale and delivery of the units. We continue to be highly selective in land acquisition, with a focus on freehold sites in Singapore,” says Teo Hong Lim, executive chairman and CEO of Roxy-Pacific. The group has a total of 10 ongoing residential projects in Singapore.

In November last year, Roxy-Pacific acquired a freehold residential site at Jalan Molek and Guillemard Road for $93 million. It has an estimated total land area of 37,131 sq ft and is allowed for residential development with a plot ratio of 2.8.

In February this year, the group announced that it has entered into an agreement to acquire a 999-year leasehold residential site in Singapore, 10A and 10B Institution Hill, for $33.6 million. The group intends to amalgamate the site with another 999-year leasehold site at 11 Institution Hill after it exercises the Option To Purchase issued on Feb 1. The amalgamated site will have an estimated total land area of 14,300 sq ft with a total gross floor area of 40,040 sq ft for residential development.

In Australia, the group’s residential development projects, Octavia Killara and West End Glebe, have been fully sold.

Hotel ownership

The Covid-19 pandemic caused a severe disruption to global economic activity and tourism activity, which has challenged Roxy-Pacific’s hotel segment. Revenue from the hotel ownership segment fell 50% to $25.2 million in FY2020 from $50.4 million in FY2019.

Teo says that cost control measures have been put in place. “We continue to focus on training and implementing ideas to improve productivity, internal processes and operational efficiencies. All these efforts will prepare the hotels to benefit well when the travel market recovers post Covid-19,” he adds.

The group’s flagship Grand Mercure Singapore Roxy is currently providing their entire accommodation facilities to people who need to be under stay-home notice as a matter of precaution.

In Japan, Noku Osaka has been closed for operations since November 2020. The group’s upscale resort in Maldives, Noku Maldives, has received enquiries since travel restrictions were lifted in July 2020. Additionally, the group’s second resort asset in Thailand, Noku Phuket, is expected to begin operation in 2022.

Property investment

The office building at 350 Queen Street in Melbourne CBD (Photo: TE Capital)

Revenue from the property investment segment remained relatively stable at $7.4 million in FY2020, compared to $7.7 million in FY2019. It was supported by rental income from Roxy Square and NZI Centre.

Overall, the group’s gross profit margin for FY2020 for the property investment segment was seven percentage points lower at 17%, from 24% in FY2019. This was mainly due to lower profit margin from the property development and hotel egments. Gross profit for FY2020 decreased 69% to $33.3 million from $106.2 million over the previous corresponding year.

The group has recently announced the investment of a 40% interest in a commercial tower located at 350 Queen Street, in Melbourne, Australia. The tower comprises offices, retail offerings and community amenities. It will also be redeveloping former Melbourne House to a commercial development to tap recurring income streams.

Read more: TE Capital Partners and Roxy Pacific jointly acquire office tower in Melbourne CBD for A$145 mil

In New Zealand, 205 Queen Street in Auckland’s CBD enjoyed a high occupancy rate of 84% as of Dec 31. The wholly owned NZI Centre is also fully leased to the insurer IAG New Zealand.

Roxy-Pacific also acquired a 49% stake in a five-storey retail building, VIVEL Shibuya, located at Shibuya-Ku, in Tokyo, Japan.

“For property investment, through proactive asset management, we have continued to attain a high average occupancy of 88% as at Dec 31, 2020,” says Teo. Barring any unforeseen circumstances, the directors expect the group to be profitable in the financial year ending Dec 31, 2021.

Teo: We continue to be highly selective in land acquisition, with a focus on freehold sites in Singapore

Other operating income

Due to government grants received for the Job Support Scheme, higher foreign exchange gain and higher fair value gain from investment property at Roxy Square, other operating income increased 129% to $16.4 million in FY2020.

Share of results of associates fell to a loss of $7.4 million in FY2020 compared to a profit of $8.5 million in FY2019, as a result of additional tax expenses for the group’s divested investment in 8 Russell Street, Hong Kong, in 2H2020, and the provision of impairment loss on its properties in the overseas associated companies. This was partially offset by the profit from the sale of property in Ginza, Japan, in 1H2020.

Overall, Roxy-Pacific’s balance sheet remained healthy with cash and bank balances of $395.6 million, and net gearing stayed low at 0.64 times.

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