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First Sponsor posts 49.4% increase in 1H earnings to $58.1 mil on foreign exchange gains, lower expenses

Samantha Chiew
Samantha Chiew • 3 min read
First Sponsor posts 49.4% increase in 1H earnings to $58.1 mil on foreign exchange gains, lower expenses
First Sponsor recorded an increase in 1H earnings despite lower revenue
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First Sponsor Group announced that its 1H20 earnings have increased by 49.4% to $58.1 million from $38.9 million in 1H19, mainly due to lower expenses and foreign exchange gains.

Revenue for the first half ended June was 16.5% lower at $104.1 million from $124.8 million a year ago, mainly due to lower revenue contribution from sale of properties, rental income from investment properties and revenue from hotel operations, but partially offset by increase in revenue from property financing.

Revenue from sale of properties decreased by 56.0% y-o-y to $22.4 million 1H20, due mainly to the lack of handover of residential and commercial units in the Millennium Waterfront project in 1H20 compared to 1H19. The decrease was partially offset by a higher number of car park lots sold in the current period.

Rental income from investment properties decreased by 35.0% y-o-y to $4.0 million in 1H20. The decrease was due mainly to the effect of deconsolidation of a subsidiary in June 2019 which owns an investment property.

Revenue from hotel operations decreased by 50.7% y-o-y to $12.8 million, due to the weaker performance of the hotel portfolio as a whole due to the impact of Covid-19 and the closure of the Bilderberg Bellevue Hotel Dresden between late March and mid-May and the Wenjiang Holiday Inn Express from late January 2020. The Wenjiang Holiday Inn Express remains partially closed now and will be opened when there is an overflow of business from the Wenjiang Crowne Plaza.

Revenue from property financing increased 55.8% to $64.9 million, because of a loan restructuring income arising from the refinancing of the FSMC loans, establishment fee from the provision of a construction facility to fund the redevelopment of the City Tattersalls Club in Sydney, and higher interest income generated from a higher average secured PRC loan portfolio in the current period.

With a 47.7% y-o-y drop in cost of sales to $20.1 million, 1H20 gross profit came in at $84.1 million, 2.7% lower than $86.4 million last year.

Overall expenses decreased, with administrative expenses declining by 35.2% y-o-y to $13.1 million and selling expenses were 18.4% lower y-o-y at $2.9 million and during this period.

During this period, the company also recorded other income of $10.0 million, which comprised mainly net foreign exchange gain, compared to other expenses of $10.5 million in the previous year.

As at end-June, First Sponsor’s cash and cash equivalents stood at $463.8 million.

First Sponsor has proposed an interim cash dividend of 1.1 cent per share, unchanged from a year ago and payable on October 1.

In addition, the company will undertake a 1-for-4 bonus issue of free warrants to reward shareholders. Each warrant is exercisable into one new share at the exercise price of $1.08 at any time from the date falling 6 months from the date of listing of the warrants and ending on the date immediately preceding 8.5 years from the issue of the warrants.

On the outlook, First Sponsor’s group CEO Neo Teck Pheng says, “The group is cautiously optimistic that the Covid-19 crisis may bring new opportunities, whether during or in the aftermath of the crisis. With a strong balance sheet, undrawn committed long term debt facilities and potential equity infusion from the exercise of outstanding warrants as well as warrants to be issued pursuant to the aforesaid bonus issue, the Group is well equipped financially to enable it to take advantage of such opportunities when they arise.”

As at 10.30am, shares in First Sponsor are trading at $1.12.

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