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Frasers Property CEO warns 'business as usual' is not an option as 2Q earnings drop

Felicia Tan
Felicia Tan • 4 min read
Frasers Property CEO warns 'business as usual' is not an option as 2Q earnings drop
Frasers Property reported 2Q20 earnings of $74.5 million from a year ago, bringing 1H20 earnings to $233.8 million, 12.1% lower than a year ago.
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SINGAPORE (May 13): Frasers Property reported 2Q20 earnings of $74.5 million, down 38.1% y-o-y, with weaker contributions from its hospitality business and associates. Revenue for 2Q20 increased 2.2% to $954.7 million.

For 1HFY20, earnings dropped by 12.1% y-o-y to $233.8 million, even though revenue increased 5.7% to $2.13 billion.

“'Business as usual' is not an option,” warns group CEO Panote Sirivadhanabhakdi. “Along with many businesses around the world, we are facing an unprecedented crisis that has greatly disrupted the business environment and operating conditions in all our markets.”

Sirivadhanabhakdi says the results “reflected only the initial impact of the COVID-19 outbreak on the Group’s financial performance”, noting that the group’s various businesses will remain “challenging” in light of the global pandemic.

No dividend has been declared for 1H20 ended March. The board has decided to temporarily suspend interim dividend, among other measures, to conserve the group’s financial resources.

Profit before interest, fair value change, taxation and exceptional items (PBIT) rose in 2Q20 12% to $328.9 million, bringing 1H20 PBIT 18.9% higher to $790.1 million.

Frasers Property says the increases in revenue and PBIT were mainly attributable to the settlements of development projects in China, and maiden contributions from PGIM Real Estate AsiaRetail Fund Limited’s (PGIM ARF) portfolio of retail assets and the consolidation upon the step-up acquisition of Golden Land Property Development Public Company Limited (GOLD).

In its Singapore business unit, revenue increased 48.6% to $198.7 million, and PBIT increased 33.2% to $128.7 million. The increase was mainly due to contributions from PGIM ARF from its investment properties portfolio, and from sales of the residential project Riviere. These were partly offset by the divestment of 50% interest from Frasers Tower in June 2019, and lower contributions from Seaside Residences.

In its Australia business unit, revenue plunged 78.1% to $88.3 million, and PBIT came in at an $8.2 million loss from last year’s $49.8 million profit. The decreases were largely due to the lumpiness (or irregularity) of revenue and profit recognitions of residential development projects, with absence of significant contributions from the projects at Central Park in Sydney, New South Wales, which was settled in the prior comparative period.

The industrial and logistics business unit logged a slight 0.4% growth in revenue to $98.6 million while PBIT grew 20.8% to $70.9 million.

Revenue for the hospitality business unit fell by 21.1% to $142.8 million, while PBIT booked a loss of $1.5 million from last year’s $20.7 million. The decreases were mainly on lower occupancies and daily rates, as well as certain property closures following the Covid-19 outbreak.

Revenue and PBIT for Frasers Property’s Thailand and Vietnam business unit increased by $173 million and $17 million to $199 million and $46 million, respectively. In Thailand, this was contributed by the step-up acquisition of GOLD from August 2019. Prior to August 2019, the results of GOLD were equity-accounted.

In order to build scalable business platforms, the group formed a retail-focused platform in Singapore comprising $8.6 billion of assets under management (AUM) and acquired property manager AsiaMalls Management in February.

In the same half year, the group formed Frasers Property Industrial, a multi-national integrated industrial and logistics strategic business unit with over $5.4 billion, as well as acquired Lakeshore Business Park, in Heathrow, UK for $238 million.

Looking ahead, Frasers Property Singapore is preparing for the completion of Seaside Residences, and integration work following the acquisition of AsiaMalls Management.

Frasers Property Australia has 1,600 residential units due for settlement in the second half of FY20.

In the logistics and industrial space, Frasers Property Industrial has 12 assets spanning 299,235 sq m planned for completion over the next 12 months.

On the hospitality front, the group is exploring alternative uses of its rooms to mitigate the impact of lower customer traffic amid the COVID-19 pandemic. These include government contracts for the hosting of people on stay home notices.

“We have worked consistently over several years to build scalable business platforms across asset classes and geographies to enhance portfolio resilience,” says Sirivadhanabhakdi.

“While these extraordinary circumstances will have an impact on our business performance and inevitably, revenue and earnings, we believe the Group’s strong foundation will stand us in good stead as we face the headwinds and maintain key business continuity measures,” he adds.

As at 9.23am, Fraser Property shares were changing hands at $1.20, down 0.8%

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