UOL Group Limited has reported a 97% plunge in FY2020 earnings of $13.1 million compared to earnings of $478.8 million in the FY2019.

For the period ended December, the lower earnings were due mainly to fair value losses on investment properties and other losses of $246.7 million in the FY2020 compared with $165.1 million gains in the FY2019.

The decline in the fair value on UOL’s commercial properties and serviced suites, as well as the impairment change for Pan Pacific London and Pan Pacific Melbourne were due to the negative impact of the Covid-19 pandemic.

Excluding fair value and other losses and gains, FY2020 group attributable profit fell 17% y-o-y to $259.8 million compared to $313.7 million previously.

Group pre-tax profit before fair value and other losses fell 17% y-o-y to $443.2 million.

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FY2020 revenue fell 13% y-o-y to $2.0 billion. Hotel operations registered a 62% y-o-y decline to $246.5 million due to the impact of Covid-19 on the group’s hotels, with the hotels in Singapore and Australia seeing the largest decline.

The lower decline in hotel operations were due to the closure of Parkroyal Collection Marina Bay and Parkroyal Kuala Lumpur, as well as the absence of revenue from Pan Pacific Suzhou, which was sold in December 2019.

Revenue from property investments fell 9% y-o-y to $503.3 million due to lower revenue from serviced suites and rental rebates extended to tenants.

Revenue from property development rose 11% y-o-y to $943.1 million due to progressive recognition of revenue from Avenue South Residence and The Tre Ver and revenue from sales of units at V on Shenton and Park Eleven.

Technology operations saw 41% y-o-y higher revenue at $225.7 million due to higher sales of information technology and related services.

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Gross profit fell 30% y-o-y to $727.6 million, while gross profit margin (GPM) fell 9 percentage points to 37% due to reduced margins for the hotel operations from the impact of the Covid-19 pandemic.

FY2020 miscellaneous income rose to $91.3 million from $19.0 million due to government grants and assistance.

The lower operating expenses, which fell 45% y-o-y to $116.5 million, were due to the absence of amortisation of development property backlog for the year as compared to the $76.4 million recorded in FY2019.

Earnings per share for the FY2020 stood at 1.56 cents on a fully diluted basis, compared to the 56.77 cents in FY2019.

As at end-December, cash and cash equivalents stood at $974.4 million. The group’s gearing ratio decreased slightly to 0.29 as at Dec 31, 2020.

The board has proposed a first and final dividend of 15 cents per share for the FY2020.

“The Covid-19 pandemic and the implementation of travel restrictions severely disrupted our hotel operations, but our diversified portfolio and sustained contributions from property development helped to mitigate the decline. We are glad that despite strong headwinds, UOL has achieved a creditable set of results overall,” says UOL Group CEO Liam Wee Sin.

SEE: Analysts remain positive on UOL Group despite $82.1mil loss in 1H20

“The pandemic has reinforced the need for us to invest in innovation to improve productivity and sustainability. Our strong balance sheet enables us to seek growth opportunities and explore potential enhancement of the Group’s commercial and hospitality assets,” he adds.

UOL says it has recently obtained in-principle approvals for the redevelopment of Faber House into a 250-key hotel, and for the asset enhancement of Odeon Towers with an additional seven-storey annexe office building. Works are likely to commence in 4Q2021 for Odeon Towers and 1H2022 for Faber House.

Looking ahead, UOL says it expects new private home sales to remain “resilient but uneven” with stronger demand for smaller units.

The construction sector is likely to see rising costs due to shortage of manpower and social distancing measures on-site.

Office demand is expected to remain subdued, and retail outlook remains uncertain.

Shares in UOL closed 13 cents lower or 1.7% down at $7.39 on Feb 26.