CDL earnings steady for Q2 as 32.4% revenue jump meets higher cost of sales

Central mall, a City Development Limited buliding.
Central mall, a City Development Limited buliding. PHOTO: CITY DEVELOPMENT LIMITED

SINGAPORE - Property developer City Developments Ltd (CDL) reported on Thursday (Aug 11) net profit of S$133.8 million for its second quarter, a tad higher than the S$133.5 million recorded a year ago.

Revenue however swelled 32.4 per cent to S$1.1 billion, underpinned by the revenue and profit recognition from Lush Acres, a fully sold executive condominium.

These increases were, however, partially offset by lower contribution from Millennium & Copthorne Hotels due to weaker performance, particularly in New York and Singapore which are the subsidiary's key markets.

Cost of sales also swelled 56.9 per cent year-on-year to S$652.3 million from S$415.8 million.

For the first half-year, earnings were 6.8 per cent at S$239.1 million from S$256.5 million a year ago.

A special interim dividend of four Singapore cents per share was declared.

CDL said property development maintained its lead as the group's highest contributor to pre-tax profits, forming 51.6 per cent and 53.1 per cent for the second quarter and first half-year pre-tax profits respectively.

But CDL noted that its hotel operating performance was "disappointing", particularly in the two focus areas of its Millennium & Copthorne Hotels (M&C) arm, New York and Singapore.

In New York, revenue per available room (RevPAR) fell by 15.8 per cent, hit by new room inventory, the strengthening US dollar and dampened leisure travel demand, especially from the UK and Europe.

Singapore's RevPAR was 10.2 per cent lower due to continued weak demand in the corporate travel segment, coupled with increases in room inventory.

On the property development front, M&C expects to commence construction for two projects by the end of 2016, once relevant approvals are received. The first is a proposed mixed-use development at Sunnyvale, California, in the heart of Silicon Valley, which comprises a 263-room hotel and a 250-unit residential apartment block in the initial phase. The second development is a proposed hotel and serviced apartments in Seoul, South Korea.

Looking ahead, CDL said it expects to remain profitable for the current year despite the uncertain global outlook and the prevailing property cooling measures and subdued economy at home that continue to weigh on market sentiment.

It sad its "robust balance sheet, high liquidity and conservative accounting practices" gives the group the "firepower to continue investing overseas, given prevailing headwinds in the Singapore property market."