CDL sees 40.6% fall in Q4 profit after absence of one-time gains

City Developments Ltd said the lower earnings were due to the substantial profits recognised in Q4 2015 from the group's second Profit Participation Securities.
City Developments Ltd said the lower earnings were due to the substantial profits recognised in Q4 2015 from the group's second Profit Participation Securities.PHOTO: BLOOMBERG

SINGAPORE - City Developments Ltd (CDL) reported on Thursday (Feb 23) a 40.6 per cent fall in net profit to to S$243.8 million for the fourth quarter ended Dec 31, 2016, compared to S$410.5 million a year ago.

This was despite a 36.5 per cent increase in revenue for the quarter to S$1.17 billion.

CDL said the lower earnings were due to the substantial profits recognised in Q4 2015 from the group's second Profit Participation Securities (PPS), which involved the monetisation of three office assets, namely 7 & 9 Tampines Grande, Manulife Centre and Central Mall Office Tower.

This was offset in part by divestitures in 2016 including CDL's 52.52 per cent interest in City e-Solutions Limited in Q3 2016, and Exchange Tower in Q4 2016, as well as its recapitalising of Summervale Properties Pte Ltd, which holds Nouvel 18, resulting in the establishment of the group's third PPS.

Full-year net profit declined 15.5 per cent to S$653.2 million while revenue rose 18.2 per cent to a record S$3.91 billion.

CDL said its revenue increases were driven by the property development segment, which contributed 51.3 per cent and 44.7 per cent to its Q4 2016 and FY 2016 revenue respectively.

There was maiden contribution from Hong Leong City Centre in Suzhou and steady sales of Singapore projects Gramercy Park, Coco Palms, D'Nest and The Venue Residences and Shoppes, as well as revenue recognition in entirety from the fully sold Lush Acres Executive Condominium (EC), which obtained Temporary Occupation Permit (TOP) in June 2016.

The board has recommended a special final dividend of 4 cents Singapore per share, on top of a final dividend of 8 cents per share.

These bring total dividends for 2016 to 16 cents per share, same as FY 2015.

Looking ahead, CDL said it is on track to achieve its S$5 billion target for acquisitions and to grow its funds under management business to S$5 billion by 2018 - a five year target set in 2014 as part of its accelerated diversification strategy.

CDL said that in 2017, given continued unpredictability, it plans to be more acquisitive with a focus on finding in-place income in Singapore and overseas. It said a strong balance sheet and war chest place it in an enviable position to deploy capital for acquisitions, which can be in the form of physical assets, equities or debt instruments.

CDL also said it will continue to pursue its funds management and capital recycling programme. This may take the form of another PPS or traditional private equity structures.

It will also seek investments in new emerging economies "to future-proof itself as the business landscape continually transforms."

In Singapore, the cooling measures and the oversupply of office space will continue to dampen market sentiment in the near-term, said CDL.

"However, the group remains highly plugged-in to its home market with defensive measures in place to navigate headwinds," it said.