CDL in the red with $1.92b loss on Sincere Property joint venture, hotel impairments

CDL said the write-down distorted the group's second-half and full-year results for fiscal 2020.
CDL said the write-down distorted the group's second-half and full-year results for fiscal 2020.PHOTO: CDL

SINGAPORE (THE BUSINESS TIMES) - City Developments Limited (CDL) sank into the red with a net loss of $1.92 billion for its second half ended Dec 31, 2020, compared with a profit of $202.6 million a year ago.

This was largely due to the property developer's move to write down 93 per cent of its total investment in Sincere Property Group, amounting to $1.78 billion, which "distorted" the group's second-half and full-year results for fiscal 2020, it said in a bourse filing on Friday (Feb 26).

"Taking into consideration Sincere Property’s debts in the next 12 months and China’s 'three red lines' policy to cap borrowings for real estate developers, the group is cautious that Sincere Property may face significant liquidity challenges," CDL said.

Concerns over CDL's investment in Sincere were cited as reasons behind the resignations of three members of its board in recent months, starting with that of Mr Kwek Leng Peck, a longstanding director and cousin of executive chairman Kwek Leng Beng, last October.

CDL won’t pump more funds into Sincere until the Chinese company returns to health, chief transformation officer Goh Ann Nee said at a briefing on the results on Friday. The investment remains a good platform for CDL to expand in a market that shouldn’t be ignored, Ms Goh added.

CDL also booked $99.5 million in impairment losses for the group's hotels and investment properties, as well as a $35 million allowance for foreseeable losses for development projects.

Excluding impairments and foreseeable losses, CDL would have registered a profit before tax of $83 million for H2 2020 and $120.8 million for FY2020.

"All business segments of the group would be on positive grounds except the hotel operations segment which reported an operational loss even after excluding the impairments since the pandemic has decimated the hospitality sector," CDL said.

Loss per share (LPS) stood at 212.5 cents for the half-year, compared with earnings per share (EPS) of 21.6 cents a year ago.

Revenue for the six months ended December fell 43.5 per cent to $1.04 billion, from $1.83 billion a year ago. CDL's hotel operations segment accounted for 81 per cent of the decline.

The property development segment also reported lower revenue due to less contribution from Singapore projects such as New Futura and Gramercy Park, as well as China project Suzhou Hong Leong City Center which was substantially sold in 2019.

The investment properties segment registered a drop in revenue due to rental rebates, poorer mall performance and lower rental contributions from hotels owned by indirect subsidiary CDL Hospitality Trusts - which are accounted for as investment properties due to master lease arrangements.

For the full year ended Dec 31, 2020, CDL recorded a net loss of $1.92 billion, from a net profit of $564.6 million for FY2019. Its revenue dropped 38.5 per cent to $2.11 billion, from $3.43 billion a year ago. LPS was 212.8 cents, compared with EPS of 60.8 cents the year prior.

Despite the unprecedented set of results, the group remains confident to weather the combined challenges with its strong fundamentals and financial strength, CDL said.

As at end-2020, the group has cash reserves of $3.2 billion, while cash and available undrawn committed bank facilities total $5.2 billion. Net gearing ratio after factoring in fair value on investment properties stands at 62 per cent.

CDL's board recommended a final dividend of eight cents per share for FY2020, as well as a special final ordinary dividend of four cents per share. This brings the total full-year dividend to 12 cents per share, compared with 20 cents a year ago.

The proposed dividend is subject to shareholders' approval at an annual general meeting to be held on April 30. If approved, the dividend will be paid on May 21 after the record date on May 6.

"The group did not declare a mid-year dividend amid a challenging operating environment in which cash conservation and prudent capital management were crucial," it said.

Shares of mainboard-listed CDL were trading down 18 cents, or 2.4 per cent, to $7.33 at 9.29am on Friday, after the results announcement.

• With additional information from The Straits Times