Huge write-downs of its troubled investment in Sincere Property Group helped send developer City Developments Limited (CDL) into the red in the second half.

The developer recorded a net loss of $1.92 billion for the six months to Dec 31 compared with a profit of $202.6 million in the same period a year earlier.

It said yesterday that its move to write down 93 per cent of its total investment in Sincere Property, amounting to $1.78 billion, "distorted" second-half and full-year results.

"Taking into consideration Sincere Property's debts in the next 12 months and China's 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 board members in recent months, starting in October with Mr Kwek Leng Peck, a longstanding director and cousin of executive chairman Kwek Leng Beng.

CDL will not pump more funds into Sincere until the Chinese company returns to health, chief transformation officer Goh Ann Nee said at a results briefing yesterday, adding that the investment remains a good platform for expansion in a market that should not be ignored.

CDL also booked $99.5 million in impairment losses for its 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 the second half and $120.8 million for the full year.

"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 stood at 212.5 cents for the half year, compared with earnings per share of 21.6 cents a year earlier.

Revenue for the six months to Dec 31 came in at $1.04 billion, down 43.5 per cent from $1.83 billion a year earlier. CDL's hotel operations segment accounted for 81 per cent of the decline.

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

Revenue in the investment properties sector fell due to rental rebates, poorer mall performance and lower rental contributions from hotels owned by indirect unit CDL Hospitality Trusts, which are seen as investment properties due to master lease arrangements.

CDL recorded a net loss of $1.92 billion for the full year, from a net profit of $564.6 million in 2019, while revenue dropped 38.5 per cent to $2.11 billion.

Despite the unprecedented results, the group said it remains confident about weathering the challenges with its strong fundamentals and financial strength.

CDL's board recommended a final dividend of eight cents a share for 2020, as well as a special final ordinary dividend of four cents a share. This brings the total full-year dividend to 12 cents a share compared with 20 cents last year.

"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.

THE BUSINESS TIMES