PropNex on why $1b in commissions did not translate to equivalent in revenue

PropNex chairman and CEO Mohamed Ismail Gafoor had, in a private event, disclosed that the group's full-year commission for 2021 had crossed $1 billion. PHOTO: PROPNEX

SINGAPORE (THE BUSINESS TIMES) - PropNex said that while commissions relating to property transactions carried out by its salespeople in 2021 had indeed exceeded $1 billion, that does not necessarily translate to an equivalent full-year revenue.

This is because the amount of commissions from transactions carried out within a financial period is different from the amount of revenue recognised for that period, PropNex said on Monday (Feb 21) in a bourse filing.

It was responding to queries from the Singapore Exchange (SGX) following feedback that PropNex chairman and chief executive officer (CEO) Mohamed Ismail Gafoor had, in a private event, disclosed to its property agents that the group's full-year commission for 2021 had crossed $1 billion.

One could therefore deduce that the group's full-year revenue would be more than $1 billion, SGX noted in its query.

SGX said that it had received relevant screenshots of the postings by the company's executive officer and property agents on social media that the company has crossed the $1 billion mark in revenue for 2021.

SGX had therefore asked PropNex to clarify whether news that the group's full-year commission and/or revenue for 2021 exceeded $1 billion is factual.

PropNex said that during the event, the CEO highlighted that the volume of property transactions for 2021 exceeded 86,000. He had indicated that the commission relating to those property transactions carried out by its salespeople exceeded $1 billion, which was factual.

"However, there is a difference in the commission related to the property transactions and the recognition of those commissions as revenue," said PropNex in a bourse filing.

As not all transactions were completed at the end of the financial period, he had not said that the group's full-year revenue for 2021 was more than $1 billion, PropNex clarified.

Commission is earned and recognised as revenue only at the point when that transaction is completed upon the execution of the sales and purchase agreement. No revenue will be recognised if the transaction is aborted.

As the buyer is usually given time to execute the agreement, the date that the transaction is carried out differs from the date when that transaction is completed.

The completion of a transaction may also be further delayed due to reasons such as the buyer needing more time to dispose of existing property, to arrange a bank loan or to review the agreement, PropNex explained.

Shares of PropNex ended on Monday at $1.72, up two cents or 1.2 per cent.

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