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Financial Highlights

Consolidated Income Statement for 4Q FY2017/18 and 4Q FY2016/17

Statement of Comprehensive Income for 4Q FY2017/18 and 4Q FY2016/17

Consolidated Income Statement for FY2017/18 and FY2016/17

Statement of Comprehensive Income for FY2017/18 and FY2016/17

Balance Sheet

Review of Performance

Revenue and Net Property Income 4Q FY2017/18 vs. 4Q FY2016/17

1 Computation is based on the financials rounded to the nearest dollar
Any differences between the individual amounts and total thereof are due to rounding

Group

Gross revenue and net property income ("NPI") for 4Q FY2017/18 were S$54.7 million and S$23.7 million, a decrease of S$2.7 million (4.6%) and S$2.1 million (8.0%) respectively as compared to 4Q FY2016/17, mainly due to weaker performance of the Australia and Japan portfolios. This was further exacerbated by the weakening of JPY and AUD against SGD.

Australia

Gross revenue and NPI for the Australia hotels for 4Q FY2017/18 were S$37.1 million and S$11.6 million, a decrease of S$2.4 million (6.1%) and S$1.5 million (11.4%) respectively as compared to 4Q FY2016/17, mainly due to lower contribution from Melbourne and Brisbane hotels for the quarter and weakening of AUD against SGD.

Overall, the Sydney hotels showed improved performance over prior year mainly due to Novotel Sydney Central on the back of strong room demand which drove higher rates and occupancy.

Pullman & Mercure Melbourne Albert Park's revenues were lower due to a decline in C&E business following the reopening of the ICC in Sydney which has drawn business away from Melbourne and increased competition amongst the larger conference venues in and around the city. Higher land tax expense also contributed to the decline in NPI.

Pullman & Mercure Brisbane King George Square recorded lower room revenue as the hotel continued to experience intense competition due to increased room supply in the market. NPI was further exacerbated by higher operating costs such as travel agent commissions and maintenance cost.

China

Gross revenue and NPI for the China hotels for the quarter were S$5.0 million and S$1.7 million, an increase of S$0.5 million (10.7%) and S$0.1 million (6.2%) respectively against the same period last year. Both hotels saw improved performance due to healthy public and corporate demand.

Japan

Gross revenue and net property income for the Japan hotels for the quarter were lower than last year by S$0.8 million (7.9%) and S$0.7 million (9.9%) respectively mainly attributable to Sunroute and Oakwood Ariake. This was further exacerbated by the weakening of JPY against SGD.

Oakwood Ariake recorded lower revenue and NPI in 4Q FY2017/18 as this was their last quarter before handing over the space to Sunroute to operate under a master lease with fixed and variable rent from 1 April 2018.

For Sunroute Ariake, total revenue and NPI were lower than the last year as the hotel has shut down two floors per month for renovation since December 2017 which impacted the hotel operations. The renovation is expected to be completed by June 2018.

Singapore

Gross revenue and net property income for Park Hotel Clarke Quay for the quarter were flat at S$3.7 million.

The hotel demonstrated resilience and was able to maintain a stable performance amidst the current hotel rooms supply overhang in the Singapore hotel market.

Income available for distribution

Income available for distribution for the quarter was S$21.1 million. With the retention of S$1.7 million for the quarter, income to be distributed for the quarter would be S$19.4 million, an increase of S$4.0 million (26.3%) over the same period last year.

The increase was mainly due to the following:

  1. Look fee of S$4.1 million received in connection to the sale of China group ;
  2. Lower net finance cost of S$0.5 million;
  3. Lower tax expense of S$0.4 million; and
  4. Lower other expense of S$0.7 million.

Partially offset by:

  1. Lower net property income of S$1.7 million (excluding non-cash items),

Revenue and Net Property Income FY2017/18 vs. FY2016/17

1 Computation is based on the financials rounded to the nearest dollar
Any differences between the individual amounts and total thereof are due to rounding

Gross revenue for FY2017/18 increased marginally by S$0.3 million (0.1%) compared to FY2016/17.

Overall gross revenue performance of the portfolio had improved by S$0.3 million over the same period last year mainly contributed by China, Singapore, Osaka Namba and Oakwood Ariake hotels. The better performance was offset by weaker JPY and RMB against SGD.

Net property income for FY2017/18 decreased by S$3.4 million over the same period last year mainly due to lower contribution from Australia hotels. This was partially mitigated by higher contribution from China, Singapore, Osaka Namba and Oakwood Ariake hotels.

After retention of S$5.1 million, income to be distributed for FY2017/18 stood at S$66.2 million, an increase of S$2.3 million (3.7%) as compared to FY2016/17, due to look fee received in connection to the sale of China group of S$4.1 million, lower tax expense of S$0.9 million and lower net finance cost of S$2.4 million. This was offset by lower NPI of S$3.0 million (excluding non-cash items), higher retention of S$1.8 million and higher trust and other expense of S$0.3 million.

Commentary

Demand is expected to remain healthy within Sydney city centre with limited upcoming supply of hotel rooms. However, challenges are expected for hotel markets in suburban Sydney from increased competition. Competition is expected to intensify in the Melbourne hotel market with influx of rooms coming into the market over the next 24 month, while the city will also continue to face competition from Sydney ICC for share of the C&E business. While oversupply situation continue to affect the Brisbane hotel market in the near term, supply growth is expected to ease off after 2018, which will provide reprieve to the hotel market in the city.

Inbound arrivals into Japan continued to grow in 2018, with 15.7% y-o-y increase for the first two months of the year1. Inbound arrivals are expected to continue growing, benefitting particularly hotels in Tokyo. Despite upcoming supply of hotel rooms, the hotel market performance for Osaka is expected to remain stable with moderate growth in the near term as inbound visitors to the city is expected to continue supporting the hotel market.

Singapore welcomed a record number of foreigners in 2017, and the positive momentum continued with 7.3% y-o-y increase in the first two months of 20182. Based on forecast from Singapore Tourism Board, international arrivals for 2018 is forecasted to grow by 1% to 4%. As the supply growth tapers off from 2018, the competition in the hotel market is expected to ease.

The divestment of the two hotels in China3 and the acquisition of KY-Heritage Hotel Dongdaemun3 are expected to be completed by the first quarter of FY2018/19.

1 Source: Japan National Tourism Organization
2 Source: Singapore Tourism Board
3 Please refer to the announcements dated 29 January 2018 and 27 April 2018 for further information on the divestment of the two hotels in China and acquisition of KY-Heritage Hotel Dongdaemun, respectively.