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Financial Highlights

Consolidated Income Statement

Statement of Comprehensive Income

Balance Sheet

Review of Performance

Revenue and Net Property Income - 4Q FY2016/17 vs. 4Q FY2015/16

Group

Gross revenue for 4Q FY2016/17 was S$57.4 million, an increase of S$4.0 million (7.5%) as compared to 4Q FY2015/16. Underlying performance of the portfolio improved by S1.7 million over the same quarter last year in local currency terms on the back of higher contribution from all hotels except Singapore. The improved performance was further augmented by the stronger JPY and AUD against SGD.

Net property income for the quarter increased S$2.4 million (10.1%) over last year.

Australia

Gross revenue for the Australia hotels for 4Q FY2016/17 was S$39.5 million, an increase of S$3.8 million (10.5%) over 4Q FY2015/16. Net property income for the quarter of S$13.0 million was S$1.5 million (12.9%) higher than the same quarter last year. The improved performance was contributed by better underlying asset performance of three hotels and the stronger AUD against SGD.

Novotel Sydney Central, Pullman Sydney Hyde Park and Pullman and Mercure Brisbane King George Square, showed improved performances in 4Q FY2016/17. The two Sydney hotels experienced strong public demand and conferencing business during the quarter and Novotel Sydney Central was also able to yield better during high demand periods due to the secured air crew business. Although the Brisbane market remained soft due to the increased room supply, Pullman and Mercure Brisbane King George Square recorded better performance over last year on the back of several sizable conference business secured for the quarter.

Courtyard by Marriott Sydney - North Ryde and Novotel Sydney Parramatta continued to experience competition from new and refurbished hotels within their respective vicinities. Pullman and Mercure Melbourne Albert Park had a weak quarter of conference business and coupled with energy cost increased from January 2017, the hotel recorded lower net property income compared to last year.

China

Gross revenue for the China hotels for the quarter were S$0.2 million (4.1%) lower than last year mainly due to adverse currency movement. In local currency terms, the underlying performance of the hotels was flat to last year primarily due to the implementation of value added tax regime in China from 1 May 2016, which resulted in lower reported revenue for the China hotels this year.

Both hotels improved performance due to positive momentum in the hospitality sector leading to strong take up at the hotels. In addition, Ibis Beijing Sanyuan also benefitted from the China Lodging Group's loyalty programme to boost its occupancy.

Net property income for the China hotels grew S$0.2 million (12.8%) year-on-year, despite the weaker Renminbi against SGD, as a result of the better underlying performance and effective cost control.

Japan

Gross revenue and net property income for the Japan hotels for the quarter were S$1.2 million (14.2%) and S$1.4 million (24.0%) higher than last year mainly due to better performance of Osaka Namba as well as the stronger JPY against SGD.

Contribution from Osaka Namba was substantially higher than last year as a result of the revised rent structure in the new master lease agreement with Sunroute whereby A-HTRUST would earn the higher of variable or fixed rent. The hotel achieved a variable rent of JPY 241 million for the quarter, which was significantly higher than the fixed rent. Costs were also lower this year as additional costs were incurred last year associated with the changing of hotel operator at Osaka Namba. The better underlying performance this quarter was augmented by the stronger JPY against SGD.

Singapore

Gross revenue and net property income for Park Hotel for the quarter were S$0.8 million (17.2%) and S$0.8 million (17.3%) lower than prior year.

The hotel continued to face soft corporate segment demand amid a competitive landscape due to recent influx of room supply, and there was also a variable rent reversal of S$0.3 million in March 2017 following confirmation of actual full year performance of the hotel.

Income available for distribution

Income available for distribution for the quarter was S$16.2 million. With the retention of S$0.8 million for the quarter, income to be distributed for the quarter was S$15.4 million, an increase of S$0.8 million or 5.7% over last year.

The increase was mainly attributable to the following:

  1. Higher net property income of S$2.7 million (excluding non-cash items)
  2. Lower net finance cost of S$0.6 million.

Partially offset by:

  1. Absence of partial distribution of proceeds from the sale of Pullman Cairns International hotel (4Q FY2015/16: S$0.7 million).
  2. Absence of distribution from Notron (4Q FY2015/16: S$0.5 million).
  3. Higher realised exchange loss of S$0.9 million.
  4. Higher other expenses of S$0.5 million.

Revenue and Net Property Income - FY2016/17 vs. FY2015/16

Gross revenue for FY2016/17 increased by S$9.3 million (4.3%) compared to FY2015/16. Excluding contribution from Cairns operations of S$1.0 million for FY2015/16, current year gross revenue would be S$10.4 million (4.8%) higher than last year.

Overall underlying performance of the portfolio has improved S$5.0 million over the same period last year. The better performance was further augmented by stronger JPY and AUD, but partially offset by weaker RMB.

Novotel Sydney Central and Pullman Sydney Hyde Park recorded strong growth on the back of strong room demand as well as conferencing business boosted by the opening of the newly completed International Convention Centre in December 2016. Pullman and Mercure Melbourne Albert Park achieved better performance due mainly to the secured business of air crew and strong conferencing business compared to a year ago.

The two hotels in China enjoyed good public demand for rooms in tandem with the positive momentum in the overall hospitality sector. Ibis Beijing Sanyuan had its gross revenue further boosted by increased materialization as it benefitted from China Lodging Group's loyalty programme. Ibis Beijing also enjoyed full year of rental income from leasing of space.

In Japan, Osaka Namba recorded higher rent of JPY 328 million in FY2016/17 under the master lease agreement with Sunroute which came into effect from January 2016.

The Brisbane hotel held up well in FY2016/17 with gross revenues flat to last year despite the onslaught of new hotel supply coupled with a prolonged downturn in the resource sector. Courtyard by Marriot North Ryde in Sydney and Park Hotel in Singapore posted lower gross revenues compared to a year ago as they continued to face challenges from new hotel room supply and weak corporate demand in their respective markets. Courtyard by North Ryde's performance was also impacted by a six-month room refurbishment from April to September 2016.

In line with the higher revenue, net property income for FY2016/17 increased S$8.3 million (9.1%) over last year. On a same store basis (excluding Cairns operations), net property income for FY2016/17 would be S$8.7 million (9.6%) higher than prior year.

After retention of S$3.3 million, income to be distributed for FY2016/17 stood at S$63.9 million, an increase of S$3.4 million (5.5%) as compared to a year ago, primarily due to:

  1. Higher net property income of S$9.1 million (excluding non-cash items).
  2. Lower net finance cost of S$0.9 million.

Partially offset by:

  1. Absence of partial distribution of proceeds from the sale of Pullman Cairns International (FY2015/16: S$2.0 million).
  2. Absence of distribution from Notron (FY2015/16: S$1.0 million).
  3. Higher tax expenses of S$1.2 million.
  4. Higher realised exchange loss of S$1.0 million.
  5. Higher other expenses of S$1.4 million.

Commentary

As the AUD remained relatively weak, it is expected to continue driving both international arrivals and domestic travelling in Australia, benefitting the hotel market in general. Recently added air routes between certain cities in China and Australia1 can also help to boost further inbound traffic from one of Australia's key growth markets. In general, while the hotel markets in Sydney CBD and Melbourne are expected to remain healthy in the near term, the market conditions in Brisbane and Sydney suburban markets are likely to remain challenging as new supply enters the market.

Growth in domestic travelling has supported the hospitality sector in Beijing, and will continue to be fundamental to the Beijing hotel market. Looking ahead, improved intercity transportation and tourism development in the city is expected to further boost domestic travelling, which will benefit the Beijing hotel market.

Having welcomed a record number of foreign visitors into Japan in 2016, the growth trend is expected to continue in near term, although at a slower pace. In general, the hotel markets in Tokyo and Osaka are expected to remain healthy in the near term, although upcoming supply may moderate hotel market performance.

A modest growth of between 0 to 2% is forecasted for the number of international arrivals into Singapore in 20172, and the year started well with a growth of 3.4% y-o-y in number of inbound for the first two months of 2017 to 2.8 million2. However in the near term, further increase in the supply of hotel rooms is expected to continue exerting downwards pressure on hotel market performance.

1 Source: Tourism Australia
2 Source: Singapore Tourism Board