Chairman’s Message

Dear Shareholders,

SOLID BUSINESS MODEL

Our business model focused on long-term investments in commercial and hotel properties provided the Group with dual advantages. It has consistently generated recurring operating cash returns, while also offering the potential of realising long term capital gains. Our past divestments yielding significant divestment gains is a strong attestation to the efficacy of this business model.

OUR HOTELS AND DEVELOPMENT PROPERTY IN AUSTRALIA

As Australia eased its travelling restrictions and fully reopened its borders, coupled with Stamford Plaza Brisbane’s reopening after the floods, our hotels have seen a strong recovery in its occupancy rates. Consequently, the underlying revenue from Australia hotels has recorded a robust 18% growth. Despite the absence of revenue from Stamford Plaza Auckland hotel divested in FY23, we still observe a solid topline revenue growth of 8%. After translating Australian Dollar revenue into Singapore Dollar, revenue from hotels has increased by 1%. This indicates a positive trend in revenue generation even after accounting for currency exchange effects.

It is commendable that despite the challenging circumstances brought about by the COVID-19 pandemic, our hotels managed to maintain profitability over the past three years. This is no small feat, considering the devastating impact the pandemic had on the hospitality industry worldwide, and a stark difference to the global counterparts which suffered unprecedented losses.

The slow return to normalcy and the shortage of human resources are significant challenges faced by many hotels globally. The exodus of workers from the industry during the pandemic has created a labour shortage that has made it difficult for hotels to fully staff their operations. Notwithstanding this, our hotels will continue to strive for improvements in profitability, bolstered by the strong recovery in occupancy rates. This bodes well for the future of the industry, with a positive trend in demand for hotel accommodations.

Moving forward, it will be important for hotels to continue adapting to the changing landscape and finding innovative ways to attract guests while also addressing staffing challenges. This might include investing in technology to streamline operations, implementing flexible staffing solutions, and focusing on employee retention and development to mitigate the effects of the labour shortage.

Overall, our hotels’ ability to maintain profitability and drive improvements in operating profits despite the adverse circumstances speaks to their resilience and strategic management. By continuing to adapt and innovate, we are well-positioned to thrive in the post-pandemic hospitality landscape.

Additionally, revenue from property development at our Macquarie Park Village in Sydney has grown 83% year on year, as the Group continues to crystalise its value from our quality landmark development.

OUR COMMERCIAL PROPERTY IN UNITED KINGDOM

The UK economy returned to growth in January 2024, after a technical recession in the second half of 2023. The macro-economic situation in London remains patchy, with companies facing challenges leading to higher vacancy rates in commercial properties. This phenomenon has led to a flight to quality assets, and our premium award-winning property 8 Finsbury Circus in the prime district of London is well poised to ride out this wave. Currently at 100% occupancy, our freehold commercial building has long dated leases and a weighted average unexpired lease term (“WAULT”) of ~8.6 years.

Additionally, the Excellent BREEM rating of 8 Finsbury Circus and its proximity to an iconic urban park makes it even more attractive in the current market environment. With a rising demand for green buildings and a growing global sustainability movement, properties like 8 Finsbury Circus are likely to capture significant opportunities and navigate the challenges faced by the London commercial property market. Its strong fundamentals, combined with its sustainability features and prime location, position it well for success in the foreseeable future.

PERFORMANCE

Capitalisation rate on our commercial property has increased on the back of higher interest rates, resulting in a fair value loss of S$81 million. Excluding the fair value loss in investment properties which is non-cash in nature, the Group has a net profit of S$56 million.

I am pleased to report another year of good performance where our core underlying net profits have grown 7% compared to prior year, after normalisation of non-cash fair value losses and foreign exchange differences; and prior year nonrecurring gain on disposals of our hotel properties (net tax and associated costs).

Finally, I am pleased to announce that the Board of Directors has recommended a final dividend of 0.5 Singapore cent per ordinary share. While maintaining a good dividend payout, the Group has also accumulated earnings for opportunistic investments.

STRONG BALANCE SHEET AND AMPLE HEADROOM FOR GROWTH

The Group is in an enviable position with a net cash of S$452 million, providing ample headroom to capitalise on future growth opportunities. The Group is well placed to ride out any global challenges and is poised to capture any opportunistic acquisitions and/or asset enhancement initiatives.

We have also fully paid down our loans, and the Group is cushioned from the rising interest rate environment. This is yet another testament of our prudent financial risk management.

APPRECIATION

The successful outcome is the culmination of the relentless hard work and dedication exhibited by our team, persisting around the clock – be it in the office, at hotels, or other properties. We take pride in our long-serving staff, whose dedication has been exemplary, and I am profoundly grateful for everyone’s unwavering efforts.

On behalf of the Board, I extend our sincere gratitude to Mr Mark Anthony James Vaile, who is retiring as an Independent Director on 30 July 2024. We acknowledge and appreciate his commendable contributions during his distinguished 15 years of service to the Group. His leadership has positively impacted the Group and we wish him all the best as he transits to the next phase of his journey. Our deepest appreciation also goes to Mr Huong Wei Beng who stepped down as an Independent Director on 31 December 2023 after serving on the Board for five years.

Furthermore, I extend my heartfelt appreciation to our Independent Directors and shareholders for their steadfast faith and support in the Group.

C. K. Ow

Executive Chairman
24 May 2024