Frasers Property's Q2 profit falls 38.1%; bosses take pay cuts

Singapore

FRASERS Property's group chief executive, other members of senior management, as well as board members of the group and its subsidiaries, have taken base salary and fee cuts effective May 1, as the company looks to conserve its financial resources.

Group chief executive Panote Sirivadhanabhakdi took a 25 per cent reduction in his base salary, while other senior management accepted base salary cuts of up to 10 per cent.

Board members of Frasers Property and its subsidiaries also took a voluntary 10 per cent reduction in their directors' fees.

For the second quarter ended March 31, 2020, Frasers Property posted a 38.1 per cent year-on-year drop to S$74.5 million, from S$120.4 million a year ago as the company's administrative expenses and interest expense rose for the quarter.

Revenue for Q2 rose 2.2 per cent to S$954.7 million, from S$934.3 million a year ago. This was mainly due to settlements of development projects in China, maiden contributions from PGIM Real Estate AsiaRetail Fund's portfolio of retail assets, and the consolidation upon the step-up acquisition of Golden Land Property Development Public Company.

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The revenue gains were partially offset by lower contributions from development projects in Australia and poorer operating results from hospitality properties due to the Covid-19 pandemic.

Meanwhile, earnings per share stood at 1.59 Singapore cents for the quarter (after fair value change and exceptional items), down from 2.81 cents a year ago.

No dividend was declared for the quarter, versus an interim dividend of 2.4 Singapore cents a year ago. Frasers Property's board decided to temporarily suspend interim dividends as a precautionary measure to conserve the company's financial resources in view of "significant" uncertainties due to the Covid-19 situation.

In an earnings briefing on Wednesday morning, Mr Sirivadhanabhakdi said that a priority for Frasers is to lower its net gearing. Its net gearing increased 20.9 percentage points from Sept 30, 2019, to 106.8 per cent as at March 31, 2020.

"The best way to do it is through our core strategy (of) injecting the asset into the Reits," he said, but added that as sponsor it has the responsibility of protecting the value of the Reit and making sure assets can be absorbed.

It depends on how the market plays out in the next one or two months here, he went on to say. At the same time, the group is curtailing any further investments to control the group's gearing.

In response to a question on whether the group is aiming to bring gearing down by the end of this financial year, Mr Sirivadhanabhakdi said that Frasers is working as fast as it can, but will also take into consideration the state of the market.

The rise in net gearing was a result of the redemption and cancellation of perpetual securities in March, higher borrowings for the acquisition of a property in the United Kingdom, capital expenditure in Thailand and Australia as well as the redemption of shares in PGIM Real Estate AsiaRetail Fund.

For the half-year ended March 31, 2020, net profit was down 12.1 per cent to S$233.8 million, while revenue was up 5.7 per cent to S$2.13 billion.

"Along with many businesses around the world, we are facing an unprecedented crisis that has greatly disrupted the business environment and operating conditions in all our markets. Frasers Property's H1 FY2020 results reflected only the initial impact of the Covid-19 outbreak on the group's financial performance," said Mr Sirivadhanabhakdi. "Until there is clarity on the duration, severity and consequences of this pandemic, significant uncertainties will persist and the operating environment of the group's various businesses will remain challenging."

To better weather the Covid-19 crisis, the group has made capital and liquidity management its strategic priorities. Cashflow management, collections and projects are a key focus. The group is also taking appropriate action to reduce operational costs, and is deferring uncommitted capital expenditure given uncertainties around the Covid-19 pandemic.

Shares in Frasers closed two cents lower at S$1.19 on Wednesday.