Full Year Financial Statement And Dividend Announcement 2017
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* Tokumei Kumiai (“TK”) refers to a form of silent partnership structure used in Japan. Allocation to TK investors refers to share of profit and loss attributable to other TK investors of the TK structure.
N/M: Not meaningful
Review of Performance
Review of Income Statement
Total income of the Group was $103.9 million for FY2017, a 20% increase from FY2016. Changes in major components of total income, including charter income, fee income, hotel income and investment returns are explained below.
(i) Charter Income
Charter income increased by 10% from $34.3 million in FY2016 to $37.8 million in FY2017. FY2017’s spot charter rates were better than that of FY2016 resulting in better charter income for the Group’s portfolio of ships under short term charter. Furthermore, the Group’s portfolio of ships recorded more charter-hire days for FY2017 compared to FY2016 due to an addition to the ship portfolio in FY2017.
(ii) Fee Income
Total fee income increased by 35% to $7.9 million in FY2017 from $5.8 million in FY2016. Arrangement deals closed in 4Q2017 increased arrangement and agency fee income to $5.0 million for FY2017, a 112% increase compared to $2.4 million in FY2016.
(iii) Hotel Income
The Group started operating 232-room Hotel Vista Premio Yokohama Minato-Mirai from 30 June 2017 and 143-room Hotel Vista Nagoya Nishiki from 1 September 2017. On the other hand, the hotel operating contract for 141-room Hotel Vista Premio Dojima in Osaka ended on 31 July 2017. Although average occupancy rates and average daily rates remained at around the same level as FY2016, with more rooms under operations, hotel income increased by 15% from $42.0 million in FY2016 to $48.1 million in FY2017.
(iv) Investment Returns
Investment returns for FY2017 was $8.5 million, a 296% increase from FY2016. This was mainly due to:
- realised gain on investment properties of $4.35 million;
- fair value gain from investment properties of $1.2 million; and
- net fair value gain from the Group’s Hong Kong property projects (commercial office building) of $6.8 million;
offset by additional net fair valuation loss of $6.2 million booked mainly for tanker and containership investments.
Total Operating Expenses
While the Group’s total income increased by 20%, the Group’s total operating expenses decreased by 4% from $92.6 million in FY2016 to $88.5 million in FY2017. Employee benefits expenses, hotel lease expenses and hotel operating expenses increased in line with the increase in the number of hotels under operations.
Impairment booked in FY2016 resulted in lower depreciation expense for FY2017, while onerous contract provisions taken by the Group in FY2016 lowered vessel operating expenses for FY2017.
Operating profit of the Group was $15.4 million for FY2017 compared to an operating loss of $6.3 million for FY2016.
Net Profit After Tax
The Group posted a net profit after tax of $8.9 million for FY2017, as compared to a loss of $12.2 million in FY2016.
According to Clarkson’s Research January issue, the global orderbook for bulk carriers as of 1 January 2018 had a 12% year-on-year decline, indicating a decline in the supply of bulk carriers. On the other hand, global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent in International Monetary Fund’s January 2018 World Economic Outlook Update. Together with the ongoing infrastructure projects in ‘Belt and Road’ countries, demand for dry bulk trade may potentially increase. This potential increase in demand coupled with reduced supply of dry bulk carriers, may result in gradual improvement in dry bulk sector in 2018. This would be favourable for the Group’s dry bulk portfolio in 2018. On the other hand, the outlook for tanker and containership market is not as good as the dry bulk market.
In the property sector, Hong Kong property market remains buoyant and Tokyo’s property market remains strong. According to the market survey dated December 2017 issued by Sumitomo Mitsui Trust Research Institute, rental of residential properties has increased steadily in Tokyo’s 23 wards, which is favourable to the Group’s ALERO projects. The Group strives to maximise its potential under these markets conditions.
As for the Group’s hotel operating business in Japan, the Group will be adding 5 hotels to the Group’s hotel operating portfolio in 2018. As the Group opens more hotels in various cities in Japan, the Group’s Vista Hotel brand profile would be raised, which may lead to more repeat customers. Higher brand profile may also result in the Group securing more hotel management contracts.
Overall, the Group will endeavour to capitalise on the better market conditions by actively pursuing business opportunities to expand and strengthen our capabilities so as to increase shareholders’ value.