The Ascott Group Achieves Strong Turnaround
The Ascott Group, created through the merger of The Ascott Limited and Somerset Holdings Limited in November last year, has chalked up an impressive set of combined results for the financial year ended December 31, 2000.
It recorded a significantly improved attributable profit of $32.8 million, compared to a loss of $178.4 million the previous year. The group's turnover jumped 52 per cent to $298.3 million and operating profit increased by $77.2 million to $117.1 million.
The group's chief executive officer, Mr Kee Teck Koon, said that the turnaround was due to the company's improved overall performance across all its major areas of operations in 2000. These spanned the serviced residence, retail and residential development sectors.
The group achieved a pre-tax profit of $21.6 million compared to a pre-tax loss of $11.9 million in 1999. It recorded an extraordinary gain of $28 million from the sale of an investment property in London and write-back on provisions for several projects due to improved market conditions.
Earnings per share after extraordinary income rose to 2.1 cents from a loss of 19.7 cents in 1999, and NTA per share grew to 82 cents from 79 cents the previous year.
Given the healthy performance, its directors are recommending a final dividend of five per cent per share (less 25.5 per cent tax) or 0.74 cents per share. This is The Ascott Limited's first dividend payment since 1997.
Serviced Residence Performance
Mr Kee added that for the company's core serviced residence business, the profit before interest and tax had surged 142 per cent to $25.6 million. Occupancies and rental rates were higher in most of its properties, especially in Singapore, Kuala Lumpur and London.
Mr Kee is optimistic of the group's improved performance in 2001. "With the merger, we have put in place a solid infrastructure for growth and strengthened our leadership in the serviced residence market in many cities. We will see stronger contributions from our newer properties, as they become more established in their markets.
"All these will translate into higher occupancy and rental rates for our operational serviced residence inventory. We are thus pushing for revenue growth of 20 to 25 per cent this year," he said.
"On the cost side, we will also benefit from the likely reduction of interest rates and cost savings from our economies of scale and synergy initiatives. We will divest our non-core assets to lower interest expenses and fund growth in our serviced residence business."
He added that the disposal of non-core assets (with total asset value of $1.4 billion) over the next two to three years, will also enable the company to realise capital appreciation for properties such as Junction 8.
Mr Kee said that the outlook for the global serviced residence industry is improving. The past oversupply of serviced residences in Singapore, Kuala Lumpur, Shanghai and Beijing is being absorbed by strong demand. The European markets are healthy. However, risks remain with slower growth in the US, and political instability in Indonesia, Philippines and Thailand.
In addition, multinational companies are increasingly choosing serviced residences over hotels and apartments for their expatriate staff. The globalisation trend is spurring cross border investments and projects, and economies such as China, Korea and Tokyo are opening up, creating new markets for serviced residences.
Mr Kee said that The Ascott Group targets to become a significant global serviced residence player within five years, with a portfolio of 15,000 units, compared to its current 6,000 units. It aims to establish strong presence in Europe and North Asia, and gain a foothold in the US, in addition to its current dominance in the Asia Pacific.
The company targets to achieve by 2005, return on equity of 10 to 12 per cent, annual turnover growth of over 12 per cent, and a reduced debt-equity ratio of 0.6 from its current 0.9.
To achieve these goals, Mr Kee said that the group will focus on improving capital productivity, brand development and operational excellence.
To maximise capital productivity, the company will grow its stock of managed properties to one-third of its portfolio, from the current 18 per cent. It will structure its investments through vehicles such as property funds, strategic investment partners and limited equity stakes.
It will also regularly unlock capital gains through the partial divestment of its serviced residence assets, or through disposing its unbranded properties. By 2005, the company expects to derive 25 per cent of its income from management fees and 10 per cent from divestment activities.
Yields will be improved through increasing non-room revenue from the current three to five per cent, to 10 per cent by 2005. The company will reduce the gestation time for its start-up properties to become viable operations, through improved processes.
The group will seek out portfolio acquisition opportunities to multiply its size rapidly to 15,000 units. To improve its earnings quality, it will shift its portfolio mix to be more heavily weighted in developed countries, from the current 22 per cent of its assets to 65 per cent.
To develop global brands, the group will rationalise its products under two brands - The Ascott luxury serviced residences for top executives; and the Somerset brand for middle to upper management executives.
In its efforts to achieve operational excellence, the company will emphasise cost management, developing innovative products and services, strengthening its marketing network, and implementing world class standards.
Mr Kee said that the group will save $3.8 million in 2001 through the right-sizing of its head office functions, and general reductions in head office expenses. It will achieve further cost reductions by clustering its properties within each city to centralise its marketing, administrative and accounting functions, and through implementing bulk procurement.
To sustain its competitive edge, the company will use E- technology to develop innovative products and strengthen its marketing network. It will also benchmark its processes against the world's best companies.
The Ascott Group - Fact Sheet
|Business Description||:||Owner and/or manager of serviced residences under the premier brand names of The Ascott and Somerset|
|Market Presence||:||Largest serviced residence company in the Asia Pacific region|
|Types of Businesses||:||Core: Serviced Residences Secondary: Retail, Hotels/Resorts/Leisure, Residential & Office Development|
|Current Portfolio||:||The company has operations in 16 cities in 10 countries, with over 6,000 serviced residence units across the Asia Pacific and UK|
|Total Assets||:||S$2.8 billion|
|Public Listing||:||Mainboard, The Singapore Exchange "Ascott"|
|Majority Shareholder||:||Capitaland Limited- 68.92 per cent stake of The Ascott Limited|
|Corporate Office||:||The Ascott Limited 8 Shenton Way #13-01 Temasek Tower Singapore 068811 Tel 65-6220-8222 Fax 65-6227-2220 www.the-ascott.com|
The Ascott Group
The Ascott Group is Asia Pacific's largest serviced residence company. Its The Ascott and Somerset serviced residence brands are dominant market leaders, and its extensive operations are well- established throughout the region.
With a presence spanning from Auckland in New Zealand to London in the UK, it is poised to become a major player in the global serviced residence industry.
The Group owns and/or manages over 6,000 serviced residence units in 16 cities in 10 countries, and over $2.8 billion assets.
The Ascott Group was created through the successful merger between The Ascott Limited and Somerset Holdings Limited in November 2000. The Ascott Group is the serviced residence subsidiary of public-listed CapitaLand Limited.
Headquartered in Singapore, the Ascott Group's shares trade as "Ascott" on the Singapore Exchange.
Ascott International, the management arm of The Ascott Group, specialises in the management of serviced residences. With 20 years' international experience, it works with developers and property owners to maximise the potential of their assets.
It leverages on the strength of its brands, well-established international infrastructure and management capabilities to add value to attractive hospitality investments.
Ida Lim, Vice President Investor Relations & Corporate Communications
Tay Cheng Cheng, Assistant Manager Investor Relations & Corporate Communications