Ascott Achieves Strong Serviced Residence Growth
2002 Full Year Financial Statement and Dividend Announcement
FY 2002 Results
|A. Core Serviced Residence Sector||FY 2002
|Profit Before Tax||45.6||58.4||-22|
|Earnings Per Share (Diluted)||1.82 cents||2.69 cents||-|
|Net Asset Value Per Share||74.1 cents||76.1 cents||-|
|Total Gross Dividend :||8% per share
(First and final dividend of 6% + bonus dividend of 2%)
1.25 cents per share after tax
|Gross Dividend Yield :||4.9% @ 32.5 cents per share on Jan 29, 2003|
The Ascott Group achieved net profit of S$28.3 million due to strong growth in its core serviced residence business. Net profit is 32 per cent lower than 2001 profit mainly due to a large one-off divestment gain from the sale of Junction 8 and Funan malls in 2001.
Ascott's directors are recommending a total gross dividend of eight per cent per share comprising a first and final gross dividend of six per cent and bonus dividend of two per cent. This represents a gross dividend yield of 4.9 per cent based on Ascott's share price of 32.5 cents on January 29. Dividend after tax would be 1.25 cents per share.
Strong Growth in Serviced Residence Business
In 2002, Ascott's core serviced residence business saw robust growth. EBITDA increased 71 per cent to S$55.5 million, and turnover rose 13 per cent to S$156.6 million.
The EBITDA increase was due to the improved occupancy and rental rates at its serviced residences in China and Vietnam, and a gain of S$9.4 million from the sale of The Ascott Mayfair to the Ascott-Dilmun joint venture, Somerset Grand Shanghai, and sale of land in Shanghai.
The increased turnover was due to new contributions from the group's Oakford residences in Australia, and China residences recently opened, offset by lower contributions from the Singapore serviced residences.
As part of group restructuring and divestment of non-core businesses, group turnover slipped 18 per cent to S$232.4 million and group EBITDA dipped 31 per cent to S$99.0 million, due to lower non-core contributions.
The lower group EBITDA was also largely due to a one-off divestment gain of S$90.8 million in the fourth quarter 2001 for the sale of the group's Junction 8 and Funan malls, and retail management contracts.
The Ascott Group's chief executive officer, Mr Kee Teck Koon, said: "Our serviced residence business continues to grow strongly, especially in China and Vietnam. But the general global economic slowdown has weakened a few of our serviced residence markets, particularly in Singapore and the UK."
He added that in 2003, the group expects attributable profit to be comparable to that in 2002. This assumes that Ascott's acquisition of the 50 per cent interest in Citadines is completed by the first quarter 2003, and that economic conditions do not deteriorate.
In 2003, the group's serviced residence sector is expected to continue its double-digit revenue growth and GOP margins are expected to improve from on-going efforts to drive operational efficiencies. In addition, there will be new contributions from the Citadines properties and new management contracts.
However, interest expense will rise with the new investment in Citadines. The group's non-core sector is expected to see stable retail sector earnings and lower contributions from other non-core assets.
Debt-equity ratio at end 2002 was reduced to 0.34 from 0.52 a year ago. Earnings per share (diluted) was 1.82 cents compared to 2.69 cents in 2001.
Net asset value per share was 74.1 cents compared to 76.1 cents in the prior year. This was due to the group's investment properties and properties under development declining in value by S$22.7 million, based on latest valuations. The decrease has been taken to the capital reserves in the group's balance sheet.
Strategies for Higher Capital Productivity
Mr Kee said that, having largely achieved its growth targets, Ascott will focus on improving its capital productivity and yields in 2003. It will restructure its asset base and look into selling or securitising its serviced residence assets into funds, while retaining their management contracts.
It will also step up yield enhancement activities for its core assets, such as upgrading and repositioning the properties. This includes upgrading The Ascott Singapore in 2003. The group will also continue to divest its remaining S$470 million non-core assets.
Operationally, Ascott will work to build a fully integrated international operation with improved margins, and consistency in standards in its properties in 20 cities. It will also continue to develop its brands internationally and deepen its customer relationships, leveraging the strengths of the Citadines brand and customer network with the rest of its operations.
Mr Kee said that in 2002, the group's return on assets was dragged by a few non-core assets, which are still incurring after-tax losses. Funds from Ascott's recent divestments, once fully invested such as in the Citadines acquisition in 2003, should generate higher yields.
Strategy Is On Track
Mr Kee said that Ascott is on target in its transformation into a pure play serviced residence company. In 2002, the group divested S$214 million non-core assets. At end 2002, its serviced residence business accounted for 67 per cent of group turnover compared to 49 per cent the year before.
It also expanded its main serviced residence business by securing new management contracts in Japan, China and the Philippines, and making new investments in Australia and the UK.
Ascott's acquisition of Citadines will expand its portfolio to 13,500 units in 37 cities in 15 countries. This will bring the group substantially closer to its target of becoming a major global serviced residence company operating 15,000 units.
On January 20, Ascott's shareholders gave the go-ahead to acquire a 50 per cent equity in Citadines for E84.2 m (S$150.6m)* based on nine times Citadines' 2001 EBITDA.
In addition, Ascott has a call option to acquire the remaining 50 per cent stake by May 2004.
Ascott said it will fund the acquisition of the pan-European serviced residence chain through cash and borrowings. It may also bring in investment partners to acquire the call option stake.
The Citadines acquisition is accretive to Ascott's earnings. Based on Ascott's proforma financial statements for FY2001, the acquisition will increase its earnings per share by two per cent from 2.66 cents to 2.71 cents, while the exercise of the call option will increase its earnings per share by 20 per cent to 3.18 cents.
*S$ conversion is based on the exchange rate of 1.789 as at December 19, 2002.
ABOUT THE ASCOTT GROUP
The Ascott Group is an international serviced residence company, owning / managing over 8,400 serviced residence units in 20 cities in 11 countries across Asia, Australasia and the UK.
These include prime properties in gateway cities and business centres such as Singapore, London, Beijing, Shanghai, Tokyo, Jakarta, Hanoi, Ho Chi Minh City, Sydney and Melbourne.
After its acquisition of a 50 per cent stake in Citadines, a pan European serviced residence chain, Ascott's portfolio will be expanded to 13,500 units spanning 37 cities.
The Ascott Group pioneered the Asia Pacific's first branded luxury serviced residence in 1984. Today, it boasts an 19-year industry track record and serviced residence brands that are market leaders in the Asia Pacific.
The group's luxury 'The Ascott' brand projects an elegant lifestyle appealing to top executives. The 'Somerset' brand offers stylish, contemporary living for senior to upper management executives.
Headquartered in Singapore, The Ascott Group's shares trade as 'Ascott' on the Singapore Exchange. It is the serviced residence arm of CapitaLand Limited, one of Asia's largest listed property companies.
For reservations on Ascott properties, call Central Reservations at (65) 6272-7272 or visit the group's website at www.the-ascott.com