SLB Development: Swung to fiscal 1Q net loss amid accounting rule changes

Mural of construction gear in Singapore's Little India neighborhood.Mural of construction gear in Singapore's Little India neighborhood.

Property developer SLB Development reported it swung to a fiscal first quarter net loss of S$2.79 million from a year-earlier net profit of S$3.65 million as the adoption of new accounting rules lowered its recognized revenue.

Revenue for the fiscal first quarter ended 31 August was S$22.99 million, down 33.61 percent from S$34.62 million in the year-earlier period, based on the new Singapore Financial Reporting Standards International (SFRS(I)) standards, it said in a filing to SGX after the market close on Friday.

The new standards require that the performance obligations for the sale of industrial properties be satisfied over time, rather than the previous completion of contract method, it said.

Before the adoption of SFRS(I), net profit for the fiscal first quarter would have been S$11.38 million on revenue of S$220.66 million, it said.

SLB Development said that total revenue achieved from units sold under T-Space @ Tampines was S$220.7 million as of the end of August, which previously would have seen all of the revenue recognized in the fiscal first quarter, but under the SFRS(I), it now much recognize the revenue over time, in line with construction progress. That meant it only reported around S$23.0 million of revenue for the quarter, it said.

Cost of sales fell 38.52 percent on-year to S$17.5 million in the fiscal first quarter, mainly on a lower percentage of construction works completed in the most recent quarter, it said.

Sales and marketing expenses doubled on-year to S$2.0 million in the fiscal first quarter, mainly on higher marketing expenses and sales commission for the sale of the T-Space @ Tampines industrial property development, SLB Development said.

The share of results of joint ventures and associates swung to a loss of S$2.5 million in the quarter from a profit of S$1.3 million in the year-earlier period due to a S$2.4 million share of loss from associates on marketing and showflat costs for the launch of new projects Affinity @ Serangoon and Riverfront Residences as well as a decrease in the share of profit form the completion of the Spottiswoode Suites residential project in June 2017, it said.

In its outlook, SLB Development pointed to a challenging Singapore residential sector.

“With the various property cooling measures implemented, the group expects the residential property market to remain challenging,” SLB Development said.

“The group will continue to monitor the property market closely and take appropriate action when necessary. The group is cautious when seeking opportunities to replenish its land bank and will continue to explore business opportunities in the region through acquisition, joint venture and/or strategic alliances that will complement its property development business,” it added.

SLB said its wholly owned industrial development project, Lorong 21 Geylang, was expected to be launched early next year, while the joint acquisition of freehold property at 24 New Industrial Road was expected to be completed by the end of 2018.

The 42 percent-owned residential project, Lorong 24 Geylang, was expected to be launched in early 2019, SLB said.

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