City Developments warns 1H21 likely swung to net loss of up to S$35M

City Developments signage on construction hoardingCity Developments signage on construction hoarding

City Developments warned Friday it expected to report a potential net loss of up to S$35 million for the first half, swinging from a year-ago net profit of S$3.1 million as the Covid-19 pandemic continued to weigh on results.

The year-earlier period included a “substantial” S$17.6 million tax credit as part of the New Zealand government’s Covid-19 support package, the hospitality and property company said.

“Though signs of improvement are evident across the group’s core business segments, the prolonged COVID-19 pandemic has led to the reinstatement of tighter measures, including travel restrictions and intermittent lockdowns to contain the outbreak,” City Developments said in a filing to SGX.

“These challenges continue to impact operations, particularly within the group’s hospitality business at its wholly-owned subsidiary, Millennium & Copthorne Hotels,” the company added.

Pre-tax profit to fall, partly on Sincere Property

Pre-tax profit is expected to have fallen by 25-30 percent from the S$13.8 million posted in the first half of 2020 on higher net financing costs, foreign exchange losses and lower divestment gains, City Developments said.

The higher net financing costs were due to the absence of interest income from loans extended to and bonds issued by Sincere Property Group, City Developments said, adding it had substantially impaired Sincere in 2020 and fully impaired all interest receivables from Sincere.

Chongqing-based developer Sincere, in which City Developments invested around S$1.36 billion, was sued for bankruptcy in a Chinese court last month, according to a Mingtiandi article. City Developments said Friday its financial exposure to Sincere is at S$117 million as of end-June.

Hotel portfolio

City Developments said the hotel portfolio was likely to post an operational loss.

“While there have been improvements in the hotel operations segment which were facilitated by the implementation of extensive cost-containment measures, the periodic lockdowns across numerous cities to slow the spread of the more infectious Delta variant since the start of 2021 has inhibited recovery,” the company said.

In addition, investment properties were also hurt by lower footfalls and sustained rental rebates to retail tenants, such as at the Jungceylong mall in Phuket, which has been closed since March, the filing said.

The company said it “wishes to emphasize” its financial position is still healthy, with sufficient liquidity to meet its commitments, adding it has total cash and available undrawn committed bank facilities of around S$4.4 billion.

City Developments said it expected to report its first half results on 12 August.