City Developments’ full-year net profit drops 20% to S$581m

Singapore property and hotel group City Developments (CDL) said Thursday its net 2008 profit fell 20 percent year-on-year to 581 million dollars (382 million US) due to lower hotel operation revenues.

The decline in 2008 profits came amid a sharp slowdown in the local property sector, but City Developments said its real estate business remained a major source of earnings.

Total revenues in 2008 amounted to 2.9 billion dollars, down from 3.1 billion dollars in the previous year, the company said in a statement.

“The group’s net profits, which are core earnings, show a credible performance given the severe economic conditions that it operated in during 2008,” the property developer said.

Earnings from its subsidiary, Millennium and Copthorne Hotels Plc, were affected by the strengthening Singapore dollar, it said.

“The sterling pound has come down quite a lot… It used to be S$3 to one pound. Now it’s S$2.20. So definitely, in terms of consolidation, the amount earned will be a lot less into City’s books,” said CDL’s executive chairman Kwek Leng Beng.

The company did not provide fourth-quarter earnings data, but calculations by AFP showed net profit in the fourth quarter came to 100 million dollars, down 57 percent from 235 million dollars in the same period in 2007.

“Not unexpectedly, 2008 was a challenging year for the Singapore property market, with downward pressure on both transaction volumes and sale prices after a blistering performance in the previous two years, weighed down by global financial woes,” the company said.

CityDev currently has 102 hotel operations on its portfolio, with another 17 more in the pipeline.

Despite the tough business environment, the firm said its balance sheet is strong.

The company also said that even though it had S$776 million in cash, and there were many distressed assets about, but it was still not the right time to buy.

“There have not been many bankruptcies and… if the economy gets worse, there will definitely be some who are so desperate that they are prepared to sell cheaper. I believe this sort of situation will arise in about one year’s time,” said Kwek.

Data released by the government in January showed private home prices fell 4.7 percent in 2008 compared with a 31 percent jump in the previous year, which made Singapore one of the hottest property markets in the world at the time.

CityDev said it expects the Singapore property market to show signs of recovery by 2011.

The firm has declared a total dividend of 11.4 Singapore cents for the year.

Source : Channel NewsAsia – 26 Feb 2009

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