Financials

Second Quarter Financial Statement And Dividend Announcement 2017

Financials Archive

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2017 SECOND QUARTER UNAUDITED FINANCIAL STATEMENTS & DISTRIBUTION ANNOUNCEMENT

Summary of First REIT's Results

Note:

  1. Actual distribution paid for FY 2016.

Statement of Comprehensive Income

Note:

NM - Not meaningful

The results for 2Q 2017 includes the full quarter contribution from Siloam Hospitals Labuan Bajo ("SHLB") which was acquired in December 2016.

  1. Property operating expenses for 2Q 2017 increased by 14.1% to S$323,000 compared to 2Q 2016 mainly due to higher property expenses incurred with the acquisition of SHLB.
  2. Interest income for 2Q 2017 decreased to S$314,000 compared to 2Q 2016 mainly due to the lower interest income from bank deposits.
  3. Finance cost for 2Q 2017 decreased to S$4.3 million compared to 2Q 2016 mainly due to the lower loan amounts as a result of the issuance of perpetual securities to pare down the loan amounts in 3Q 2016.
  4. Other income for 2Q 2017 as compared to other expenses for 2Q 2016 mainly due to the higher unrealised exchange gain from the USD loan.
  5. Net change in fair value of derivative financial instruments for 2Q 2017 relates to the revaluation of interest rate swap contracts.
  6. Income tax expenses for 2Q 2017 increased to S$4.5 million compared to 2Q 2016 mainly due to higher revenue.

Statements of Financial Position

Note:

  1. Trade and other receivables increased from S$11.8 million to S$18.9 million mainly due to advance rental receivables from tenants.
  2. Other financial liabilities, non-current decreased from S$271.6 million to S$172.4 million mainly due to reclassification of the S$100 million Medium Term Notes (MTN), net of unamortised cost from non-current to current as the MTN will be maturing in May 2018.
  3. In 2016, the Trust issued S$60.0 million of fixed rate perpetual securities. The perpetual securities may be redeemed at the option of the Trust in whole, but not in part, on 8 July 2021 or each successive date falling every five years thereafter and otherwise upon the occurrence of certain redemption events specified in the terms and conditions. The perpetual securities, net of issuance costs and includes amount reserved for distribution to the perpetual securities holders, are classified as equity in the Statements of Changes in Unitholders’ Funds.

Review of the performance

2Q 2017 vs 2Q 2016

The results for this quarter includes the full quarter contribution from First REIT’s latest property, Siloam Hospitals Labuan Bajo ("SHLB") which was acquired in December 2016.

Gross revenue for 2Q 2017 increased by 3.3% to S$27.5 million compared to 2Q 2016, mainly due to contribution from SHLB.

Property operating expenses for 2Q 2017 increased by 14.1% to S$323,000 compared to 2Q 2016, mainly due to higher property expenses incurred with the acquisition of SHLB.

Interest income for 2Q 2017 decreased to S$314,000 compared to 2Q 2016, mainly due to lower interest income from bank deposits.

Finance costs for 2Q 2017 decreased by 8.9% to S$4.3 million compared to 2Q 2016, mainly due to the lower loan amounts as a result of the issuance of perpetual securities to pare down the loan amounts in 3Q 2016.

Other income for 2Q 2017 as compared to other expenses for 2Q 2016, mainly due the higher exchange gain on USD loan.

Net change in fair value of derivative financial instruments relates to the revaluation of interest rate swap contracts.

Income tax for 2Q 2017 increased by 6.2% to S$4.5 million compared to 2Q 2016, mainly due to the higher revenue.

1H 2017 vs 1H 2016

Gross revenue for 1H 2017 increased by 2.9% to S$54.6 million compared to 1H 2016, mainly due to contribution from SHLB.

Property operating expenses for 1H 2017 increased by 6.1% to S$607,000 compared to 1H 2016, mainly due to the higher property expenses incurred with the acquisition of SHLB.

Interest income for 1H 2017 increased to S$624,000 compared to 1H 2016, mainly due to the return from the progress payment for the development of new Siloam Hospitals Surabaya.

Finance costs for 1H 2017 decreased by 8.0% to S$8.6 million compared to 1H 2016, mainly due to the lower loan amounts as a result of the issuance of perpetual securities to pare down the loan amounts in 3Q 2016.

Other income for 1H 2017 compared to other expenses for 1H 2016, mainly due to absence of the expenses for MTN exercise and costs related to Siloam Hospitals Surabaya transaction incurred in 1Q 2016.

Net change in fair value of derivative financial instruments relates to the revaluation of interest rate swap contracts.

Commentary on the competitive conditions of the industry

Indonesia’s gross domestic product grew 5.01% in the first quarter of 2017, up slightly from 4.94% in the preceding quarter in 20161, driven mainly by higher export prices. With continued government reforms and infrastructure developments, the International Monetary Fund forecasts a growth of 5.1% for Indonesia in 20172. The healthcare sector will continue to benefit from the ongoing national health insurance scheme, which will boost demand among the rising middle-income class in Indonesia for better quality private healthcare. Indonesia remains First REIT’s key focal market for growth, especially with the expanding pipeline of over 40 hospitals from its Sponsor, PT Lippo Karawaci Tbk, for acquisition.

In Singapore, the growing ageing population will continue to support demand for nursing homes. The Ministry of Health plans to increase the number of nursing home beds from 12,000 currently to 17,000 in 20203.

  1. 6 May 2017, The Business Times – Indonesia records 5.01% growth in Q1 on higher prices of commodities
  2. 3 February 2017, International Monetary Fund – Indonesia: Resilient economy can benefit from stronger reforms
  3. 26 April 2017, The Straits Times - Demand for elderly care facilities on the rise

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