CDL’s FY2023 earnings down 75.3% to $317.3 mil on higher financing costs and lack of divestment gains

The lobby of Republic Plaza at level 2. Photo: Samuel Isaac Chua/The Edge Singapore

City Developments Limited (CDL) has reported earnings of $317.3 million for the FY2023 ended Dec 31, 2023, 75.3% lower than the earnings of $1.29 billion in the FY2022.

The earnings plunge was largely due to higher financing costs during the year and the absence of substantial divestment gains that was recorded in the year before. FY2022 saw the divestment of Millennium Hilton Seoul, the deconsolidation of CDL Hospitality Trusts (CDLHT) and the completion of the collective sales of Tanglin Shopping Centre and Golden Mile Complex.

2HFY2023 earnings, however, rose by 51.2% y-o-y to $250.8 million as 2HFY2023 revenue rose by 22.9% y-o-y to $2.24 billion.

For the FY2023, revenue was up by 50.0% y-o-y to a record $4.94 billion. The increases in both revenues were driven by CDL’s property development segment, which contributed 48% to the total revenue in 2HFY2023 and 57% in FY2023.

During the year, CDL’s property development segment saw revenue double mainly due to the fully sold executive condominium (EC) project Piermont Grand, which obtained its temporary occupation permit (TOP) in 1H2023. This enabled the project’s revenue and profit to be recognised completely for the EC.

The higher property revenue was also attributed to the sale of CDL’s freehold land site at Shirokane, Japan in the 3QFY2023 for 50 billion yen ($495.0 million).

The group also recorded increased revenue recognition from its local projects including Amber Park and Irwell Hill Residences which have either achieved their TOP or are at an advanced construction stage in the current year.

In FY2023, CDL also saw higher revenue from its hotel operation and investment properties segments. The former continued to benefit from the gradual recovery in the hospitality market post-Covid with revenue per available room (RevPAR) growth of 25.3% in FY2023 to $168.70. The higher revenue from investment properties was mainly due to acquisitions made.

Gross profit for the FY2023 rose by 32.2% y-o-y to $1.65 billion in tandem with the higher revenue although gross profit margin (GPM) fell by 5 percentage points y-o-y to 38%. The lower GPM in FY2023 due to the higher exposure to property development segment whose gross margin was compressed.

Profit before tax for the FY2023 fell by 74.5% y-o-y to $472.6 million as net finance costs more than doubled. The lower profit before tax was also from the absence of one-off divestment gains seen in the FY2022.

The board has recommended a final dividend of 8.0 cents per share, bringing the total dividend for FY2023 to 12.0 cents per share.

As at Dec 31, 2023, cash and cash equivalents stood at $2.04 billion. Net gearing ratio stood at 61% after factoring in fair value on investment properties.

“The CDL Group delivered a resilient set of results despite an extremely challenging year for the global real estate sector, with a high interest rate environment, inflation, weak global economies and geopolitical tensions. Singapore’s additional property cooling measures added to the challenges. However, the group seized opportunities to expand our portfolio, optimise operational efficiencies, refurbish assets and strengthen synergies across the group’s business segments to enhance performance and drive value extraction,” says Kwek Leng Beng, executive chairman of CDL.

“Though headwinds persist, we will embrace 2024 with cautious optimism, confident of our ability to navigate the changing landscape of the real estate sector,” he adds.

Sherman Kwek, CDL’s group CEO notes that the “challenging market conditions” in 2023 presented the group with “attractive acquisition opportunities”, which enabled it to expand its portfolio and strengthen its growth prospects.

“In 2023, we completed about $2.4 billion of strategic investments to grow our development pipeline, enlarge our living sector portfolio, enhance our recurring income stream and expand our hospitality footprint. In 2024, we will adopt a prudent approach to new acquisitions while proactively pursuing divestments to recycle capital. We remain steadfast in pursuing our fund management aspirations, leveraging our expertise and significant asset base to create new platforms,” he says.