Far East Orchard has reported a net profit of $7.0 million for the 9MFY2022 ended Sept 30, reversing from the $20.8 million net loss in the 9MFY2021.
The higher net profit was attributable to the recovery of the hospitality sector, says the group.
Revenue for the nine-month period increased by 30.1% y-o-y to $98.1 million mainly due to contributions from the group’s hospitality segment on the back of the continued travel recovery.
The improved operating performance was also supported by the stable contributions from the purpose-built student accommodation (PBSA) and property investment segments.
The group’s performance, however, was offset by the weakening of the Australian dollar (AUD) and British pound (GBP), resulting in unrealised currency translation losses of $13.1 million, up from the $5.0 million losses in the 9MFY2021.
In its hospitality segment, the group says the business has seen the return of business and leisure travellers and that it has benefitted from the pent-up travel demand.
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Across the group’s portfolio of properties, uplifts in occupancies and room rates were recorded, it says.
It adds that the prospects for the remainder of the year remain “cautiously optimistic”.
“However, beyond that, uncertainty in the international economic environment has tempered economic forecasts and has dampened the return to pre-Covid-19 levels in the near term. The main factors weighing on the recovery of international tourism includes rising inflation and spike in oil prices, resulting in higher transportation and accommodation costs, putting consumer purchasing power and savings under pressure,” reads the statement put out by the group on Oct 28.
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In its PBSA segment, the group says it is not immune to the current macroeconomic headwinds. The rising cost of energy is also an immediate concern. However, it remains confident of the PBSA sector in the UK and will continue to expand its portfolio in the country when the opportunity arises.
On the back of inflationary pressures, the group says its business will “inevitably be affected”, maintaining a cautious outlook for the remainder of 2022 and 2023.
“With the relaxation of border restrictions and pent-up travel demand, our hospitality segment has turned around this year. We are heartened to reverse the losses recorded a year ago into profit year to date. Nevertheless, the group remains cognisant of the headwinds facing the businesses – ongoing developments of the geopolitical and macroeconomic environment, labour shortages, escalating energy costs, inflationary cost pressures and rising interest rates, to name a few,” says Alan Tang, group CEO of Far East Orchard.
“At this stage, our strategy of building a lodging platform, anchored by the hospitality management services and the resilient PBSA segments, is heading in the right direction. This will help to mitigate the impact of the current global economic downturn.”
He adds: “In the face of mounting uncertainties and pending global economic downturn, the group’s diversified portfolio and healthy balance sheet will be effective in managing these risks, while remaining open to strategic investment opportunities.”
Shares in Far East Orchard closed flat at $1.04 on Oct 28.
