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Quarterly Financial Highlights

2017 FULL YEAR UNAUDITED FINANCIAL STATEMENT & DISTRIBUTION ANNOUNCEMENT

Financials Archive

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Statement of financial position

  Notes Group
31/12/17
S$'000
Group
31/12/16
S$'000
Current assets      
Trade and other receivables   10,894 10,504
Financial derivatives   13 335
Cash and cash equivalents (a) 25,720 71,096
    36,627 81,935
Non-current assets      
Investment properties (b) 1,731,063 1,657,209
Interests in subsidiaries   - -
Financial derivatives   3,531 210
Total assets   1,771,221 1,739,354
Current liabilities    
Financial derivatives   163 336
Trade and other payables   19,451 23,482
Current portion of security deposits   940 2,676
Loans and borrowings   15,900 16,246
Provision for taxation   1 -
    36,455 42,740
Non-current liabilities      
Financial derivatives   1,224 8,002
Non-current portion of security deposits   18,076 17,704
Loans and borrowings (c) 626,382 612,539
Deferred tax liabilities   23,744 20,733
Total liabilities   705,881 701,718
Net assets   1,065,340 1,037,636
Represented by:      
Unitholders' funds   1,065,340 1,037,636
Total equity   1,065,340 1,037,636

Note(s):

  1. The decrease in cash and cash equivalents was mainly due to the redeployment of divestment proceeds to fund the acquisition of five Japan properties and to repay short term loans in 1Q 2017.
  2. Investment properties were stated at valuation performed by independent valuers as at 31 December 2017. The increase in investment properties was due to the gain on revaluation, acquisition of four nursing homes and a group home on 24 February 2017, capital expenditure on existing portfolio offset by the depreciation of the Japanese Yen. A revaluation surplus of S$26.0 million was recognised in the Statement of Total Return.
  3. The increase in long term borrowings was mainly due to additional funding required for the properties acquisition on 24 February 2017 offset by the depreciation of the Japanese Yen.

Review of Performance

 
4Q
2017
S$'000
4Q
2016
S$'000
Inc/ (Dec)
%
2017
S$'000
2016
S$'000
Inc/ (Dec)
%
Gross revenue 27,537 27,731 (0.7) 109,881 110,123 (0.2)
Property expenses (1,791) (2,172) (17.5) (7,232) (7,697) (6.0)
Net property income
25,746 25,559 0.7 102,649 102,426 0.2
Management fees (2,781) (2,800) (0.7) (11,151) (11,113) 0.3
Trust expenses (1,040) (697) 49.2 (3,086) (2,870) 7.5
Net foreign exchange gain 406 240 69.2 1,583 1,234 28.3
Interest income - 1 (100.0) - 4 (100.0)
Finance costs (1,892) (2,416) (21.7) (7,952) (9,910) (19.8)
Non-property expenses (5,307) (5,672) (6.4) (20,606) (22,655) (9.0)
Total return before changes in fair value of financial derivatives and invetment properties 20,439 19,887 2.8 82,043 79,771 2.8
Net change in fair value of financial derivatives 1,261 3,046 (58.6) 1,954 (1,912) 202.2
Net change in fair value of investment properties 25,970 18,159 43.0 25,970 18,159 43.0
Gain on disposal of investment properties - 4,156 (100.0) - 4,156 (100.0)
Total return for the period before tax and distribution 47,670 45,248 5.4 109,967 100,174 9.8
Income tax expense (2,726) (3,036) (10.2) (8,503) (8,245) 3.1
Total return for the period after tax before distribution 44,944 42,212 6.5 101,464 91,929 10.4
Net effect of non-tax deductible/(non-taxable) items (25,090) (22,976) 9.2 (23,099) (15,600) 48.1
Rollover adjustment - - n.m. (2) (23) 91.3
Amount available for distribution to Unitholders 19,854 19,263 3.2 78,363 76,306 2.7
Distribution of divestment gains 1,348 - n.m. 5,390 - n.m.
Amount retained for capital expenditure (750) (750) - (3,000) (3,000) -
Distributable income to Unitholders 20,452 18,486 10.6 80,753 73,306 10.2
Distribution per Unit (cents) 3.38 3.06 10.6 13.35 12.12 10.2
Annualised Distribution per Unit (cents) 13.52 12.24 10.6 13.35 12.12 10.2

4Q 2017 Vs 4Q 2016

Gross revenue for 4Q 2017 was lower than 4Q 2016 by S$0.2 million largely due to depreciation of the Japanese Yen as compared to the same period last year offset by higher rents received from the Singapore properties and contributions from the asset recycling.

Property expenses were lower in 4Q 2017 due to absence of one-off marketing commission paid to the Manager. After deducting property expenses, we have achieved a net property income of S$25.7 million for 4Q 2017, which was S$0.2 million higher than 4Q 2016.

The decrease in management fees were mainly due to the depreciation of Japanese Yen as compared to the same period last year despite an increase in deposited property contributed by higher deposited property value and higher net property income from the properties acquired in February 2017, as well as valuation gains on the existing property portfolio.

Higher professional fees primarily resulted in an increase in trust expenses for 4Q 2017.

In 4Q 2017, the Group has recognised a lower realised foreign exchange gain of S$0.2 million from the delivery of quarterly Japanese Yen forward contracts due to progressive expiry of earlier income hedges locked in at higher contract rates.

Despite the growth of portfolio, finance costs have decreased mainly due to the finance cost savings arising from the refinancing initiatives completed in 2016 and in 1Q 2017 and depreciation of the Japanese Yen. There was no significant saving impact from the recent loan refinancing exercise as it was completed in late December 2017.

Overall, distribution per unit (DPU) of 3.38 cents for 4Q 2017 has outperformed 4Q 2016 by 10.6%, mainly due to partial distribution of the gains arising from the divestment of four Japan properties in December 2016 of S$1.3 million. Excluding the one-off gain, DPU from recurring operations (net of amount retained for capital expenditure) for 4Q 2017 has grown by 2.8% year-on-year.

2017 Vs 2016

Gross revenue for 2017 was S$109.9 million compared with S$110.1 million for 2016, a decrease of S$0.2 million or 0.2%. This was mainly due to depreciation of the Japanese Yen offset by revenue contribution from the Japan property acquisition in March 2016, higher yielding properties acquired from the asset recycling initiative completed in February 2017 and higher rent from the existing properties.

Property expenses for 2017 were S$7.2 million, which was S$0.5 million lower than 2016 due to absence of one-off marketing commission paid to the Manager. The result was a net property income of S$102.6 for 2017, which was S$0.2 million higher than 2016.

Finance costs have decreased mainly due to finance cost savings arising from the refinancing initiatives took place in 2016 and 2017, and depreciation of the Japanese Yen as compared to the same period last year. The lower finance costs have offset the additional financing costs incurred to finance the properties acquired in 1Q 2016 and 1Q 2017. Increase in trust expenses for 2017 due to higher professional fees incurred during the year.

During the year, the Group had registered a realised foreign exchange gain amounting to S$0.6 million from the delivery of Japan net income hedges. The Group has also recognised a realised foreign exchange gain of S$0.9 million arising from the capital repatriation for the cash trap in Japan, which unlocked the foreign exchange gain in the foreign currency translation reserve for its earlier Japan acquisitions.

Overall, DPU for 2017 of 13.35 cents has outperformed by 10.2% or 1.23 cents as compared with 2016's DPU of 12.12 cents, mainly due to one-off distribution of the gains arising from the divestment of four Japan properties in December 2016 of S$5.39 million.

Commentary

The long-term outlook of the industry continues to be driven by favourable patient demographics and demand for better quality healthcare and aged care services.

Parkway Life REIT's enlarged portfolio of 49 high-quality healthcare and healthcare-related assets places it in a good position to benefit from the resilient growth of the healthcare industry in the Asia Pacific region.

In addition, Parkway Life REIT is supported by favourable rental lease structures, where at least 95% of its Singapore and Japan portfolios have downside revenue protection and 62% of the total portfolio is pegged to CPI-linked revision formulae, ensuring steady future rental growth whilst protecting revenue stability amid uncertain market conditions.


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