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Quarterly Financial Highlights

2017 THIRD QUARTER UNAUDITED FINANCIAL STATEMENT & DISTRIBUTION ANNOUNCEMENT

Financials Archive

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Balance Sheet

  Notes Group
30/09/17
S$'000
Group
31/12/16
S$'000
Current assets      
Trade and other receivables   11,017 10,504
Financial derivatives   17 335
Cash and cash equivalents (a) 30,788 71,096
    41,822 81,935
Non-current assets      
Investment properties (b) 1,711,285 1,657,209
Interests in subsidiaries   - -
Financial derivatives   1,175 210
Total assets   1,754,282 1,739,354
Current liabilities    
Financial derivatives   277 336
Trade and other payables   17,466 23,482
Current portion of security deposits   981 2,676
Loans and borrowings (c) 18,827 16,246
Provision for taxation   3
    37,554 42,740
Non-current liabilities      
Financial derivatives   3,116 8,002
Non-current portion of security deposits   18,359 17,704
Loans and borrowings (d) 634,146 612,539
Deferred tax liabilities   22,555 20,733
Total liabilities   715,730 701,718
Net assets   1,038,552 1,037,636
Represented by:      
Unitholders' funds   1,038,552 1,037,636
Total equity   1,038,552 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. The increase in investment properties was due to the 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.
  3. The increase in current term borrowings was mainly due to the drawdown of short term loan facility for working capital purposes.
  4. 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

 
3Q
2017
S$'000
3Q
2016
S$'000
Inc/ (Dec)
%
YTD 3Q
2017
S$'000
YTD 3Q
2016
S$'000
Inc/ (Dec)
%
Gross revenue 27,700 28,106 (1.4) 82,344 82,392 (0.1)
Property expenses (1,817) (1,904) (4.6) (5,441) (5,525) (1.5)
Net property income
25,883 26,202 (1.2) 76,903 76,867 0.0
Management fees (2,801) (2,849) (1.7) (8,370) (8,313) 0.7
Trust expenses (896) (699) 28.2 (2,046) (2,173) (5.8)
Net foreign exchange gain 142 142 - 1,177 994 18.4
Interest income - 1 (100.0) - 3 (100.0)
Finance costs (1,839) (2,415) (23.9) (6,060) (7,494) (19.1)
Non-property expenses (5,394) (5,820) (7.3) (15,299) (16,983) (9.9)
Total return before changes in fair value of financial derivatives 20,489 20,382 0.5 61,604 59,884 2.9
Net change in fair value of financial derivatives 543 (703) 177.2 693 (4,958) 114.0
Total return for the period before tax and distribution 21,032 19,679 6.9 62,297 54,926 13.4
Income tax expense (1,810) (1,761) 2.8 (5,777) (5,209) 10.9
Total return for the period after tax before distribution 19,222 17,918 7.3 56,520 49,717 13.7
Net effect of non-tax deductible/(non-taxable) items 565 1,345 (58.0) 1,991 7,376 (73.0)
Rollover adjustment (2) - n.m. (2) (23) 91.3
Amount available for distribution to Unitholders 19,785 19,263 2.7 58,509 57,070 2.5
Distribution of divestment gains 1,348 - n.m. 4,042 - n.m.
Amount retained for capital expenditure (750) (750) - (2,250) (2,250) -
Distributable income to Unitholders 20,383 18,513 10.1 60,301 54,820 10.0
Distribution per Unit (cents) 3.37 3.06 10.1 9.97 9.06 10.0
Annualised Distribution per Unit (cents) 13.48 12.24 10.1 13.29 12.08 10.0

3Q 2017 Vs 3Q 2016

Gross revenue for 3Q 2017 was lower than 3Q 2016 by S$0.4 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. In addition, Parkway East Hospital's adjusted hospital revenue for the 10th year lease (23 August 2016 to 22 August 2017) has outperformed its minimum guaranteed rent, contributing to the increase in revenue from Singapore.

After deducting property expenses, we have achieved a net property income of S$25.9 million for 3Q 2017, which was S$0.3 million lower than 3Q 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 3Q 2017.

In 3Q 2017, the Group has recognised a lower realised foreign exchange gain of S$0.03 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.

Overall, distribution per unit (DPU) of 3.37 cents for 3Q 2017 has outperformed 3Q 2016 by 10.1%, 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 3Q 2017 has grown by 2.8% year-on-year.

YTD 3Q 2017 Vs YTD 3Q 2016

Gross revenue for YTD 3Q 2017 was S$82.3 million compared with S$82.4 million for YTD 3Q 2016, a decrease of S$0.1 million or 0.1%. 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.

Correspondingly, property expenses for YTD 3Q 2017 were S$5.4 million, which was S$0.1 million lower than YTD 3Q 2016. The result was a consistent property income of S$76.9 million for both years.

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. In addition, there was higher amortisation of transaction costs due to one-off expense of the remaining un-amortised costs for the debt facilities that were refinanced in 1H 2016. There were lesser Trust expenses incurred in YTD 3Q 2017.

During YTD 3Q 2017, the Group had registered a realised foreign exchange gain amounting to S$0.4 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, annualised DPU for YTD 3Q 2017 of 13.29 cents has outperformed by 10.0% or 1.21 cents as compared with YTD 3Q 2016's DPU of 12.08 cents, mainly due to partial distribution of the gains arising from the divestment of four Japan properties in December 2016 of S$4.0 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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