Home  >  Investor Relations  >  Quarterly Financial Highlights

Email This Print This Quarterly Financial Highlights

FINANCIAL STATEMENTS FOR THE FULL YEAR ENDED 31 DECEMBER 2023

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Balance Sheet

    Group
31/12/23
S$'000
Group
31/12/22
S$'000
Current assets      
Trade and other receivables   6,316 15,597
Financial derivatives   1,341 470
Cash and cash equivalents   28,499 40,010
Advance payment   27,740 18,493
    63,896 74,570
Non-current assets      
Investment properties   2,230,981 2,205,881
Interests in subsidiaries   - -
Advance payment   - 27,740
Financial derivatives   39,257 33,958
    2,270,238 2,267,579
Total assets   2,334,134 2,342,149
Current liabilities    
Financial derivatives   1,820 -
Trade and other payables   30,723 23,697
Current portion of security deposits   440 823
Lease liabilities   15 15
Loans and borrowings   53,544 56,635
    86,542 81,170
Non-current liabilities      
Financial derivatives   3,572 -
Non-current portion of security deposits   16,889 17,754
Lease liabilities   2,069 2,084
Loans and borrowings   772,843 793,154
Deferred income   1,506 1,732
Deferred tax liabilities   36,156 35,769
    833,035 850,493
Total liabilities   919,577 931,663
Net assets   1,414,557 1,410,486
Represented by:      
Unitholders' funds   1,414,557 1,410,486
       
Units in issue (‘000)   605,002 605,002
Net asset value per unit ($)   2.34 2.33

Review of Performance

Summary of Parkway Life REIT's Results for the full year ended 31 December 2023

  Note
2023
S$'000
2022
S$'000
Increase
S$'000
Increase
%
Gross revenue   147,467 129,972 17,495 13.5
Net property income
  139,084 121,868 17,216 14.1
Distributable Income to Unitholders (a) 89,341 87,004 2,337 2.7
Distribution per unit based on Distributable Income to Unitholders (cents) (b) 14.77 14.38 0.39 2.7
Distribution yield (%), based on
- Closing market price of $3.67 as at 29 December 2023
  4.02 3.92   2.7

Note:

  1. Net of amount retained for capital expenditure on existing properties amounting to $3.0 million each year.
  2. In computing the Distribution per Unit ("DPU"), the number of units in issue as at the end of each period is used.

Consolidated Statements of Total Return

2H 2023 Vs 2H 2022

Gross revenue for 2H 2023 has increased by 4.7% year-on-year to $73.1 million. The increase was due to contribution from five nursing homes acquired in September 2022, two nursing homes acquired in October 2023 and higher rent from the Singapore properties under the new master lease agreements which commenced in August 2022. This was partially offset by the depreciation of Japanese Yen. Correspondingly, the net property income has increased by 4.8% to $69.0 million for 2H 2023.

The Manager's management fees for 2H 2023 of $7.2 million was 0.9% higher than 2H 2022 largely attributed to the increase in net property income. This increase is partially offset by the depreciation of Japanese Yen. Lower trust expenses were registered for 2H 2023 due to lower professional fees incurred during the period.

Of the net foreign exchange movement, the Group had registered a realised foreign exchange gain amounting to about $4.5 million and $3.2 million from the settlement of Japanese Yen forward contracts in 2H 2023 and 2H 2022 respectively.

Finance costs have increased mainly due to funding of capital expenditure and new acquisitions in 2022 and 2023 and higher interest costs from Singapore dollar debts partially offset by depreciation of JPY.

The Group has step-up lease arrangements for certain of its properties which include the new 20.4 year master lease agreements for its three Singapore hospitals and the 20-year lease agreements for the 3 Japan nursing home (Palmary Inn) properties. As part of revenue recognition, the step-up lease arrangements were accounted on a straight line basis over the lease term (i.e. effective rent) since August 2022 and September 2021, respectively. This had led to corresponding increase in the gross revenue and investment properties. As property valuation is based on discounted cash flow method which deviates from effective rent accounting treatment, the Group has removed the impact of effective rent from investment properties accordingly. This resulted in adjustments in the net change in fair value of investment properties (See Note 3 to the Financial Statements). There is no distribution impact arising from the above treatment.

Overall, DPU for 2H 2023 of 7.48 cents has outperformed by 2.1% or 0.16 cents as compared with 2H 2022's DPU of 7.32 cents.

2023 Vs 2022

Gross revenue for 2023 has increased by 13.5% year-on-year to $147.5 million. The increase was due to contribution from five nursing homes acquired in September 2022, two nursing homes acquired in October 2023 and higher rent from the Singapore properties under the new master lease agreements which commenced in August 2022. This was partially offset by the depreciation of Japanese Yen. Correspondingly, the net property income has increased by 14.1% to $139.1 million for 2023.

The Manager's management fees for 2023 of $14.5 million was 5.1% higher than 2022 largely attributed to the increase in net property income. This increase is partially offset by the depreciation of Japanese Yen. Lower trust expenses were registered for 2023 due to lower professional fees incurred during the period.

Of the net foreign exchange movement, the Group had registered a realised foreign exchange gain amounting to about $7.8 million and $5.1 million from the settlement of Japanese Yen forward contracts in 2023 and 2022 respectively.

Finance costs have increased mainly due to funding of capital expenditure and new acquisitions in 2022 and 2023 and higher interest costs from Singapore dollar debts partially offset by depreciation of JPY.

At the reporting date, the Group has outstanding forward exchange contracts with aggregate notional amounts of approximately $182.0 million. The change in fair value of $1.2 million gain was charged to the statement of total return.

Valuations were performed by independent professional valuers for all investment properties as at 31 December 2023. During the year, the Group has recognised a net change in fair value of investment properties of $11.2 million in the Statement of Total Return, which includes fair value gain of $15.8 million offset by impact from straight-line rental adjustments and amortisation of right-of-use assets amounting to $27.0 million. The valuation gain was largely contributed by the fixed rent increase for the Singapore hospitals. Any fair value adjustments (surplus / deficit) in respect of the revaluation would not be taxable / deductible on the basis that the fair value changes are unrealised and the properties are held for long-term purposes. As such, these fair value adjustments (surplus / deficit) would be adjusted out when determining the distributable income to the Unitholders.

Overall, DPU for 2023 of 14.77 cents has outperformed by 2.7% or 0.39 cents as compared with 2022's DPU of 14.38 cents.

Consolidated Statements of Financial Position

The advance payment arose from a one-time payment of approximately $46.2 million to the contractor in December 2022 in relation to the Renewal Capex Works and synchronised regular capex for Mount Elizabeth Hospital ("MEH"). With the progression of the capex works in MEH, part of the advance payment has been progressively utilised and capitalised in investment properties from 3Q 2023 onwards.

Lower trade and other receivables as of 31 December 2023 was mainly due to lower variable rent receivables from the Singapore properties. Under the new 20.4 years master lease agreements, total rent collected from the 3 hospitals are guaranteed a 2% step-up for the Interim Period (23 August 2022 to 31 December 2022) and 3% step-up year-on-year till FY2025. The reset of base rent from $30.0 million to $64.8 million per annum, led to an increase in the monthly base rent paid by Parkway Hospitals Singapore Pte Ltd and a corresponding decline in the variable rent income paid quarterly in arrears.

The increase in investment properties was largely due to the acquisition of two nursing homes in Japan in October 2023, capital expenditure of existing assets and valuation gain on the property portfolio. This was partially offset by the depreciation of the Japanese Yen. Excluding the impact from straight-line rental adjustments and amortisation of right-of-use assets amounting to $27.0 million, a fair value gain of $15.8 million was recognised in the Statement of Total Return, representing a gain of 0.7% in the total portfolio value. The valuation gain was largely contributed by the fixed rent increase for the Singapore hospitals.

Higher trade and other payables in 2023 was mainly due to the capital expenditure for MEH.

The overall decrease in loans and borrowings was mainly due to the repayment of fixed rate note and depreciation of the Japanese Yen, partly offset by additional drawdown of long term loans for funding of acquisitions, capital expenditure and working capital purposes.

During the year, the Group has repaid outstanding fixed rate note of JPY2,000 million (approximately $18.6 million) upon its maturity in June 2023 and issued a 7-year fixed rate note of JPY3,500 million (approximately $32.6 million) to term out an existing fixed rate note in advance of its maturity in February 2024. In 2H 2023, the Group has drawn down 6-year unsecured loan facility of JPY2,100 million (approximately $19.5 million) to fund the acquisition in October 2023. As at 31 December 2023, the Group classified a term loan of JPY4,400 million (approximately $40.9 million) as current loans and borrowings due to its maturity in 1Q 2024. The maturing loan represents about 5% of the Group's borrowings. The Group had put in place long-term facilities to refinance the maturing loans as and when they fall due. Including the two new 6-year committed and unsecured loan facilities signed on 17 January 2024, the Group has in place unutilised long term committed facilities amounting to $259.1 million.

Notwithstanding the net current liabilities position, based on the Group's existing financial resources, the Group believes that it will be able to refinance its borrowings and meet its current obligations as and when they fall due.

The Aggregate Leverage of the Group as at 31 December 2023 was 35.6% (31 December 2022: 36.4%) of the Group's Deposited Property. This complied with the stipulated Aggregate Leverage limit. The interest coverage ratio (ICR) and adjusted ICR1 stood at 11.3 times at of 31 December 2023.

Consolidated Statement of Cash Flows

Net cash from operating activities has increased in 2023 as compared to 2022, mainly due to higher rental income from the nursing homes acquired in September 2022 and October 2023 as well as higher rent from the Singapore properties.

Net cash outflow on purchase of investment properties (including acquisition related costs) was as follows:

The acquisition related costs paid in 2023 were in relation to the nursing home properties acquired in September 2022 and October 2023.

Net cash used in investing activities as of 2023 included payment of capital expenditure on existing properties and the Renewal Capex Works for MEH.

Net cash used in financing activities in 2023 was mainly due to the payment of distributions to Unitholders and repayment of fixed rate note, partially offset by the drawdown of loan facilities to finance the property acquisitions in October 2022, capital expenditure and working capital.

Commentary

Amid the macroeconomic uncertainties and challenges, Parkway Life REIT remains prudent as the Group continues to proactively manage its portfolio and strategically navigate for growth opportunities. In October 2023, the REIT completed the acquisition of two nursing homes in Osaka Prefecture for a total consideration price of JPY1,766.4 million (approximately $16.4 million)2, bringing the REIT's Japan portfolio to 59 properties, totalling approximately $717.2 million in value as at 31 December 2023. Importantly, this latest acquisition enhances tenant diversification with a new operator, K.K. BISCUSS, a reputable nursing and care service operator in the Kansai region of Japan, and will further entrench Parkway Life REIT's presence across Japan. The acquisition was fully funded by JPY debts, providing a natural hedge for foreign exchange risks arising from JPYdenominated assets and mitigating against potential currency volatility. With an established portfolio of 59 high quality nursing homes and care facilities and strategic partnerships with local operators in the aged care sector, Parkway Life REIT is well-positioned to maximise impact on the silver economy in Japan helmed by the Group's diligence and timeliness in the market, where it first established a foothold in 2008.

Parkway Life REIT continues to adhere to a disciplined financial management framework to mitigate any potential refinancing risks as well as actively manages any exposure to interest rate and foreign currency risks on an ongoing basis. The Group has completed a series of refinancing exercises in 2H 2023 and effectively managed its debt maturity profile with no immediate long-term debt refinancing need till March 2025. The Group has executed several interest rate swaps in 4Q 2023 (including forward-starting swaps) and will increase its proportion of fixed-rate interest bearing borrowings to about 90% by end 1Q 2024. Additionally, the Group has extended its JPY net income hedges for another 2 years till 1Q 2029 to manage adverse foreign currency risk pertaining to its Japan portfolio.

Going forward, Parkway Life REIT will continue to focus on driving resilient returns backed by solid financial management. The healthcare industry will remain critically essential in a rapidly aging population with greater demand for better quality healthcare and aged care services. Parkway Life REIT's portfolio of assets place it in a good position to benefit from the resilient growth of the healthcare industry in the Asia Pacific region.

1 As PLife REIT has no hybrid securities as of the reporting date, there is no difference between ICR and Adjusted ICR.

2 Based on exchange rate of SGD1.00 to JPY107.53