Yearly Financial Highlights
INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2024
Financials Archive
Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.
Balance Sheet
| Group 30/06/24 S$'000 |
Group 31/12/23 S$'000 |
||
| Current assets | |||
| Trade and other receivables | 6,952 | 6,316 | |
| Financial derivatives | 4,877 | 1,341 | |
| Cash and cash equivalents | 57,067 | 28,499 | |
| Advance payment | 9,247 | 27,740 | |
| 78,143 | 63,896 | ||
| Non-current assets | |||
| Investment properties | 2,194,883 | 2,230,981 | |
| Interests in subsidiaries | - | - | |
| Financial derivatives | 46,488 | 39,257 | |
| 2,241,371 | 2,270,238 | ||
| Total assets | 2,319,514 | 2,334,134 | |
| Current liabilities | |||
| Financial derivatives | - | 1,820 | |
| Trade and other payables | 26,361 | 30,723 | |
| Current portion of security deposits | 461 | 440 | |
| Lease liabilities | 15 | 15 | |
| Loans and borrowings | 94,258 | 53,544 | |
| 121,095 | 86,542 | ||
| Non-current liabilities | |||
| Financial derivatives | 240 | 3,572 | |
| Non-current portion of security deposits | 15,130 | 16,889 | |
| Lease liabilities | 2,062 | 2,069 | |
| Loans and borrowings | 720,677 | 772,843 | |
| Deferred income | 1,506 | 1,506 | |
| Deferred tax liabilities | 34,175 | 36,156 | |
| 773,790 | 833,035 | ||
| Total liabilities | 894,885 | 919,577 | |
| Net assets | 1,424,629 | 1,414,557 | |
| Represented by: | |||
| Unitholders' funds | 1,424,629 | 1,414,557 | |
| Units in issue (‘000) | 605,002 | 605,002 | |
| Net asset value per unit ($) | 2.35 | 2.34 |
Review of Performance
Summary of Parkway Life REIT's Results for the half year ended 30 June 2024
| Note | 1H 2024 S$'000 |
1H 2023 S$'000 |
Inc/ (Dec) S$'000 |
Inc/ (Dec) % |
|
| Gross Revenue | 72,420 | 74,402 | (1,982) | (2.7) | |
| Net Property Income |
68,355 | 70,084 | (1,729) | (2.5) | |
| Distributable Income to Unitholders | (a) | 45,609 | 44,084 | 1,525 | 3.5 |
| Distribution per unit based on Distributable Income to Unitholders (cents) | (b) | 7.54 | 7.29 | 0.25 | 3.5 |
| Annualised distribution per unit (cents) | 15.08 | 14.58 | 0.50 | 3.5 | |
| Distribution yield (%), based on - Closing market price of $3.50 as at 28 June 2024 |
4.31 | 4.16 | 3.5 |
Note:
- Net of amount retained for capital expenditure on existing properties amounting to $3.0 million each year.
- 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
1H 2024 Vs 1H 2023
Gross revenue for 1H 2024 has decreased by 2.7% year-on-year to $72.4 million. The decrease was due to depreciation of Japanese Yen, partially offset by the contribution from two nursing homes acquired in October 2023. Correspondingly, the net property income has decreased by 2.5% to $68.4 million for 1H 2024.
The Manager's management fees for 1H 2024 of $7.2 million was 2.1% lower than 1H 2023 largely attributed to the decrease in net property income. Higher trust expenses were registered for 1H 2024 due to higher professional fees incurred during the period.
Of the net foreign exchange movement, the Group had registered a realised foreign exchange gain amounting to about $4.7 million and $3.3 million from the settlement of Japanese Yen forward contracts in 1H 2024 and 1H 2023 respectively.
Net finance costs have increased mainly due to funding of capital expenditure and new acquisitions in 2023 and higher interest costs from Singapore dollar and Japanese Yen 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 three Japan nursing home 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 in the initial years of lease. 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). These properties with step-up lease arrangements contributed to the higher distributable income in 1H 2024 as compared to 1H 2023.
At the reporting date, the Group has outstanding forward exchange contracts with aggregate notional amounts of approximately $114.0 million. The change in fair value of $8.2 million gain was charged to the statement of total return.
Overall, annualised DPU for 1H 2024 of 15.08 cents has outperformed by 3.5% or 0.50 cents as compared with 1H 2023's annualised DPU of 14.58 cents.
Consolidated Statements of Financial Position
Cash and cash equivalents as at 30 June 2024 included a short-term fixed deposit placement of $25.2 million.
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 capital expenditure works in MEH, part of the advance payment has been progressively utilised and capitalised in investment properties.
The decrease in investment properties was mainly due to the depreciation of Japanese Yen, offset by the capital expenditure work done for 1H 2024.
The overall decrease in loans and borrowings was mainly due to the depreciation of the Japanese Yen, partly offset by net drawdown of loans for capital expenditure and working capital purposes. In 1H 2024, the Group has drawn down JPY long-term facilities to replace an existing $50.0m loan for currency re-alignment between asset and liability to fine-tune the Group's natural hedge, as well as to term out maturing term loans totalling JPY7,798 million (approximately $66.1 million). As at 30 June 2024, the Group classified two long-term loans, total amounting to JPY8,600 million (approximately $72.9 million), as current loans and borrowings due to their maturity in 1H 2025. The maturing loans represents about 9% of the Group's borrowings.
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 30 June 2024 was 35.3% (31 December 2023: 35.6%) of the Group's Deposited Property. This complied with the stipulated Aggregate Leverage limit. The interest coverage ratio (ICR) and adjusted ICR1 stood at 10.6 times at of 30 June 2024.
Consolidated Statement of Cash Flows
Net cash from operating activities in 1H 2024 are mainly contributed by rental income from the properties net of property and other operating expenses.
Net cash outflow on purchase of investment properties (including acquisition related costs) was as follows:
The acquisition related costs paid in 1H 2024 were in relation to the nursing home properties acquired in October 2023.
Net cash used in investing activities as of 1H 2024 mainly relates to the payment of capital expenditure on existing properties and the Renewal Capex Works for MEH.
Net cash used in financing activities in 1H 2024 was mainly related to the payment of distributions to Unitholders, partially offset by net drawdown of borrowings.
Commentary
Amid the persistent macroeconomic uncertainties and challenges, Parkway Life REIT remains prudent to proactively manage its portfolio and navigate for growth opportunities strategically. The portfolio of 63 high quality nursing homes and care facilities worth approximately $2.23 billion2 is largely supported by favourable rental lease structures, where at least 98.6% of its portfolios have downside revenue protection3 and approximately 65.4% of the total portfolio is pegged to CPI-linked revision formula, ensuring steady rental growth whilst protecting revenue stability amid uncertain market conditions.
Parkway Life REIT continues to adhere to a disciplined financial management framework to mitigate any potential refinancing risks as well as actively manage any exposure to interest rate and foreign currency risks on an ongoing basis. The Group has no immediate long-term debt refinancing need till March 2025 and has increased its proportion of fixed-rate interest bearing borrowings to about 90% as at 30 June 2024. Additionally, the Group has put in place Japanese Yen forward contracts till 1Q 2029 to manage adverse foreign currency risk pertaining to its net income from the Japan portfolio. In the face of on-going uncertainties in the macro economy and volatility in the financial markets, Parkway Life REIT remains in a stable financial position with a healthy gearing level of 35.3% and interest cover of 10.6 times.
The healthcare industry will remain critically essential in a rapidly aging population underpinning greater demand for better quality healthcare and aged care services. Parkway Life REIT's portfolio of assets places it in a good position to benefit from the resilient growth of the healthcare industry in the Asia Pacific region. Going forward, Parkway Life REIT will continue to focus on driving resilient returns backed by solid financial management to create greater value for its unitholders.
1 As PLife REIT has no hybrid securities as of the reporting date, there is no difference between ICR and Adjusted-ICR.
2 Appraised values based on exchange rates as at 31 December 2023.
3 Based on existing lease agreements and subject to applicable laws.