XFUND reports 94% decline in year end net profit attributable to shareholders

Date: May 29, 2019

Sagicor Real Estate XFUND Limited, for the year ended December 2018, reported total revenue of $8.81 billion relative to $13.01 billion recorded in 2017, a 32% decline year over year. For the quarter, total revenue closed at $1.15 million versus $3.05 billion in the prior comparable quarter. “This was due to lower hotel revenues as a result of the sale of Hilton Rose Hall, and lower returns from the Sigma Real Estate Portfolio,” as noted by the Group. Of this:

Hotel revenue for the year end increased to $5.55 billion versus $4.74 billion in 2017, a 17% improvement year over year.

Hotel revenue from discontinued operations amounted to $2.72 billion, a 51% decline relative to $5.60 billion reported the prior year.

Net capital gains amounted to $246.51 million (2017: $2.61 billion), while interest income closed at $26.84 million (2017: $59.89 million).

Management stated that, “DoubleTree by Hilton at the Entrance to Universal Orlando, Florida (DoubleTree) net income increasing by $174 million, as they enjoyed higher year-over-year occupancy levels and average daily rates increasing by 4.3% and 5.4%, respectively. In addition, interest expense was lower by $128 million, as cash proceeds from the sale of the hotels was used to paydown borrowings and other obligations.”

Operating expenses fell 18% to $8.25 billion compared to $10 billion in the prior corresponding period. For the quarter, operating expenses amounted to $1.67 billion compared to $2.77 billion reported in the same period last year. Of this:

Hotel expenses increased to $4.27 billion, up 15% when compared to $3.70 billion in the prior corresponding year.

Depreciation went up to $678.18 million (2017: $453.53 million).

Net impairment losses on financial assets closed at $2.04 billion versus $4.52 billion recorded a year earlier in 2017.

Interest expense declined 10% to $1.15 billion (2017: $1.27 billion)

Other operating expenses totaled $110.73 million (2017: $53.58 million).

The Company reported loss before tax of $163.57 million relative to profit before tax of $3.01 billion for the year ended 2017. After incurring tax charges of $163.58 million (2017: tax charges $268.23 million), net loss from continuing operations closed at $15,000 compared to net profit from continuing operations of $2.74 billion in December 2017. For the quarter, net loss from continuing operations closed at $440.90 million versus net profit from continuing operations of $379.33 million in the previous comparable quarter.

XFUND stated that, “a gain on disposal of discontinued hotel operations of $264 million. On June 2, 2018, Sagicor Real Estate X Fund and Sagicor Group Jamaica through its affiliated entities, sold the Hilton Rose Hall Resort and Spa (Hilton Rose Hall), three (3) of the Jewel hotels as well as lands that were owned by the Sigma Real Estate Portfolio (Sigma Portfolio), and a part of the Jewel Grande Montego Bay to Playa Hotels and Resort N.V. (Playa) in exchange for 20,000,000 Playa shares and US$100 million in cash.”

The Company recorded net profit attributable to shareholders of $154.35 million (2017: $2.74 billion). As such the earnings per share (EPS) for the year end closed at $0.07 relative to an EPS of $1.22 in 2017. The number of shares used in our calculations was 2,243,005,125. As at May 28, 2019, the stock traded at $9.91.

The Company highlighted that, “reduction of $2.32 billion in gains from the investments in the Sigma Real Estate Fund year over year. This was due to a reduction in the number of units held, down from 7.17 billion in 2017, to 402 million as at 31 December 2018, and lower performance from Sigma Real Estate Fund during 2018. Effective 1 July 2018, the Group liquidated 91% of its units in the Sigma Real Estate Fund, in exchange for 51.86% ownership of Jamziv MoBay Jamaica Portfolio Limited (Jamziv), which holds the Playa shares.”

Furthermore, XFUND noted that, “Our newly refurbished towers and conference rooms at DoubleTree continue to attract better rates and returns for the Group. Both X Fund and Sigma Real Estate Fund continue to actively seek viable real property investments across the region to drive long-term shareholder value. We are confident that as Playa continues to expand its refurbishment program and build out new hotels, earnings will continue to grow.”

Balance Sheet Highlights:

The Company, as at December 2018, recorded Total Assets of $48.80 billion, a slight increase when compared to $47.69 billion recorded as at December 2017. This was as a result of ‘Investment in associate’ of $27.80 million relative to nil the prior year. This movement was however tempered by the reductions in ‘Property, Plant and Equipment’ and ‘Investment in Sigma Global Fund – Real Estate Portfolio’ to $14.77 billion (2017: $26.28 billion) and $774.86 million (2017:$15.20 billion) respectively.

Total Shareholders’ Equity as at December 31, 2018 closed at $28.05 billion, a 24% increase from the $22.69 billion reported for the corresponding period last year. This resulted in a book value per share of $18.76 (2017: $15.17).



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