November 17, 2020

Sagicor Real Estate XFUND Limited (XFUND), for the nine months ended September 2020, reported total revenue of $2.01 billion relative to $4.76 billion reported in 2019, a 58% decline year over year. XFUND stated, “Our direct hotel operations segment which comprised DTO and JGM contributed $2.13 billion, 55% below prior year. Travel-related revenue continues to be impacted by the worldwide collapse of the tourism market.” For the third quarter, total revenue amounted to $362.78 million (2019: $1.35 billion).

Hotel revenue for the nine months period decreased to $1.85 billion relative to $3.87 billion in 2019. While, Hotel Revenue from discontinued operations fell 62% to $292.45 million (2019: $769.58 million). Net capital losses on financial assets and liabilities amounted to $143.93 million relative to net capital gains of $95.77 million in the prior year. Other income amounted to $514,000 (2019: nil) for the nine months.

Operating expenses fell by 23% to $3.60 billion (2019: $4.70 billion). For the quarter, operating expenses amounted to $1.31 billion compared to $1.56 billion reported in the prior corresponding quarter. Of this:

• Hotel expenses decreased to $1.61 billion, down by 43% when compared to $2.82 billion in the prior comparable year.  For the quarter, hotel expenses closed at $417.07 million versus $897.04 million in the prior comparative quarter.
• There was depreciation of $638.83 million (2019: $572.85 million) for the period under review. Depreciation for the quarter totaled $213.27 million (2019: $219.14 million). Interest expense for the period declined 1% to $536.71 million (2019: $542.19 million).

  Other operating expenses decreased to $80.81 million (2019: $92.32 million). While for the quarter, other operating expenses climbed by 43% to close at $44.01 million (2019: $30.68 million).

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•  Expenses from discontinued operations totaled $340.39 million for the nine months ended September 30, 2020 compared to $676.31 million in for the corresponding period in 2019.
• Loss on sale of hotel operations amounted to $388.45 million (2019: nil). XFUND reported that, “effective September 22nd, 2020, the Group sold its interest in JGM to Sagicor Pooled Investment Fund Limited (PIF). The transaction significantly improved X-Fund’s liquidity profile and generated inflows of $1.6 billion that were used to reduce borrowings. The sale price was based on a recent valuation, but amid the COVID-19 pandemic, property values declined significantly over the prior year resulting in a loss of $0.39 billion.”
• Operating loss for the period amounted to $1.59 billion compared to an operating profit of $54.54 million booked in 2019.
• Impairment expense of investment in associate amounted to $5.21 billion for the nine months. Also, loss due to dilution of associate amounted to $388.15 million for the nine months. The Company noted, “On June 12, 2020, Playa announced the issue of 4,880,000 ordinary shares priced at U$4.10 per share and additional debt financing of US$204 million. This transaction led to a 0.56% reduction in X-Fund’s holdings and the Group recorded a loss on dilution of $0.39 billion. The shareholders of X-Fund Group recorded a $3.41 billion loss in relation to the impairment charge and the dilution of interest.”
• Share of loss from associate accounted for using equity method amounted to $3.39 billion compared to a profit of $273.59 million.  The company reported loss before tax of $10.58 billion relative to profit before tax of $328.13 million for the nine months. After a tax credit of $169.41 million (2019 tax charge: $285.19 million), the Company reported a net loss of $10.41 billion compared to a net profit of $42.94 million 2019. For the third quarter, net loss amounted to $2.36 billion versus a net loss of $990.25 million as at September 2019.

Net loss attributable to shareholders for the nine months amounted to $6.89 billion (2019 loss: $64.29 million) while for the quarter net loss attributable to shareholders amounted to $1.78 billion (2019 loss: $753.16 million).

Total comprehensive loss for the nine months amounted to $10.40 billion relative to a comprehensive income of $2.16 billion booked last year. Whereas for the quarter, total comprehensive loss amounted to $4.13 billion (2019 income: $61.85 million).

The loss per share (LPS) for the nine months closed at $3.07 relative to a LPS of $0.03 in 2019. While, the loss per share (LPS) for the quarter amounted to $0.79 (2019: LPS of $0.34). The trailing twelve-month LPS is $3.06.  The number of shares used in our calculations was 2,243,005,125. As at November 16, 2020, the stock traded at $7.77.

Management highlighted that, “The outbreak of COVID-19 globally has devastated the tourism industry. Business activities at Jewel Grande Montego Bay (JGM) and Playa Hotels & Resorts N.V. (Playa) were halted during the second quarter of the year while DoubleTree by Hilton (DTO) continued operations but at reduced occupancy levels. JGM resumed full operations on July 1st while the Playa resorts began re-opening on a phased basis. The reopening of the tourism sector has improved the outlook for our business activities. Likewise, occupancy levels specifically at DTO have shown steady month on month improvements. However, the uncertainty surrounding patrons’ confidence in leisure and travel activities, led to the recording of non-cash impairment charge of $5.21 billion during the first half of the year on our investment in associated company, Playa.”

The Company, as at September 2020, recorded total assets of $36.91 billion, a decrease of 28% when compared to $51.45 billion recorded as at September 2019. The decrease was due to 31% and 17% decline in ‘Investment in Associate and ‘Property, Plant & Equipment, respectively. ‘Property, Plant & Equipment’ closed the period at $12.53 billion (2019: $15.16 billion), while ‘Investment in Associate’ amounted to $20.51 billion (2019: $29.66 billion).

Total Shareholders’ Equity as at September 30, 2020 closed at $18.05 billion, a 32% decrease from the $26.48 billion reported for the corresponding period last year. This resulted in a book value per share of $8.05 (2019: $11.81).

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