Profit falls 55% at Kingston Properties

Profit falls 55% at Kingston Properties

Wednesday, August 21, 2019

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Kingston Properties Limited (KPREIT) reported on Thursday last (August 15) an unaudited after-tax surplus of $28.6 million, for the six months ended June 30, 2019, despite a 55 per cent decrease due to unrealised foreign exchange losses incurred on net assets when compared to gains in the prior year. The company recorded $6 million in unrealized foreign exchange losses and a $1.8 million tax charge.

Chief executive officer (CEO) Kevin Richards, in reporting to shareholders, indicated KPREIT recorded $63.5 million in the first half of 2018, primarily due to a combination of nearly $31 million of unrealised foreign exchange gains coupled with another $31 million of tax credits.

Despite these results, Richards indicated that the group's earnings before interest and taxes amounted to $61.4 million, an increase compared to the $24.1 million recorded in the prior year.

“This was primarily due to a net fair value gain on investment property of $23.8 million, after recording a loss on disposal of investment properties following the sale of two condo units in Florida, as well as an impairment loss of $4.2 million due to the group's adoption of IFRS 9,” he stated.

The International Financial Reporting Standards (IFRS) provides a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

“Operating expenses for [the period under review] declined by 3.6 per cent to $66.1 million from $68.5 million the same prior year period; [this is] reflected by lower HOA fees and property taxes — two of our largest expense items,” he stated.

Homeowners Association (HOA) fees refer to the amount of money that must be paid monthly by owners of certain types of residential properties to assist with maintaining and improving properties in the association.

“Funds from operations for the first half of 2019 amounted to $28 million compared to $18.6 million in 2018; this represents a year-on-year improvement of 51 per cent and highlights the group's intention to consistently generate strong net cash flows from its operations,” Richards continued.

Total assets stood at $2.875 billion as at June 30, 2019, an increase of 7.6 per cent over the $2.672 billion balance as at June 30, 2018. Richard added that the group continues to generate higher cash balances in 2019 compared with 2018, largely from the proceeds of assets; the cash will be used in the acquisition of new properties.

“Our strategy remains focused on prudently funding the acquisition of properties with strong fundamentals and attractive cash yields,” he stated.

“We continue to monitor developments in the economies in which we own properties, and remain bullish on the Jamaican and especially the Caymanian economies.”

The CEO indicated that on August 2, 2019, at an extraordinary general meeting, KPREIT shareholders approved the increase in share capital of the company to one billion ordinary shares to facilitate a renounceable rights issue to be executed shortly; a strategy to substantially increase KPREIT's capital base over the next three years.

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