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Unaudited Condensed Interim Financial Statements and Dividend Announcement For the six months and for the year ended 31 December 2023

Financials Archive

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Condensed Interim Consolidated Income Statement

Profit & Loss

Condensed Interim Consolidated Statement of Comprehensive Income

Statement of Comprehensive Income

Condensed Balance Sheets

Balance Sheet

* The gearing ratio is computed as borrowings divided by total capital. Total capital is calculated as borrowings plus net assets of the Group.
** The net gearing ratio is computed as borrowings less cash and bank balances divided by total capital.

Group Performance Review

(a)(i) Second half review – 2H 2023 vs 2H 2022

The Group's revenue increased 22% to S$109.3 million in the second half year ended 31 December 2023 ("2H 2023"), from S$89.9 million reported in the second half year ended 31 December 2022 ("2H 2022").

The higher Group revenue was attributable to the continued positive rental rate revisions and increases in occupancies in both Purpose-Built Workers Accommodation ("PBWA") and Purpose-Built Student Accommodation ("PBSA") portfolio globally.

Amid increased demand and an ongoing supply and demand imbalance in workers' accommodations, Singapore PBWA rental rates increased alongside its financial occupancies which increased from 98% in 2H 2022 to 99%1 in 2H 2023 excluding an additional 888 beds were added to the Quick Build Dormitories ("QBDs") since April 2023. The overall improvement in revenue was however offset against the absence of revenue from two migrant worker Onboard Centres ("OCs") in Singapore managed by the Group which ceased operations from September 2022.

Strong demand in the United Kingdom ("UK") from both domestic and international students has enabled higher occupancy of 99% in 2H 2023 with higher rental rates as compared to 91% in 2H 2022.

With the return of international students to Australia, revenue was boosted via healthy rental rate revisions and average financial occupancy of the Group's two assets in Adelaide and Melbourne improved from 86% in 2H 2022 to 90% in 2H 2023.

In Malaysia, the Group's PBWA financial occupancy increased from 89% in 2H 2022 to 92% in 2H 2023, mainly driven by an increase in the demand for good quality worker accommodation in Malaysia that complies with Act 446 although a weaker Malaysian Ringgit moderated revenue in 2H 2023.

The Group's gross profit increased S$17.0 million or 27% from S$62.6 million in 2H 2022 to S$79.6 million in 2H 2023 due mainly to revenue growth as a result of improvements in financial occupancy and rental rates.

Other income reduced S$0.5 million mainly due to the absence of Covid-19 related insurance claims in 2H 2023. In 2H 2023, the Group incurred S$1.0 million in other losses as a result of currency exchange loss from return of capital and loss on derecognition of a joint venture in Korea PBSA, which has ceased operations in February 2023 as part of the Group's asset rationalisation strategy.

Distribution expenses increased by S$0.3 million due to the increase in business activities.

Finance expenses increased by S$2.2 million due to the higher interest rate environment.

Share of profit of associated companies and joint venture increased by S$17.9 million, largely due to fair value gain on investment property in Westlite Mandai PBWA.

A fair valuation exercise was conducted by independent valuers on the Group's investment properties as at 31 December 2023, and a net fair value gain reflecting current market conditions of S$79.4 million was recognised in 2H 2023, compared to a gain of S$9.4 million in 2H 2022.

Tax expenses increased by S$7.7 million in line with higher profits and deferred tax on fair value changes.

Accordingly, total profits for 2H 2023 was S$133.5 million, 224% higher compared to S$41.2 million in 2H 2022.

Net profit derived from core business operations was S$40.3 million in 2H 2023 which was S$9.2 million or 30% higher than the S$31.1 million reported in 2H 2022.

Note:

  1. Excluding the additional 888 beds in Quick Build Dormitories added in 2Q 2023 for a fair comparison.

(a)(ii) Full year review – FY 2023 vs FY 2022

The Group registered a 15% growth in revenue, from S$180.5 million in the year ended 31 December 2022 ("FY 2022") to S$207.3 million in the year ended 31 December 2023 ("FY 2023"). This was attributable to increased occupancies and positive rental rate revisions across its entire portfolio globally. The improvement in revenue was however offset against the absence of revenue from two migrant worker OCs in Singapore managed by the Group which ceased operations from September 2022.

The Group's PBWA portfolio experienced a growth in financial occupancy from 90% in FY 2022 to 96% in FY 2023.

Revenue from Singapore in FY 2023 was S$137.9 million compared to S$120.3 million in FY 2022 as a result of positive revisions in rental rates and better financial occupancy at 98% in FY 2023.

Malaysia revenue increased 22% to S$19.5 million in FY 2023 from S$15.9 million in FY 2022 as financial occupancy improved from 80% in FY 2022 to 93% in FY 2023. This was aided by the increase in beds available for rents after Asset Enhancement Initiatives ("AEIs") in Westlite Senai and Westlite Tampoi which were completed during the year alongside rental rates improvements. These gains were partially muted by a weaker Malaysian Ringgit.

The Group's PBSA portfolio saw a growth in financial occupancy from 86%2 in FY 2022 to 92%2 in FY 2023. The growth was mainly attributed to a strong occupancy rebound from its Australia PBSA assets while the Group's UK PBSA assets saw improved occupancy from 90% to 93% (or 98% excluding beds unavailable in the current academic year due to ongoing AEIs).

UK PBSA revenue, in British pounds, increased 12% compared to FY 2022. The increase was however muted by the weaker British pound registered in FY 2023 as compared to FY 2022. As a result, UK revenue upon translation to Singapore dollar increased only 9% from S$30.6 million in FY 2022 to S$33.4 million in FY 2023.

Australia PBSA revenue grew 36% from S$11.0 million to S$15.0 million with average financial occupancy increasing significantly from 73% in FY 2022 to 88% in FY 2023 on the back of growth in student population, exacerbated by the Chinese government's move to end recognition of online degrees.

The Group's gross profit increased S$26.4 million or 21% from S$123.6 million in FY 2022 to S$150.0 million in FY 2023.

Other income reduced S$0.7 million mainly due to the absence of government grant income.

In other losses, the Group incurred S$1.0 million from currency exchange loss from return of capital and loss on derecognition of a joint venture in Korea PBSA, which has ceased operations in February 2023 as part of the Group's asset rationalisation strategy.

Distribution expenses increased by S$0.2 million due to the increase in business activities.

Finance expenses increased by S$8.7 million mainly due to the higher interest rate environment.

Share of profit of associated companies and joint venture increased by S$18.4 million, largely due to fair value gain on investment property in Westlite Mandai PBWA as well as higher occupancy and rental rate in Westlite Mandai PBWA.

The net fair value gain of S$84.8 million in FY 2023 was due to the Group's investment properties across all territories in Singapore, UK, Malaysia and Australia, offset against the adjustment of fair value of Right of Use ("ROU") investment properties. This was compared to a net fair value gain of S$19.0 million in FY 2022 arising mainly from investment properties in UK, Malaysia and Australia, offset against the fair value loss of investment properties in Singapore as well as the adjustment of fair value of ROU investment properties.

Tax expenses increased by S$0.5 million mainly due to higher profits.

Total profit for FY 2023 was S$175.9 million, an increase of S$99.6 million or 131% as compared to S$76.3 million in FY 2022. Excluding fair value adjustments and costs on derecognition of a joint venture, net profit derived from core business operations was S$76.3 million in FY 2023, which was S$12.8 million or 20% higher than S$63.5 million in FY 2022.

Note:

  1. Occupancy excludes Korea PBSA which ceased operations by the end of February 2023.

(b) Review of Group Balance Sheet

Cash and bank balances increased by S$6.4 million to S$74.7 million as at 31 December 2023, largely due to net cash provided by operating activities.

Other assets increased S$2.0 million due to deposits paid for potential projects.

Financial assets, at fair value through other comprehensive income reduced by S$3.0 million, due mainly to the redemption of some listed debt securities in Singapore.

Assets held for sale consist of the Westlite Bukit Minyak and Westlite Tampoi which are in the process of sale to Kumpulan Wang Persaraan (Diperbadankan) ("KWAP").

Investments in associated companies increased S$21.6 million mainly due to an increase in the share of profits arose from better financial performance and net fair valuation gains derived from investment properties.

Investment in a joint venture reduced S$6.0 million primarily due to the cessation of operations in Korea.

Investment properties increased by S$94.5 million, largely due to the net fair value gains as well as acquisition of land at Ubi Avenue 3 in Singapore for development into workers accommodation and AEIs to the UK and Australia properties. This is offset against the investment properties in Westlite Bukit Minyak and Westlite Tampoi which had been transferred to assets held for sale.

Trade and other payables increased S$25.1 million largely due to advance rental and rental deposits received from new tenants as the occupancy rates have increased.

Lease liabilities decreased by S$13.4 million to S$73.5 million due mainly to the repayment of the principal component of the lease liabilities.

Borrowings & Gearing

The Group's borrowings reduced from S$663.1 million as at 31 December 2022 to S$657.4 million as at 31 December 2023 due primarily to repayment of borrowings.

The Group's net gearing ratio was reduced from 43% as at 31 December 2022 to 38% as at 31 December 2023. The Group's acquired operating assets and assets under development are primarily funded through bank borrowings, which have an average remaining maturity profile of 6 years. The Group uses long-term bank debt with regular principal repayments to finance its long-term assets.

As at 31 December 2023, the Group's balance sheet remained healthy with S$74.7 million in cash and bank balances. The Group has unutilised committed credit facilities of S$83.2 million (of which S$69.4 million relates to unutilised committed credit facilities expiring more than 12 months after balance sheet date) to meet the net current liabilities of S$10.1 million as at 31 December 2023.

(c) Review of Company Balance Sheet

Trade and other receivables as well as trade and other payables relate mainly to intercompany balances with subsidiaries.

Borrowings reduced by S$7.4 million largely due to the redemption of S$6.25 million fixed rate notes due 2024 on 12 April 2023.

(d) Review of Statement of Cash Flows

In FY 2023, the Group generated positive cash flow of S$122.8 million from operating activities.

Net cash used in investing activities amounted to S$45.3 million, mainly due to additions to investment properties and property, plant and equipment, partially offset by dividends received from joint venture and associated company as well as return of capital from a joint venture.

The Group recorded net cash used in financing activities of S$72.2 million mainly for the repayment of borrowings, interest, principal portion of lease liabilities and dividends paid during the year which offset proceeds from borrowings.

Commentary On Current Year Prospects

As at 31 December 2023, Centurion operates a diversified portfolio of 34 operational purpose-built workers and student accommodation assets ("PBWA" and "PBSA" respectively), comprising 67,377 beds across Singapore, Malaysia, Australia, the United Kingdom ("UK") and the United States ("US").

Workers Accommodation

Singapore

In Singapore, the Group operates nine Purpose-Built Workers Accommodation ("PBWA") of 34,786 beds, which includes five Purpose-Built Dormitories ("PBDs") comprising 27,530 beds, and four Quick Build Dormitories ("QBDs") comprising 7,256 beds.

Demand and supply dynamics for PBWAs continue to be positive, with healthy rental revisions given strong employer demand for dormitory beds. The average financial occupancy for the Group's nine PBWAs grew 1 percentage point from 97% in FY 2022 to 98% in FY 2023.

Rental rate revisions continue to be healthy, and 2H 2023 Singapore PBWA revenue increased 25% as compared to 2H 2022, whereas revenue growth for FY2023 was 15% compared to FY 2022. As the 1-year tenant leases expire and are renewed at prevailing higher rental rates, the full impact of rental rate revisions is expected to emerge progressively over the next 12 months.

During 2023, the number of Work Permit holders in the Construction, Marine and Process (CMP) sectors increased by 23% since January 2022, or almost 10% higher than pre-COVID levels, as employers brought in more workers to catch up on projects delayed by the pandemic1. This resulted in a shortage of PBWA beds, which the Government and industry took measures to address. To assist in enlarging bed supply to the market, Centurion has begun to convert some of its amenity spaces into dual use as isolation facilities which will release approximately 346 beds to the market. Earlier in the year, the Group added approximately 888 beds at two of its QBDs, Westlite Jalan Tukang and Westlite Tuas Avenue 2. With the uplift in bed capacity, these two QBDs still meet the New Dormitory Standards ("NDS") announced by the Ministry of Manpower, with six residents per unit at 4.2m2 living space per bed.

The Group continues to explore opportunities to enlarge its Singapore portfolio capacity. In January 2023, the Group together with a joint venture partner won a land tender from JTC, for development and use as a purpose-built worker dormitory. The development Westlite Ubi, which is expected to be completed in December 2024, will add approximately 1,650 beds to the Group's portfolio and will comply fully with NDS.

The Group remains well-positioned to capture the rising demand for workers accommodation, with Singapore's Building and Construction Authority (BCA) expecting to award more construction contracts amounting to between $32 billion to $38 billion from 2025 to 20282.

On 11 October 2023, the Ministry of Manpower announced its Dormitory Transition Scheme ("DTS"), requiring existing dormitories to comply with new interim dormitory specifications between 2027 and 2030 and the higher NDS by 2040. The Group welcomes the evolution of dormitory standards to improve pandemic resilience and dormitory liveability, and is well-prepared with plans in place to meet the interim standards or where possible the higher NDS, to deliver a better dormitory product while maintaining operational bed capacities to support the needs of employer-customers.

As part of its transition plan, the Group has received Provisional Permissions from the relevant authorities for partial redevelopment of two PBDs, Westlite Toh Guan and Westlite Mandai. The redevelopment of Block 14 at Westlite Toh Guan is targeted to complete in 2026, adding approximately 1,764 beds. At Westlite Mandai, the Group plans to redevelop its outdoor courts into a new block of approximately 3,696 beds, to be completed in 2026. Centurion aims to substantially complete and deliver the added dormitory bed supply to the market ahead of the transition period beginning in 2027. This would enable the Group to meet the strong market demand and commence progressive retrofitting of other parts of its PBDs, with minimal reduction of its total bed capacity and disruption of dormitory bed supply to employers. The new blocks, complying to the NDS ahead of 2040, will provide "swing sites" for residents to move to, while retrofitting works are carried out in existing blocks.

Malaysia

Increased regulatory controls such as the Workers' Minimum Standards of Housing and Amenities (Amendment) Act 2019 ("Act 446"), coupled with growing awareness around the need for improved welfare of migrant worker populations, has heightened demand for well-designed, professionally-managed PBWAs (or Centralized Living Quarters) in Malaysia. The Group's Malaysian assets are all certified by JTKSM to be compliant to Act 446.

The Group's Malaysian PBWA portfolio comprises eight properties spanning Johor in the South, Penang in the North and Selangor in the Central region of Peninsula Malaysia. The States of Johor, Penang, and Selangor are the top three states in Malaysia with the highest number of foreign workers in the manufacturing sector, which dominates the number of foreign workers, with about 35% of the country's estimated 2 million foreign workforce.

The Malaysian PBWA portfolio bed capacity was 27,373 beds as of 31 December 2023, which includes an additional capacity of 290 beds in Westlite Tampoi, following approval from JTKSM received in early 2023.

Average financial occupancy for the Malaysia PBWA portfolio has improved steadily to 93% in FY 2023 as compared to 80% in FY 2022, as occupancy continues to improve in tandem with the growth in demand for quality worker accommodation compliant to Act 446. Demand for PBWA beds is expected to remain strong into 2024, and Centurion continues to explore opportunities to grow its portfolio capacity in this market.

Asset Enhancement Initiatives ("AEI") have commenced at Westlite Senai II and Westlite Johor Tech Park, which will add approximately 920 beds and 1,740 beds respectively on expected completion in 4Q 2024. Additional enhancements are planned at Westlite Pasir Gudang, to add approximately 950 beds on expected completion in 1Q 2025.

On 4 December 2023, Centurion entered into sale and leaseback agreements with Kumpulan Wang Persaraan (Diperbadankan) (KWAP), Malaysia's public sector pension fund, for two of the Group's Malaysia assets, Westlite Bukit Minyak and Westlite Tampoi (the "Properties"). On completion of the sales and purchase agreements, the Group will leaseback and operate the two properties for a period of 15 years.

The divestment of the Properties is part of the Group's ongoing strategic rationalisation of its portfolio assets, to recycle and redeploy capital to further grow its portfolio of assets under management. The sale and leaseback of the Properties is also aligned with the Group's strategy to grow its business via asset light means. This sale and leaseback transaction exemplifies the strategy by which Centurion intends to optimise its capital, enlarge its portfolio and expand revenue streams. The Group will pursue this model and similar asset light strategies for synergistic, scalable growth of its specialised accommodation business across all global markets moving forward.

Also in December 2023, the Group completed the acquisition of the remaining shares in the associated company Oriental Amber Sdn Bhd, which holds a plot of land in Nusajaya, Iskandar, Johor. The Group is evaluating development of a new PBWA of approximately 7,000 beds on the land, which was originally zoned for agricultural use but has now been converted and zoned for industrial use.

Student Accommodation

As at 31 December 2023, the Group operates a portfolio of 5,218 beds across 17 operational PBSA assets in Australia, the UK and the US. Financial occupancies in the Group's PBSAs have improved significantly across the markets in tandem with the return of students to these markets, amid continuing under-supply of PBSA beds in key university cities.

Data from the global Student Housing Annual Report 2023 by Bonard3 reflects high occupancy rates and positive revisions in PBSA rents in 2023 across all higher education destinations analysed, including the UK, Australia and the US, and indicates continued healthy demand and potential for rental income growth for PBSA properties in the year ahead.

United Kingdom

Average financial occupancy in the Group's UK portfolio, which comprises 10 assets strategically located near top universities, continues to improve with UK continuing to be a destination of choice for international students. Average financial occupancy remained robust at 93% in FY 2023 as compared to 90% in FY 2022. Excluding beds not available during the year due to an AEI at dwell Cathedral Campus, average financial occupancy was 98% in FY 2023.

Continued shortage in PBSA supply in the face of increasing demand from both domestic and international students pursuing education in the UK, has enabled strong rental reversions, which cushioned the impact of high energy prices, inflationary pressures and increased operating costs for the Group.

Changes in the UK visa system, alongside the UK government's recent scrutiny of visa integrity, have contributed to a more genuine and committed student-tenant base, potentially benefiting PBSA providers4.

Pre-bookings for Academic Year 2024/25 are healthy, and the Group continues to explore opportunities to enhance its UK portfolio to meet growing and evolving demand.

In 2023, the Group completed AEIs at dwell MSV in Manchester and dwell Cathedral Campus in Liverpool, converting selected non-ensuite apartments to ensuite apartments and studios, with a reduction of 21 beds at dwell MSV. The retrofitted new room formats align with the shifts in consumer demands post-pandemic and are expected to enhance occupancy and rental income in the two assets.

Australia

In Australia, the average financial occupancy of the Group's two assets in Adelaide and Melbourne has recovered strongly, improving from 73% in FY 2022 to 88% in FY 2023 as total number of student arrivals for 2023 set a new record for Australia5.

Rental rate revisions have also been positive in FY 2023, reflecting a continued PBSA bed shortage and low PBSA vacancy rates in the cities where Centurion operates.

Occupancies are expected to remain at healthy levels, with positive rental revisions, as demand for PBSAs in Australia continues to rise6.

The Group continues to explore opportunities for portfolio enhancement or expansion in Australia.

In 2023, the Group carried out minor reconfiguration to convert selected twin occupancy rooms to single occupancy room formats, in continuing efforts to optimise occupancy and yield. At dwell Village Melbourne City, pending finalization of Development Approval, the Group plans to redevelop an existing carpark into a new block of PBSA, to add approximately 600 beds. The Group is also evaluating the redevelopment of existing accommodation blocks in dwell Village Melbourne City, to further enhance the asset.

United States

Centurion's US portfolio comprises five freehold PBSAs, which are held under the Centurion US Student Housing Fund ("CUSSHF"), the Group's inaugural private fund. Centurion holds approximately 28.7% of the total number of units in issue in CUSSHF and is the manager of the fund and its assets.

The portfolio assets continue to deliver healthy and stable occupancy, and the Group had in November 2022 extended the term of CUSSHF to November 2024. In 2Q 2023, CUSSHF successfully disposed of a single asset, dwell Tenn Street in Tallahassee, Florida.

As the fund approaches its term conclusion in November 2024, CUSSHF is currently evaluating the potential divestment of its remaining assets. Notably, occupancy remains strong and stable for the current academic year 2023/2024, and pre-leasing for the next academic year is healthy.

Looking Ahead

Notwithstanding high interest rates and inflationary cost pressures, the Group remains positive that its portfolio of assets will continue to do well in 2024 and will continue to practice prudent financial management whilst growing its global portfolio of assets under management.

Reiterating the Group's firm commitment to deliver sustained, long-term value to shareholders through both AEIs as well as investments in synergistic assets and businesses globally, the Group will also continue its strategic review to rationalise its specialised accommodation portfolio for strategic alignment, executing capital recycling and capital allocation towards higher yielding markets and assets, identifying opportunities to scale in existing markets, or to enter new markets.

The Group will also continue to calibrate and enhance its assets, spaces and operations to adjust to demand shifts as well as regulatory changes, to boost pandemic management resilience and ensure the wellbeing of its worker and student residents, as well as enhance operational efficiency going forward.

Remarks:

  1. https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2022/1020-written-answer-to-pq-on-price-and-adequacy-of- bed-space-in-mw-dorms.
  2. https://www.straitstimes.com/singapore/between-32-billion-to-38-billion-in-construction-contracts-to-be-awarded-in-2024-bca The Straits Times 15 Jan 2024.
  3. https://studytravel.network/magazine/news/0/30389 6 Feb 2024.
  4. https://thepienews.com/analysis/visa-integrity-the-hunt-for-genuine-students/ The PIE News 4 Jan 2024.
  5. International students arriving in 'record numbers', putting more pressure on housing, News.com.au, 12 Sep 2023.
  6. https://pbsanews.co.uk/2024/01/04/australia-pbsa-sector-stable-and-resilient-savills-finds/ PBSA News, 4 Jan 2024.