Uni-Asia Recorded Highest 9-month Profits in 5 Years, Expects Dry Bulk Market Rebound in Coming Months
Uni-Asia Group Limited, an alternative investment company, asset manager and integrated service provider of vessels and properties, announced its financial results for the three months and nine months ended 30 September 2019 (“3Q2019” and “9M2019” respectively).
Charter income decreased by 7% from US$29.4 million in 9M2018 to US$27.4 million in 9M2019. The total number of wholly-owned/majority-owned ships contributing to the Group’s charter income was 11 for 9M2019 compared to 12 for 9M2018 as a vessel was disposed in April 2018. Dry bulk market deteriorated badly in 1H2019, although in 3Q2019, market recovered some lost grounds. Notwithstanding the recovery, the average 9M2019 shipping market was still weaker than 9M2018. In addition, scheduled maintenance dry-docking of some of the Group’s ships reduced the charter hire days and hence charter income for 3Q2019. The charter for the Group’s sole wholly owned containership was also weaker in 9M2019 compared to 9M2018 due to uncertainties arising from trade war in 9M2019.
Total fee income, at US$5.7 million for 9M2019, represented a 1% increase from 9M2018. Asset management and administration fee increased by 27% to US$2.3 million mainly due to increase in assets under management of the Group’s property asset management subsidiary, Uni-Asia Capital (Japan) Limited (“UACJ”). Arrangement and agency fee for 9M2019 at US$1.8 million was less than 9M2018 by 43% due to less arrangement deal transactions in 9M2019. The increase in brokerage commission to US$1.1 million in 9M2019 from US$0.4 million in 9M2018 was due to more brokerage commission deals closed in 9M2019. Incentive fees earned by subsidiary UACJ from meeting targets in managing Japan property projects increased by 46% to US$0.5 million in 9M2019.
Total Operating Expenses
The Group’s employee benefit expenses and hotel operating expenses increased by 13% and 21% respectively in 9M2019 compared to 9M2018. With increased business activities as the new hotels which opened between April 2018 to August 2018 (towards end of 3Q2018) became more established in 2019, more expenses were incurred. The total number of hotel rooms available for sale (i.e. room inventory) had increased from around 603 thousand rooms during 9M2018 to around 700 thousand rooms during 9M2019. All long term hotel and ship leases of the Group are accounted according to IFRS 16 Leases. This has resulted in depreciation of right-of-use assets of US$16.0 million in 9M2019 and decrease in hotel operating lease expenses by 59% from US$16.1 million in 9M2018 to US$6.6 million in 9M2019. Hotel operating lease expenses are in respect of leases of the Group that are outside the scope of IFRS 16. In 9M2019, the Group disposed of a hotel held as Property, Plant and Equipment (“PPE”) through a consolidated Godo Kaisha entity. The disposal resulted in a gain of US$4.3 million which was recognised as gain on disposal of PPE. Due to the above factors, the Group’s net operating expenses increased by 15% for 9M2019 compared to 9M2018.
Operating profit of the Group increased by 46% from US$11.8 million for 9M2018 to US$17.3 million for 9M2019.
Finance And Other Costs
Interest on borrowings was US$4.1 million for 9M2019, a 7% decrease from 9M2018 as the Group pared down borrowings in 9M2019. Following the adoption of IFRS 16 Leases, the Group has to recognise lease interest for the lease liabilities recognised on the balance sheet in accordance to IFRS 16. The Group recognised a lease interest expense of US$3.5 million in 9M2019. No lease interest expense was recorded in 9M2018 as the Group adopted IFRS 16 on 1 January 2019. The allocation of profit of US$1.8 million to Tokumei Kumiai investors are similar to the allocation of profit to non-controlling interest, but for Godo Kaisha structure in Japan. The increase is mainly due to sharing of profit following disposal of PPE as mentioned above.
Net Profit After Tax
The Group posted a net profit after tax of US$7.4 million for 9M2019, a 20% increase from US$6.2 million in 9M2018.
Net Profit After Tax Attributable to Shareholders
The Group recorded a 35% increase in net profit attributable to shareholders of US$6.7 million for 9M2019.
Dry Bulk According to Clarksons Research “Dry Bulk Trade Outlook” October 2019 issue, 2020’s bulkcarrier market may be fairly balanced in terms of bulkcarrier demand growth vs fleet growth, but other factors including reduced speed, scrubber retrofit time and increased recycling may lend support to bulkcarrier market. Some of the Group’s vessels which are on short term index-linked charter may be able to benefit as the market improves, although there is normally a time lag between market improvement and increase in index-linked charter.
Source: Uni-Asia Group Limited