Paramount Corporation Berhad registers 19% growth in profit for FY2015

Petaling Jaya, 24 February 2016: Paramount Corporation Berhad (PCB) today announced its full year results for the financial year ended 31 December 2015, posting a significant 19% growth in Profit Before Tax (PBT) to RM101.7 million (FY2014: RM85.7 million) and a net profit of RM74.2 million for the same period, on the back of a 13% growth in revenue to RM576.0 million (FY2014: RM510 million). PCB’s core divisions Paramount Property and Paramount Education both registered growth in revenue for the same period.

The results follow the Group’s 4Q2015 results, which saw Group PBT jump a significant 38% to RM22.7 million (4Q2014: RM16.5 million). Net profit for the same period was RM16.5 million on marginally lower revenue of RM147.7 million (4Q2014: RM157.7 million).

A final dividend of 5.75 sen has been proposed for the financial year ended 31 December 2015. Together with the interim dividend of 2.5 sen paid, the total dividend for the year would amount to 8.25 sen per share (FY2014: 7.5 sen).

Announcing the results, PCB Group Chief Executive Officer Jeffrey Chew said, “Despite challenging market conditions, both Paramount Property and Paramount Education performed well in 2015, laying a good foundation for long-term sustainable growth. We remain on track with our 5-year business plan, which is anchored on our strategy of strength through synergy, exploring and maximising opportunities across our property and education businesses.”

The Group’s financial performance was underpinned by several factors – Paramount Property’s new launches on existing developments enjoyed good take up rates of between 60% and 80%, while its newest development in the Klang Valley, Greenwoods Salak Perdana had a take up rate of 30% since its launch in Q4. Paramount Property recorded sales of 506 units for FY2015, with sales value of RM432 million and lock-in sales of RM370 million carried forward into 2016.

These results were further supported by Paramount Education’s primary, secondary and tertiary business units, which registered an across-the-board increase in new student enrolment. KDU University College (KDU UC) at Utropolis, Glenmarie recorded the highest increase in growth, at 15%.

Chew said that KDU UC’s new programmes, which were launched in response to market demand, its new Utropolis campus and more organised marketing activities all contributed to its improved performance. The Sri KDU primary and secondary schools continued to operate at close to full capacity with another record year of profits, while KDU Penang University College (KDU Penang UC) held steady.

Touching on prospects for the Group in 2016, he said that in 4Q2015, the consumer sentiment index sank to a new low of 63.8 points (source: Malaysian Institute of Economic Research), which in turn adversely impacted all sectors of the economy, more so the property market. He added that the banking sector’s stringent lending policies further compounded the property market’s performance, with drop-out rates of as high as 50% amongst those who did indicate an interest to purchase.

“In this competitive marketplace, we expect demand for property to remain primarily in the affordably priced segment and in the property hotspots of Klang Valley and Penang, with interest focused on developments with innovative lifestyle concepts,” said Chew. “Paramount Property’s future performance will be underpinned by the breadth of its product portfolio, which includes both affordably priced properties as well as innovatively conceptualised developments.”

Paramount Property’s current portfolio consists of Sejati Residences, Cyberjaya; Sekitar26 Business, Shah Alam; Utropolis in Glenmarie, Shah Alam, Greenwoods, Salak Perdana, Sepang as well as Bandar Laguna Merbok and Bukit Banyan in Sungai Petani.

Chew said that Paramount Property will also be rolling out two innovative concept developments in 2016. “The first, in Section 13, Petaling Jaya, will cater to those interested in investing in this mature and highly accessible mid-town address, while the second will be Penang’s first university metropolis in the new growth area of Batu Kawan, Penang. The Batu Kawan development will mirror the very successful Utropolis Glenmarie university metropolis concept.”

On the education front, he said Paramount Education was facing two key challenges.

The first, he said, was more intense competition across all business segments. In the tertiary segment, the opening of Xiamen University in 2016 and the coming on-stream of new campuses by existing players, many offering large capacities, would impact demand, whilst there were several new schools opening in 2016, 2017 and 2018 in the primary and secondary schools segment.

The second challenge, he elaborated, was the market’s increasing preference for medium-to-lower priced institutions, as a result of the muted economic environment and the change in Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) loan criteria, which compounded the affordability problem of students.

On a positive note, Sri KDU private school has received the Ministry of Education’s approval to be a Dual Language Programme school giving the school the option to teach Science and Mathematics in either English or Bahasa Malaysia to Primary 1 and 4 as well as Secondary 1 students.

“Paramount Education’s tertiary education business continues to see positive growth in 2016, with the new Utropolis Glenmarie campus offerings, KDU Penang UC’s strong leadership position in the North as well as its recent elevation to university college status and its 6-star MyQUEST rating expected to further spur interest in our brands,” he concluded.

Against this scenario, Paramount Education’s prospects remain good, with the primary and secondary schools and their strong value proposition, continuing to drive the performance of the division, said Chew.

Other financial highlights

In 4Q2015, revenue for Paramount Property decreased by 11% to RM109.6 million (4Q2014: RM122.8 million) mainly due to the cessation of its construction activities and lower progressive billings registered on the Utropolis in Glenmarie, Shah Alam, Kemuning Utama in Shah Alam and Sejati Residences in Cyberjaya developments, which were offset by the higher progressive billings registered on Sekitar26 Business in Shah Alam development.

PBT, however, increased by 40% to RM19.0 million (4Q2014: RM13.6 million) mainly due to the higher PBT registered on the Sekitar26 Business development and a net provision of RM3.8 million on impairment of investment properties recorded in 4Q2014.

In the same period, revenue for the Paramount Education (comprising the primary, secondary and tertiary schools) grew by 12% to RM38.2 million (4Q2014: RM34.1 million) with higher revenue contribution across all its business units stemming from higher new student enrolments.

PBT, however, decreased by 28% to RM3.9 million (4Q2014: RM5.4 million) due to KDU UC incurring higher losses stemming from the onset of depreciation charges and interest costs on its new campus in Utropolis, Glenmarie this year offsetting the higher PBT recorded by Sri KDU.

For FY2015, revenue for Paramount Property grew 13% to RM427.1 million (FY2014: RM376.4 million) due to higher sales and progressive billings registered on the Sejati Residences in Cyberjaya, Utropolis in Glenmarie, Shah Alam, Sekitar26 Business in Shah Alam and Bukit Banyan in Sungai Petani developments offsetting the lower revenue from the construction sector as a result of the cessation of its external projects. As a result of the higher revenue and despite the lower PBT from the construction sector, PBT increased by 23% to RM83.9 million (FY2014: RM68.3 million).

Revenue for Paramount Education grew 13% in FY2015 to RM147.9 million (FY2014: RM131.1 million) with higher revenue contributions from all its business units stemming from higher new student enrolments. While the primary and secondary schools recorded a higher PBT compared with the previous year, KDU UC incurred higher losses due to the onset of depreciation charges and interest costs on its new campus in Utropolis, Glenmarie this year. Overall, PBT for Paramount Education decreased by 12% to RM21.6 million (FY2014: RM24.6 million).