Paramount records slim profit for 1H2020 from continuing operations

PETALING JAYA, 24 August 2020: Paramount Corporation Berhad (Paramount) reported a slim 1H2020 profit after tax (PAT) of RM877,000 from its continuing operations anchored by its property development business, a drop of 97% compared to the corresponding period of 2019 due to the impacts of the COVID-19 pandemic.

Paramount, however, reported a record-high profit attributable to shareholders of RM463.3 million in 1H2020 due to the one-off gain of RM460.6 million from the disposal of its controlling equity stakes in the pre-tertiary education business in 1Q2020.

In 1H2020, Paramount’s property division achieved a revenue of RM182.0 million, which was RM155.5 million lower than the corresponding period in 2019. The main revenue contributors for the period were Bukit Banyan in Sungai Petani, Greenwoods Salak Perdana in Sepang and Utropolis Batu Kawan in Penang.

Paramount Group CEO Jeffrey Chew said, “The Movement Control Order (MCO) had significantly disrupted both our construction activities and sales, the two key drivers of the Group’s revenue.”

“Construction was almost at a standstill for two and a half months in 1H2020. Without progress at work sites, no revenue could be recognised.

“Fortunately, our 1Q2020 profits together with our cost rationalisation efforts allowed us to remain profitable for 1H2020,” he said.

He added that Paramount’s construction sites are fully operational today, having resumed work progressively since May, after completing COVID–19 screenings for workers, complying with health and safety guidelines, and putting in place new Standard Operating Procedures (SOPs).

“We are keeping our fingers crossed that there will not be another MCO, so that we can continue to recognise revenue from construction progress as well as from new sales,” he said.

Chew said, “Although our digital marketing and promotional activities attracted strong interest during the MCO period, converting this into sales took longer because legal documents could not be executed during the MCO, and customers needed more time to procure financing. This had affected property sales.  In addition, property launches had to be deferred during this period.

“Despite these setbacks, we managed to achieve 1H2020 property sales of RM193 million, which was 62% of the corresponding period last year.

“Interestingly, our July bookings were the second highest in five years for Paramount, and our team will be working hard to convert these into sales,” he said.

He said Paramount’s unbilled sales of RM873 million as at 30 June 2020 provided some visibility of the Group’s cashflow in the near term, but the pace of conversion into billings would depend on the construction progress of its projects.

Chew said while the property market will be weighed down by uncertainties tied to COVID-19, he believed low interest rates, the reintroduced home ownership campaign (HOC) and Paramount’s Priority campaign would support the company’s sales performance in the second half of the year.

“Property launches for the second half of FY2020 is estimated at a Gross Development Value (GDV) of RM640 million and will comprise entirely of residential properties, including new phases of existing projects,” said Chew. This represents an increase of 121% to the RM290 million launched in 1H2020.

“We are investing in new land bank at strategic locations with strong growth potential and scaling up our property development activities for long-term sustainable income. In July 2020, we entered into Sales & Purchase Agreements (SPA) to acquire 137.1 acres of land in Sungai Petani to expand our award-winning Bukit Banyan. The second transaction was for 4.54 acres of land with buildings, located at the ‘Embassy Row’ off Jalan Ampang, Kuala Lumpur for redevelopment. These purchases are expected to be completed by end 2020,” said Chew.

In addition, Paramount’s coworking business would also capitalise on opportunities arising from changes in the business landscape caused by the COVID-19.  Aside from co-working spaces, it is also offering end-to-end consult, design, build and manage workspace solutions services.

As cash and liquidity management remain critical during this challenging time, the Group has put in place risk mitigation plans and cost rationalisation measures to manage expenses but will continue to invest for long term business sustainability.

The Board of Directors has exercised prudence not to declare any dividend in this quarter. The decision was made in light of existing uncertainties surrounding the COVID-19 pandemic and after taking into consideration that a special interim dividend of 29 sen per share had already been paid to shareholders on 23 April 2020 from the gain on the disposal of the pre-tertiary education business.