Petaling Jaya, 10 February 2017 : Paramount Corporation Berhad (Paramount) today announced its financial performance for FY2016, recording a 11% increase in Profit Before Tax (PBT) despite market challenges. Group PBT increased from RM101.7 million in FY2015 to RM112.5 million in FY2016, with higher PBT contribution from Paramount’s education division. Group revenue for FY2016 was marginally lower, by 1%, at RM573.1 million compared with the previous year (FY2015: RM576.0 million), with the property division recording marginally lower revenue that was offset by a higher contribution from the education division.
Announcing the results, Paramount Group Chief Executive Officer Jeffrey Chew said, “The Group turned in an excellent performance in 4Q2016, surpassing the performances of the preceding three quarters to end FY2016 on a strong note. Strong sales momentum was seen across most of Paramount Property’s developments while Paramount Education held steady.”
Revenue for Paramount’s property division was marginally lower at RM420.5 million, about 2% less compared with the previous year’s revenue (FY2015: RM427.3 million), principally due to substantially lower contributions from the Sekitar26 Business development, which was completed and handed over during the year. Higher contributions from the Bukit Banyan and Sejati Residences developments together with the coming on-stream of new developments, Greenwoods Salak Perdana and Utropolis Batu Kawan, ameliorated the lower revenue contribution from this completed development.
PBT for the division decreased marginally, by 1% to RM82.5 million (FY2015: RM83.1 million) attributable to the higher losses from property investment, which was offset by the higher contributions from the Bukit Banyan, Sejati Residences, Greenwoods Salak Perdana developments and the recognition of remaining construction profits from a completed external project, the accounts of which were finalised at the beginning of FY2016.
Chew said that Paramount Property’s newly launched Utropolis Batu Kawan development was very well received – its first phase of commercial properties with a GDV of RM162 million registered a take-up rate of 55% while sales at Utropolis Glenmarie quadrupled from the preceding quarters. In total, Paramount Property recorded sales of 459 units in 2016 with a sales value of RM420 million.
Revenue for the education division grew marginally by 3% to RM152.4 million (2015: RM147.9 million) attributable to higher revenue contributions from the primary & secondary schools, and KDU University College (KDU UC) stemming from higher new student enrolments.
PBT for the division increased by 68% to RM36.4 million (FY2015: RM21.7 million) mainly attributable to the gain of RM8.8 million recognised on the disposal of a block of apartments that were no longer required. The primary & secondary school segment registered higher profits while lower losses were incurred by KDU UC offsetting the lower profits from KDU UC Penang.
Looking forward, Chew said the weak consumer sentiment experienced in 2016 is expected to continue into 2017. “The ringgit remains volatile, although Bank Negara Malaysia (BNM)’s recent measures are expected to stabilise the Ringgit,” he said. “We expect a cautious market, with more homebuyers, upgraders and astute investors looking for properties in good locations, in particular townships/integrated developments that are affordably priced and innovatively conceptualised.”
Under this scenario, he said Paramount Property’s performance will be underpinned by the breadth of its product portfolio, which includes both affordably-priced properties and innovatively conceptualised developments.
“This will be further supported by the rolling out of another two innovative developments in 2017. The first, in Section 13 in Petaling Jaya, will cater to those interested in investing in this mature and highly-accessible mid-town address complete with senior living concepts, while the second will be Sekitar26 Enterprise, a neighbourhood community retail centre designed for a myriad of uses, and anchored by Paramount Property’s new development office,” he said.
On the education front, Chew said Paramount Education will continue to face challenges, particularly in the tertiary segment where competition is intense and highly price-sensitive. Education institutions have gone into a price war in an attempt to hold their respective market positions and compete for new students. However, he said Paramount Education’s prospects remain good as overall enrolment to-date has registered growth over the previous year. The primary and secondary schools, with their strong value proposition, will continue to drive the performance of the division. The recent acquisition of R.E.A.L Education Group, an established K-12 player with three key brands - REAL Kids, REAL Schools and the Cambridge English for Life - will boost Paramount Education’s income, accelerate its growth plans, and allow instant access to REAL’s 18,000 strong student base.
“The acquisition also provides Paramount Education the opportunity to offer a more affordable alternative for high quality K-12 education, in turn allowing it to reach out to a wider student universe and diversify into a new kindergarten market,” he concluded.