The downturn in the travel and tourism business led to a significant reduction in earnings for the Sagicor Real Estate X Fund Limited for its first quarter ending March 31, 2020.
The Group generated net loss attributable to stockholders of $2.77 billion compared to a net profit of $0.69 billion in the prior year.
Directors, in comments attached to the report explain that the uncertainty surrounding the timing for reopening of the tourism sector and the current reduction in business activities led to a non-cash impairment charge of $3.88 billion on the company’s investment in associated company, Playa.
The X Fund owns 15 per cent of the international resort group.
The shareholders of X Fund Group recorded $2.36 billion in relation to this impairment charge.
Notwithstanding the large non-cash adjustment, the Group assert that the company remains in a “healthy liquidity position, an important indicator of our financial resilience.”
During the quarter, cash resources increased by $0.15 billion to $2.18 billion and generated positive cash flows from operations of $0.26 billion.
The directors said, “We remain confident that our cash resources are sufficient to meet our short to medium term liquidity needs.”
The company indicates that hotel revenue had been on an upward trend until the latter part of the quarter, when the Group began to experience a significant reduction in demand for travel and leisure activities.
Its direct hotel operations segment which comprised DTO (a hotel located at the entrance of Universal Orlando) and a stake in the former Palmyra Hotel, renamed Jewel Grande, contributed $1.56 billion, down 11 per cent on prior year.
Directors stated, “In a time when the tourism sector is reporting significant losses, our hotel business generated net profits of $0.06 billion.”
The Group, meanwhile, says it has taken immediate measures to curtail operating and non-critical capital expenses in order to limit further loss in value.
The Group’s indirect hotel and commercial operations comprise of investments in Jamziv Mobay Jamaica Portfolio Limited (Jamziv) and units in Sigma Real Estate Fund.
This segment reflects the share of profits from associate and capital appreciation from Sigma Units in the current year.
X Fund, through Jamziv holds 60.81 per cent of the 20,000,000 Playa shares and in the Sigma Real Estate Fund it has 402 million units or a 3 per cent interest.
Jamziv had share of profit from associate of $0.86 billion in prior year versus a share of loss of $0.47 billion in the quarter.
The directors indicate that DTO had a good first quarter considering the impact of COVID-19 and continued s to outperform comparable properties in the Orlando market with occupancy levels of 77 per cent for the quarter.
Hotel revenues for DTO were $1.35 billion (2019 $1.47 billion), with Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) of $0.43 billion (2019 $0.49 billion), and net income for the quarter of $0.11 billion (2019 $0.18 billion).
The reduction compared to last year is as a result of a significant decline in occupancy during March 2020.
Reductions in total assets to $45.22 billion at March 2020 down from $49.22 billion at December 2019 were said to be largely due to the impairment of investment in Playa.
Directors said that they remain hopeful “that our business activities will rebound in the latter part of the year but are cautious as global economic conditions may not improve in the coming months.
“We are carefully monitoring and assessing the overall impact on the Group.”