Chairman's Message

Chairman's Message (Chinese)

Dear Shareholders,

On behalf of the Board of Metro Holdings Limited (“Metro” or the “Group”), it is my pleasure to present our Annual Report for the financial year ended 31 March 2016 (“FY2016”).


We achieved a net profit of S$113.3 million in FY2016, the bulk of which were substantially contributed by the share of joint ventures’ results of S$68.2 million and share of associates’ results of S$75.7 million. These were collectively driven mainly by the Property Division’s divestment gains as well as fair value gains and recognition of sales of its residential property component.

Our financial performance, while lower than the net profit of S$142.4 million recorded in FY2015, was favourable considering that FY2016’s results excluded a significant amount of negative goodwill of S$57.4 million recorded in FY2015.

Contributions from Metro’s joint ventures’ and share of associates’ results were also offset by a number of factors. These included the S$6.6 million in unrealised fair value deficit of short term investments, S$9.5 million in impairment of amount due from a joint venture, and a S$13.0 million increase in general and administrative expenses which arose mainly from the unrealised foreign exchange losses on bank balances.

We ended the financial year with a robust balance sheet, with shareholders’ equity of approximately S$1.4 billion and a cash position of approximately S$493.6 million as at 31 March 2016. Having a strong financial position will provide us with the buffer to weather macroeconomic uncertainties and the capacity to capitalise on value accretive opportunities. This is particularly the case in the capital intensive field of property development and investment.


At this juncture, I wish to express our great sadness on the loss of Mr Jopie Ong, our Group Managing Director, who passed away in February 2016. While Metro has a long operational retail history that stretches back almost six decades, it was under his watch that Metro transformed itself from a domestic departmental store chain into a global real estate and retail group. His leadership and ability to keep his fingers firmly on the pulse of retail trends ensured that Metro successfully navigated the fast changing retail and fashion landscape.

With his farsightedness during the 1980s in anticipating opportunities in China ahead of other players, Metro was able to capitalise on its resources to gain an early mover advantage there and in developing its now-core property development and investment business. The strong head start has since enabled us to expand our real estate presence not just in China, but also the United Kingdom (“UK”) and Singapore.

On behalf of our staff, business associates and the Board, I would like to express gratitude for Mr Jopie Ong’s leadership and for being an inspiration to all who have worked with him. We will always remember his pioneering vision and wisdom in charting the Group’s strategic direction, resulting in Metro’s position of strength today.


I would also like to take this opportunity to congratulate Mr Lawrence Chiang, who has been appointed as Metro’s Group Chief Executive Officer in June 2016. He has been with Metro since 1989 and was the Group General Manager since 2007 before assuming the position of Group Chief Operating Officer in 2013. Following that, he was appointed the Acting Group Chief Executive Officer in February 2016. Given his long tenure with Metro, he understands our overall operations thoroughly. Mr Chiang was also instrumental in successfully executing the strategies through our evolution into a leading property development and investment group with an established retail track record. I am confident that with his outstanding leadership that has guided Metro forward, he will be able to provide the continuity in our operations and in pursuing our core strategies that have earned us success through the years.


On an overall basis, the average occupancy of our three investment properties, held by a subsidiary and joint ventures, in FY2016 continued to be high at 91.2%.

Buoyed by the vibrancy of the residential market in Shanghai, our investment in Shanghai Shama Century Park serviced apartments have continued to generate good returns. The property registered the highest fair value gains among our investment properties, including those held by our associates and joint ventures, during the financial year.

Strengthened Partnerships Through Collaborations

During FY2016, we deepened our presence in the UK and further strengthened our trusted partnership with Scarborough Group International Limited (“Scarborough”) by investing in an office development land site in Sheffield, UK. With an anticipated completion of the first building in Q3 2017, the development, comprising two office buildings, is expected to provide 80,300 square feet and 50,900 square feet of net internal area respectively. This also marks our second collaboration with Scarborough in the country, following the partnership to develop Milliners Wharf The Hat Box and Middlewood Locks in Manchester, UK, in FY2015.

For our Nanchang Fashion Mark project, our collaboration with Top Spring International Holdings Limited has progressed well and we continued to reap benefits from this strategic partnership. During FY2016, the completion and recognition of sales of 80.2% of the residential property component led to the recording of a significant contribution of S$46.7 million.

We also extended our successful partnership with InfraRed NF China Real Estate Fund in FY2016 by committing a total of US$57 million for investments in InfraRed NF China Real Estate Fund II (A), L.P. (“Fund II”), with an initial investment of US$24 million. Beyond broadening our revenue streams, this will allow us to further expand our property interests in China, where we are highly familiar with, and in which we have made substantial investments. As part of the agreement, Metro also has the discretion to co-invest with Fund II in its investments, thus being in a position to capitalise on favourable opportunities alongside the fund.

Unlocking Capital for Future Redeployment

Consistent with our strategy of unlocking capital when the opportunities are ripe, we divested our 50% interest in the joint ventures owning EC Mall, Beijing, in April 2015, and Frontier Koishikawa Building, Tokyo, in August 2015. As a result, divestment gains of S$38.1 million and S$4.4 million were registered respectively from the disposals. During FY2016, over one-third of the Shanghai Shama Century Park serviced apartments were also disposed.

With our secure cash reserves following these divestments, we are well-placed to selectively redeploy capital in a strategic manner as we have done so in the past, embarking on a cycle that rewards shareholders. In particular, within the domain of property development and investment where we have deep experience in, we remain steadfast in seeking opportunities where we can leverage on both our competencies and established relationships with partners.


For our Retail Division, we have streamlined our presence in Singapore with the closure of the Metro Sengkang and Metro City Square stores following the expiry of the leases. As for Metro Centrepoint, it operated on a full year basis in FY2016 as compared to just five months during the previous financial year.

While our heritage remains in retail, the generation of returns for shareholders continues to be our key focus and we are deploying multiple strategies to improve our retail operations. These include the refreshing of our store experience by updating our wide range of quality merchandise and the offering of innovative and new marketing platforms.

The division remained affected by the soft retail environment. While the full year sales contribution from Metro Centrepoint led the division to record a 7.7% growth in revenue to S$146.1 million, challenging operational conditions resulted in continual losses on a segment results basis, which amounted to S$2.4 million in FY2016. This was however, narrower than the S$13.7 million loss recorded for the segment results in FY2015.

For Indonesia’s retail operations, our associate was able to improve profitability amidst pressures from a challenging retail market. As such, the Retail Division’s share of associates’ results, net of tax, rose to S$2.5 million from S$1.5 million in FY2015.


The anticipated slowing of China’s economic growth to between 6.3% and 6.7% for 20161 has led to lower market confidence. However, the mid- and long-term outlook remains sound given China’s robust domestic consumption trends. Looking ahead, we expect rental income from our investment property, GIE Tower, Guangzhou, to remain stable. As for Metro City, Shanghai, asset enhancement work continues on the last two levels of the mall.

China remains a core property development and investment market where we possess extensive insights and where we have forged close working relationships with stakeholders over the years.

As the majority of our Nanchang Fashion Mark project’s presales of residential and ancillary retail properties of the residential sites have been recognised, going forward, the project’s contributions for the subsequent phases will primarily be from recognition of presales of commercial space. On that front, we are encouraged by the presales of these properties, which largely comprise office and skirt retail space, as almost half of the project’s next phase has been presold. However, the gross margins of the office component, as indicated following the presales, were reduced and will continue to be significantly lower than that of the residential properties.

For the UK, we continue to be on the lookout for favourable opportunities, particularly outside of London where it is less competitive and valuations remain at levels that are more compelling. Similar to our developments and investments in Manchester and Sheffield, this prudent approach will raise the likelihood that we can derive higher returns from our initiatives for the benefit of Metro’s investors.

As the sentiment of Singapore’s residential property market has been weak, this has also affected the sales of our residential project – The Crest at Prince Charles Crescent – which has continued to be sluggish.

As our business is predominantly in property development and investment, our results are inextricably linked to property market cycles. Further, given the nature of property development having a relatively longer lead time for completion, Metro’s overall financial performance inevitably fluctuates across different financial years.

On the retail front, given that The Centrepoint is still undergoing a makeover until late 2016, the foot traffic and sales of the Metro Centrepoint store is anticipated to remain impacted. Further, we also expect a number of factors, including the competitiveness of the industry and elevated operating costs to continue impacting the retail operations of our three remaining stores in Singapore.


With Metro on steady foundations, backed by a strong balance sheet and the achievement of realised gains from property divestments during the financial year, the Board has recommended on a per share basis, an increase in total dividends from 6.0 Singapore cents in FY2015 to 7.0 Singapore cents in FY2016. These comprise an ordinary final dividend and a special dividend of 2.0 Singapore cents and 5.0 Singapore cents respectively per share. Taken collectively, the dividends represent a payout ratio of 51.2% of the Group’s net profit attributable to shareholders for FY2016 and a dividend yield of 7.4%2.


Metro’s continued strength and performance over the years are the results of the dedication of our staff and management team. On behalf of the Board, I would like to express my gratitude to them for their hard work. I would also like to thank our shareholders for their unwavering commitment in the Group, as well as our business partners, associates, customers and tenants for their steadfast support.

Last but not least, I would like to extend my appreciation to my fellow directors for their counsel and who have been instrumental in guiding Metro’s sound strategy.

With Metro on strong footing and the collective support from our stakeholders, we will continue striving towards strengthening Metro’s leading position as a property development and investment group.

Lt-Gen (Retd) Winston Choo

17 June 2016

1 CBRE, Greater China Real Estate Market Outlook – 2016
2 Share price of S$0.95 as at 31 March 2016