Net profits down by 38% as tertiary student accommodation company recovers from pandemic

Tertiary student accommodations provider 138 Student Living, marketed as 138SL, has seen its income declining during the half-year period ended March 2021, as the negative effects of the COVID-19 pandemic bear down on the company.

While slowly recovering from the pandemic, 138SL’s income decreased by 29 per cent to $522.64 million relative to the $733.59 million recorded for the corresponding six-month period the year prior. Other operating income increased for the period under review, growing by 84 per cent to $36 million relative to $19.57 million a year earlier. 

Income for the quarter declined by four per cent to $267.07 million (2020: $278.35 million), while other operating income climbed 42 per cent to $15.43 million (2020: $10.86 million). Administrative expenses decreased by 22 per cent for the period amounting to $278.64 million (2020: $357.57 million).

As for the March quarter, there was a 10 per cent decline to $136.93 million versus $152.57 million reported in the prior year’s corresponding period. Thus, operating profit for the six-month period closed at $279.96 million, a decrease of 29 per cent compared to $395.58 million that was recorded for the comparative period in 2020.

Operating profit for the quarter closed at $145.58 million, up from the $136.65 million posted in 2020. 138SL reported finance costs of $114.56 million, down from the $134.47 million posted last year, representing a 15 per cent decline year over year.

For the quarter, finance cost dropped 17 per cent to close at $55.46 million coming from $66.79 million, the year before.

Profits down as 138SL recovers

Profit before taxation for the six-month period amounted to $165.39 million compared with a profit before taxation of $261.11 million for the comparable period last year. For the quarter under review,  profit before taxation amounted $90.12 million coming from $69.86 million in 2020.

The management reports that “the results of the quarter are positively impacted by the recording of the 90 per cent Occupancy Guarantee under the Concession Agreement”. Following tax credits of $1.40 million, net profit totalled $166.79 million versus a net profit of $270.20 million recorded in 2020.

Net profit for the quarter closed at $100.87 million relative to a net profit of $87.34 million the prior year. Total comprehensive income for the six months review period amounted to $166.79 million relative to an income of $270.01 million last year.

For the second quarter, total comprehensive income summed to $100.87 million versus a total comprehensive income of $87.15 million the prior year.

Recovering from the pandemic

138SL highlighted that, “during the period under review, 138SL operated 1,464 world-class rooms at its four locations on the UWI Mona Campus consisting of 1,692 beds. Whilst the COVID-19 pandemic continues to negatively impact the business operations, there has been a steady growth in occupancy since the start of the January 2021 academic semester”.

Occupancy increased from an average of 15 per cent to an average of 45 per cent. The management is optimistic that this trend will continue upon the commencement of the upcoming academic year.

With the introduction of the vaccination programme, it is anticipated that more face-to-face classes will resume which will increase the demand for student accommodation. Furthermore, the management team remains motivated not just to contain cost, but also to grow revenues from the short-term rental business.

According to 138SL, “we see the short-term rental business as an opportunity for increased revenue and will continue our efforts to grow this business portfolio. We remain committed to our long-term strategic goal of delivering long term shareholder value”.

As at March 31, 2021, total assets decreased by nine per cent to $10.09 billion coming from $11.14 billion in 2020. This decrease was primarily driven by financial asset-service concession, which closed at $8.87 billion.