138 Student Living Jamaica Delivers Sub Optimal Revenue & Losses For Twelve Months Ended 30 September 2018.
The Board of Directors of 138 Student Living Jamaica Limited (138 SL) is pleased to present our unaudited consolidated financial statements for the twelve months ended 30 September 2018.
The financial year ended 2018 September 30 was, in many respects, a very challenging year for 138 Student Living Jamaica Limited [138SL] and its subsidiary 138SL Restoration Limited [138SLR] which culminated with the Group recording a loss after taxation of $ 18.90M; disaggregated as a net profit of $31.34M for 138SL and a net loss of $50.24M for 138SLR.
It was for both companies, the first full year of operations with the present compliment of 1464 rooms; 1008 for 138SL and 456 for 138SLR. Whilst for 2017, 138SL did have 1008 rooms by year end, 288 were operational for only nine (9) months whereas for 138SLR, only 72 rooms were operational; 384 rooms at Irvine Hall becoming operational for only one month of the year.
Probably not unexpectedly, the increased rooms under management impacted profitability negatively, as income was less than optimal whilst at the same time, expenses increased. To elaborate, as with many new housing developments, occupancy levels grew slowly falling below the targeted level of 97%.
For 138SL, the 90% occupancy guarantee provided by the University of the West Indies (UWI) presented its own challenges as, where UWI failed to provide students to fulfil this guarantee; the company booked such revenue as receivable from UWI. Subsequently, discussions with UWI revealed differences of interpretation as to who constitutes students for the purpose of computing this occupancy guarantee; as a result of which the company has made a provision of $19.96M or 50% of the disputed sum previously booked as revenue.
For 138SLR, revenue was also sub optimal arising from a change in the configuration of the Irvine Hall re-development relative to that contemplated in the Concession Agreement [CA] coupled with lower approved rental rates. These matters and the adverse financial impact on the company are under discussion with UWI as to measures that can be implemented to remedy this situation. The company is confident that the CA provides an avenue for compensation, which is being pursued.
At the same time, even with the pressures on revenue as identified above, expenses increased as the companies increased operational and administrative efforts to manage this expanded business. Also, financing costs, much of which had previously been capitalized, became fully chargeable against revenue as the project had now shifted to the operational phase. In addition, the company has made a provision of $19.81M, representing approximately 18.2% of rental receivable based on its assessment of the recoverability of the rental receivable portfolio. This assessment is ongoing even as the company has implemented a rigorous rental recovery programme.
For the future, the company anticipates improved financial performance resulting from improved occupancy levels, a trend that is already evident in the registration realized for the 2018/2019 academic year; resolution of the UWI related issues which are actively being pursued; our confidence in the positive outcome of these discussions and as operational issues are fine-tuned to realize cost savings, inclusive of improved collections of revenue. Additionally, the company intends to build on the gains achieved in the marketing of the short-term rental product, which for the 2018 financial year accounted for 14% of rental revenue.
The ruling from the Arbitration, which was scheduled for July, was postponed to November 2018 with a further postponement to the middle of December 2018.
RICHARD O. BYLES CHAIRMAN