Group managing director Azmir Merican said the significant losses in the first half of 2024 (H1 2024) were primarily driven by the negative accounting impact of IFRS 17, related to a five-year rental guarantee.
“With the new building’s occupancy rate starting at just 20%, the accounting impact for 2024 has been notably large.
“However, we do not foresee any further impact because we have taken a prudent move to account for the major effects in the current quarter, and do not foresee substantial additional impacts for the remainder of the year,” he said after SDP’s virtual media briefing on its H1 2024 financial results today.
Azmir said by aiming to increase the building’s occupancy to a minimum of 50% within the next 12 months and eventually to 80%, the company anticipates a reduction in the financial impact as the tenancy improves.
“Our focus is now on increasing tenant occupancy, which will help mitigate future accounting impacts,” he stated.
Azmir said SDP will review the situation again at the end of the year, but current assessments suggest that any further financial impacts will be minimal unless significant changes occur.
SDP’s net profit surged 127.9% to RM161.96 million in the second quarter ended June 30 (Q2 2024) from RM71.07 million in Q2 2023, while revenue soared 74.2% to RM1.2 billion from RM688.92 million previously.
For the cumulative six-month period ended June 30 (H1 2024), the company’s net profit more than doubled to RM285.54 million from RM131.74 million in H1 2023, while revenue jumped to RM2.18 billion from RM1.37 billion previously.
Overall, Azmir said the company remains positive about its financial outlook and is confident in its strategy to manage and mitigate the impacts of these accounting adjustments.
Previously, it was reported that three Malaysian entities, EPF, SDP and SP Setia Bhd were likely to shoulder losses of some RM250 million a quarter or RM1 billion a year from a five-year rental guarantee at the iconic Battersea development in London.
It noted that SDP and SP Setia each have a 40% stake in the venture, while EPF has 20%.