KY­RON REG­IS

ky­ron.reg­is@guardian.co.tt

En­deav­our Hold­ings Ltd (EHL) has ex­pe­ri­enced an 83 per cent de­cline in its prof­its for the year end­ed April 30, 2020—slid­ing from $38 mil­lion to $6.4 mil­lion. The com­pa­ny’s core busi­ness is in the lease and rental of prop­er­ties.

EHL’s rev­enue from con­tracts with cus­tomers fell by 5 per cent as it moved from $93 mil­lion to $88.4 mil­lion. The notes to the fi­nan­cial state­ments re­vealed that the com­pa­ny re­port­ed the biggest drop in it’s shop­ping mall seg­ment. The in­come in this seg­ment fell from $38.7 mil­lion to $33.9 mil­lion, which rep­re­sent­ed a 12.3 per cent de­cline.

The com­pa­ny’s rental ex­pens­es al­so in­creased by 4.5 per cent in a climb from $21.7 mil­lion to $22.6 mil­lion. As a re­sult, EHL’s net rental in­come of $65.8 mil­lion was 7.8 per cent low­er than the amount record­ed in the com­pa­ra­ble pe­ri­od last year ($71.4 mil­lion).

How­ev­er, the com­pa­ny’s dra­mat­ic fall in net prof­it arose due to the line item “fair val­ue ad­just­ment on in­vest­ment prop­er­ties,” which record­ed a $26.2 mil­lion de­crease.

In the com­pa­ny’s notes, it re­vealed that this drop in fair val­ue arose in re­la­tion to it’s Price Plaza, Ch­agua­nas prop­er­ty, which was ad­just­ed from $418.6 mil­lion to $390.8 mil­lion. This rep­re­sent­ed a 6.6 per cent de­cline in val­ue.

Nonethe­less, this was not a cash re­duc­tion, but the fair val­ue loss was re­port­ed through the prof­it and loss state­ment. EHL’s cash flow from op­er­at­ing ac­tiv­i­ties on­ly fell by 4.2 per cent, mov­ing from $38.8 mil­lion to 37.2 mil­lion.

The note in­di­cat­ed that the com­pa­ny’s man­age­ment per­formed the val­u­a­tion of the in­vest­ment prop­er­ties us­ing the In­come Val­u­a­tion method. The fi­nan­cial re­port stat­ed: “This method is used to es­ti­mate the val­ue of prop­er­ties which are re­gard­ed as in­vest­ments and more­over, where the ba­sis of ar­rival at the mar­ket price is di­rect­ly re­lat­ed to the in­come which the prop­er­ty is pro­duc­ing or ca­pa­ble of pro­duc­ing.”

The notes to the fi­nan­cial state­ments in­di­cat­ed that An­nu­al Rental Val­ue is de­ter­mined ei­ther from the ac­tu­al rental in­come or cal­cu­lat­ed through the use of com­pa­ra­ble rates and rel­e­vant ex­pens­es, out­go­ings and es­ti­mat­ed va­can­cies are de­duct­ed from the rental in­come to ar­rive at a net in­come po­si­tion.

As part of the as­sess­ment of fair val­ue move­ments, fu­ture rental cash in­flow, main­te­nance costs, cap­i­tal­i­sa­tion rates and the COVID-19 pan­dem­ic were in­clud­ed in the analy­sis.

Con­cern­ing the pan­dem­ic the notes said: “Man­age­ment has car­ried out an ex­ten­sive re­view and tak­en in­to ac­count the im­pact of COVID-19 to date on the fair val­ue of In­vest­ment Prop­er­ties. With the con­tin­ued un­cer­tain­ty and chal­lenges pre­sent­ed by COVID-19 man­age­ment will con­tin­ue to mon­i­tor fur­ther de­vel­op­ments and de­ter­mine what fur­ther im­pact these will have on the port­fo­lio.”