AL-SALAM REIT ANNUAL REPORT 2020

36 AL-SALĀM REIT MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL AND BUSINESS REVIEW OVERVIEW OF AL-SALĀM REIT Al-Salām REIT is a diversified Malaysian REIT with a total portfolio asset value of RM1.19 billion. The asset portfolio comprises retail, office, F&B Restaurants and F&B non-restaurant properties. Aggregate gross floor area of its investment properties as at 31 December 2020 totalled 2.73 million sq ft with 1.96 million sq ft of total net lettable area. FINANCIAL REVIEW Table 1: Key Financial Highlights The Group FY2019 (RM`000) FY2020 (RM`000) Variance (%) Gross Revenue 94,912 86,101 (9.3) Net Property Income 69,121 64,970 (6.0) Trust Expenses 37,578 46,445 (23.6) Profit for the Year (Realised) 28,395 14,555 (48.7) EPU (Sen)- Realised 4.90 2.51 (48.7) The Fund Income Available for distribution (Realised) 28,461 12,596 (55.7) DPU (Sen)- Realised 4.75 2.08 (56.2) On the back of reductions in revenue by 9.3,% Al-Salām REIT registered a lower net property income (NPI) of RM65.0 million (FY2019: RM69.1 million). The reduction in revenue and net property income were largely from the retail segment particularly KOMTAR JBCC in the wake of the COVID-19 pandemic but was mitigated by the performance of other segments. Given the weaker economic climate and reduced consumer consumption especially in the retail segment in FY2020, a vast majority of the Fund’s tenants had suffered a slump in business operations. As such, as a support to tenants within our properties, the Manager has opted to provide selective rental assistance in FY2020 which totalled to RM13.4 million and was recognised in the trust expenses. However, this was mitigated by lower Islamic financing costs of RM4.9 million. As a result, Al-Salām REIT registered lower realised earnings per unit (EPU) of 2.51 sen for FY 2020 (FY2019: 4.90 sen). SEGMENTAL PERFORMANCE The retail segment reported a total revenue of RM49.4 million and net property income of RM32.8 million, a decrease of RM10.4 million and RM5.8 million compared to the preceding year, respectively. The decline in revenue was mainly attributable to imposition of various MCOs and closure of Malaysia-Singapore border which adversely impacted the retail segment particularly KOMTAR JBCC but was mitigated by lower operating expenses of RM4.7 million from all retail outlets. The office segment reported a total revenue of RM9.2 million and net property income of RM5.5 million, a decrease of RM0.1 million and an increase of RM0.1 million as compared to FY2019 respectively. The increase in net property income in FY2020 was due to lower operating expenses of RM0.2 million. The F&B segment recorded a total revenue and net property income of RM16.2 million and RM16.1 million in FY2020 respectively, an increase of RM1.7 million as compared to FY2019. This was due to the full year contribution from 16 QSR Properties acquired in March 2019 and contribution from 5 QSR Properties acquired in September 2020. The properties are on a triple net arrangement with 100% occupancy rate (2019: 100%).