24 AL-SALĀM REIT ANNUAL REPORT 2023 MANAGEMENT DISCUSSION & 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 RM1.24 billion. The asset portfolio comprises retail, office, F&B restaurant, industrial and college. FINANCIAL REVIEW Table 1: Key Financial Highlights FY2022 FY2023 Variance RM‘000 RM‘000 (%) Gross Revenue 71,800 76,283 6.2 Net Property Income 51,439 50,908 (1.0) Trust Expenses 32,624 42,543 30.4 Profit for the Year (Realised) 15,733 7,571 (51.9) Income Available for Distribution (Realised) 15,733 7,571 (51.9) EPU (sen) – Realised 2.71 1.31 (51.7) DPU (sen) – Realised 2.50 1.20 (52.0) For FY2023, Al-Salām REIT registered revenue of RM76.3 million, which is an improvement of 6.2% from RM71.8 million recorded in FY2022. The increase in revenue was mainly contributed to by the retail segment, particularly KOMTAR JBCC. Despite the higher revenue, Al-Salām REIT's NPI decreased marginally by 1% year-on-year to RM50.9 million (FY2022: RM51.4 million). The decrease was mainly due to a lower contribution from the office segment and an increase in electricity costs following the introduction of the Imbalance Cost Pass Through ("ICPT") by Tenaga Nasional Berhad. Higher trust expenses were attributable to higher Islamic financing costs of RM36.5 million (FY2022: RM28.4 million), due to the full impact of a 100 basis points and 25 basis points increase in OPR in FY2022 and FY2023 respectively. As such, Al-Salām REIT registered lower realised earnings per unit ("EPU") of 1.31 sen for FY2023 (FY2022: 2.71 sen). SEGMENTAL PERFORMANCE The retail segment reported higher total revenue of RM39.5 million, marking a notable year-on-year increase of 15.8%. This was mainly driven by KOMTAR JBCC, attributable to higher rental, parking and promotional income. However, NPI registered a 7.3% increase yearon-year as the higher total revenue was partially offset by higher operating expenses from all retail outlets. The office segment reported a lower total revenue of RM8.1 million, representing a year-on-year decrease of RM0.6 million. This was due to lower rental rate charged to tenants, despite achieving a higher occupancy rate of 92% (2022: 89%). Consequently, the NPI experienced a year-on-year decrease of RM1.5 million, which was further compounded by a rise in operating expenses totalling RM0.9 million. The F&B segment recorded a slight 2.4% decrease year-on-year in both total revenue and NPI. This was due to the lower provision of rental variable income, as previously mentioned. Notably, the properties maintain a triple net arrangement with a consistent 100% occupancy rate (2022: 100%). The industrial & others segment saw a marginal year-on-year increase of RM0.1 million in total revenue. Correspondingly, the NPI recorded a slight 0.1% increase year-on-year, as the higher revenue was offset by the higher operating expenses.
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