After-tax profit increased to $347 million driven by variation claims

University construction and rental company, 138 Student Living Jamaica has ended its 2020 financial year on a high, posting increased profits and higher revenues, even with the challenges brought on by COVID-19, resulting in a fall-off in long-term occupancy revenues.

The company recorded profit before taxation of $441 million and an after-tax profit of $347 million for the 12-month period ending September 30, 2020. In its just released unaudited consolidated financial statements for the 2020 financial year, 138 Student Living Jamaica reports that, “this result continues to be positively impacted by: (i) effective management of operating costs (primarily utilities) and (ii) variation claims relating to Irvine Hall”.

Irvine Hall is one of halls on the University of the West Indies (UWI), Mona campus in Jamaica. 138 Student Living was established in August 2014 to construct and rent living facilities at UWI Mona under a 65 years concession agreement granted by the regional university.

VARIATION CLAIMS

138 Student Living Chairman Ian Parsard explains that the variation claims relating to Irvine Hall are for the full year 2019 as well as a claim for this year. Adjusting for the variation claims, Parsard reports that the group recorded year-to-date profit amounting to $78 million.

During the period under review, 138 Student Living continued to operate 1,464 world-class rooms at its four locations on the UWI Mona Campus consisting of 1,692 beds. Overall revenue increased by 28 per cent while expenses were down three per cent when compared to the 2019 financial year.

Parsard says this positive out-turn “provides the basis for a solid foundation and enables future growth.” While the impact of the COVID-19 pandemic has negatively impacted its business operations, 138 Student Living continues to see the positive impact of sustained measures that were previously implemented.

These include the effective execution of the concession agreements with its partner, UWI, the efficient operations, whereby 138 Student Living continues to improve on its efficiency in all areas of business operations and, finally, receivables and credit management.

The company states that the increase in receivables for the period under review is primarily due to the Irvine Hall variation claims, which was mentioned previously.

In addition, 138 Student Living continues to see reductions in accommodation receivables as a result of sustained efforts and measures implemented to manage this area.

COVID-19 IMPACT AND RESPONSE

The COVID-19 pandemic has had a negative impact on the company’s long-term occupancy revenues, which saw occupancy before March 2020 of 99 per cent falling to levels below 20 per cent. This translates into a reduction in long-term rental revenue for the fourth quarter of approximately $101 million.

The 138 Student Living chairman told shareholders that the management of the company would continue to place priority on the health and safety of employees and residents through a number of measures that were implemented. These include aligning the business within the current realities.

According to Parsard, “these actions include but are not limited to consolidation of accommodation to house the students who remained on campus, after the UWI issued a notice for local students to return to their homes, on one building of each of the halls of residence. Thus reducing utilities and staff costs (primarily security and housekeeping which forms our largest staff classifications).”

Deferral of capital expenditure plans for the remainder of the financial year was also another strategy to deal with the impact of COVID-19. So too was minimising maintenance activities to only essential services.

Parsard advised shareholders that the company was also seeking opportunities for new sources of revenue during the COVID-19 period by engaging the Government of Jamaica for housing during their COVID-19 quarantine period.

In addition, discussions were held with the company’s bankers and financers to negotiate financing options to mitigate the impact of the COVID-19 pandemic on the business operation. The company notes that The UWI has moved classes online for the first semester, effective September 7, 2020.

As a result, students who had previously applied for on-campus accommodation, decided to defer their accommodation requirement to the next semester.