KUALA LUMPUR: Sime Darby Property Bhd says the financial losses from Battersea Power Station (BPS) project in the UK reported in the second quarter of 2024 (2Q24) is a non-recurring item.
SD Property managing director Datuk Seri Azmir Merican said the project had been affected by International Financial Reporting Standard 17 (IFRS 17) due to assumptions about future cash flows from the building, leading to an accounting impact.
"When the building was completed in 2Q, we had to take an impact of RM55 million based on the projection of the occupancy today.
"Occupancy will not stay at 20 per cent, so this is probably the lowest end. We open at 20 per cent of the quarter and this will improve.
"We anticipate significant improvement within the next 12 months," he explained during SD Property's first half of 2024 (1H24) results briefing today.
The BPS project is a joint venture established in 2012 between SD Property, SP Setia Bhd and the Employees Provident Fund (EPF).
Sime Darby and SP Setia each hold a 40 per cent stake in the project, with the EPF owning the remaining 20 per cent.
Azmir explained that the company had adopted a conservative approach in recognising the accounting impact of IFRS 17.
The company does not anticipate any further impact.
He added that SD Property took a cautious approach by addressing the issue early on when the building was delivered in the 2Q, absorbing the impact at that time.
"Looking ahead, there are two key focuses. Operationally, we aim to increase tenancy.
"Our projection is to raise occupancy to at least 50 per cent within the next 12 months, with the next target being 80 per cent. If we achieve these goals, the impact should be significantly reduced," he said.
Regarding BPS' outlook, Azmir indicated that economic challenges were expected for the rest of the year due to persistently high interest rates.
He noted that there had been 14 interest rate increases in the UK, with one adjustment of 25 basis points.
"Interest rates will take a bit of time where the monetary policy will largely hinge on inflation and how the UK economy is doing.
"There has been a little bit of tension in the UK, so we hope that this settles down," he added.