MD & A

In 2020, the company continues to invest in real estate projects under the construction and launches one high-end project at the end of the year, Soft Launch, a luxury condominium project, located on Hua Hin beach, to generate sales and recognize future income. The company believes that if the economic conditions are recovering, Covid-19 pandemic has improved signs, the company will be able to drain the finished inventories in the present as expected, including the new projects which are just launched. The company’s revenue in 2020 dropped 37 percent from 2019, due to the sluggish economy in the previous year. In addition, since the beginning of the year 2020, the situation of the Covid-19 virus outbreak has led to an economic lockdown. Limited domestic and international travel. The company was hit hard, especially the hotel business that had to be suspended. Revenue from hotel operations decreased 33% compared to 2019.

At the beginning of 2020, the Company sold 15.74% of its investment in the Bangkok Property Fund. The total amount of 210 million baht resulted in the Company’s interest in the mutual fund decreased from 33.30% to 17.56%, causing the Company to lose significant influence over the mutual fund. Share profits from investments in such funds as well.

In 2020, the company has funded by issuing and selling a series of debentures worth 290 million baht to repay the existing debentures that are due at the value of 440 million baht.

In 2020, the company had a total debt to total equity ratio (D/ E ratio) of 3.43 times and a debt bearing interest to equity ratio of 3.02 times, which is a higher ratio compared to 2019 at 1.94. The significant increase in the ratio resulted from the adoption of TFRS 16 Accounting Standards on Lease Agreement. The Company has recognized the liability from the lease over the lease term. As a result, there were liabilities under lease agreements of the 2020 financial statements totaling 2,065 million baht, and the performance did not meet the target, resulting in a loss, resulting in a decrease in shareholders’ equity of 511-million-baht on 2019.

Details of assets, liabilities and capital, as well as operating results, have been identified by categories. Including the following important financial ratios.

Financial Position

Assets

The company has total assets as of December 31, 2020 in the amount of 10,805 million baht, an increase from the year 2019 by 2,124 million baht or 24 percent.

  1. Cost of real estate development projects for sale amounted to 5,351 million baht or 50% of total assets. Increased from year 2019 to 650 million baht due to increased investment in real estate for sale.
  2. Property, plant and equipment increased by 291 million baht from the increase of the subsidiary company. It has invested in the development of assets used in the operation of the Baba Beach Club Hua Hin (Main hotel), gas station and commercial area.
  3. Right-of-use assets increased by 1,566 million baht, an increase from the adoption of Accounting Standard No. 16 regarding lease agreements. Effective for the first year for 2020 financial reporting, assets, use rights must be recognized and liable under the lease.

Debt

The Company had total liabilities as of December 31, 2020 equal to 8,367 million baht, an increase from 31 December 2019 (5,731 million baht) by 2,636 million baht, with significant changes as follows:

  • Financial institution loans increased by Baht 1,068 million due to the drawdown for project development under construction.
  • Liabilities under lease contracts increased by 2,061 million baht from the adoption of Accounting Standard No. 16 regarding lease agreements. Effective for the first year for 2020 financial reporting, assets, use rights must be recognized and liable under the lease.
  • Trade payables and other current payables decreased 309 million baht from the accrual of accrued hotel lease payables that were included in lease liabilities of 73 million baht and the decrease in procurement volumes.
  • Debentures decreased 148 million baht due to the issuance of debentures of 290 million baht to repay the debentures that were due for the amount of 438 million baht.

Equity

The Company had total shareholders’ equity as of December 31, 2020 equal to 2,438 million baht, a decrease from 31 December 2019 (2,949 million baht) by 511 million baht due to the Company’s operating results affected by the economic slowdown and the spread of the Covid-19 virus. Revenues from hotel business have declined. As a result, the company results in a loss from operations. As a result, shareholders’ equity decreased in the same direction in 2020, net equity of 1,563 million baht and non-controlling interests of 875 million baht.

Income

Charn Issara Development Public Company Limited and subsidiaries’ total operating income in 2020 was 1,429 million baht, a decrease from the year 2019 by 827 million baht or 87 percent. Composed of income of 3 main businesses and other income as follows

  1. Revenue from real estate sales in 2020 equals to 649 million baht, slightly increased from before.
  2. Revenue from hotel operations in 2020 was 455 million baht, a decrease of 224 million baht from 2019, a 33% decrease due to the situation of the Covid-19 virus epidemic, causing the economic lockdown and travel restrictions including travel to the country from foreign tourists who have disappeared since the beginning of the year. The company was hit hard, the hotel business temporarily ceased operation. As a result, the revenue from the hotel business has decreased significantly.
  3. Rental and service income in 2020 is 78 million baht, which is similar to the previous year.
  4. Revenue from product sales in 2020 is equal to 61 million baht, which is the revenue that Shell gas station service is opened. And the commercial area of a subsidiary that offers full-year service for the first year.

(Unit: Baht million)

Revenue Description 2020 2019 Increase / Decrease % Increase
(Decrease)
Revenue from sale of real estate 649 640 9 1
Rental and service income 78 80 (2) (3)
Revenue from hotel operation 455 679 (224) (33)
Revenue from sales of goods 61 6 55 833
Administrative and other fees income 28 34 (6) (16)
Other income 158 817 (659) (81)
Total Income 1,429 2,256 (827) (37)


Gross profit

The company had a gross profit margin from real estate sales in 2020 of about 29 percent, a slight increase from the previous year. As well as gross profit margins from office rental and services In Charn Issara Tower 1 and 2 buildings and condominiums in Issara Ladprao condominiums were 47%, with a slight increase in gross profit margin from 2019 with 45% gross profit margin. Operating a hotel business in 2020, a loss of approximately (10%), an increase from a loss of (8) in 2019 due to a significant decrease in revenues in 2020. Due to the temporary shutdown, the impact of the Covid-19 virus outbreak, while hotels have the cost of normal hotel rents. As for the gross profit margin ratio in 2020, the loss is approximately (0.77%) due to the depreciation of assets from operations, accounting for 10% of the revenue from the sale of goods.

The details of gross profit for each business are shown in the table below.w

(Unit : Million Baht)

Gross Profit 2020 2019 % increase
/(Decrease)
Gross profit from the sale of real estate 29.05% 27.89% 1.16%
Gross profit from rentaland servicefees 46.55% 44.76% 1.79%
Revenue from hotel operation (9.75%) (8.24%) (1.51%)
Gross profit from the sale of goods (0.77%) 4.33% (5.10%)
Total Gross Profit 14.48% 11.30% 3.18%


Cost

  1. Selling and administrative expenses in the year 2020 equal to 509-million-baht, accounting for 35% of total income, which has a 30% decrease compared to the year 2019. The Company paid for sales and management in the amount of 738 million baht. As a result of the company, there are measures to reduce overall sales and administrative expenses, such as reducing expenses, employee benefits, and directors’ remuneration.
  2. Financial cost in 2020 increased from the year 2019 equal to 214 million baht due to the application of Financial Reporting Standards No. 16 regarding lease agreements for the first year. As a result, the interest expense of the lease was recognized as a basis. In 2020, the Company recognized the financial cost of the additional lease interest in the financial statements of Baht 201 million.
  3. Net profit/ (loss)

    The Company had a profit (loss) from operations in 2020 equal to (387) million baht, with net profit (loss) attributable to the Company’s shareholders of 328 million baht. In 2019, net profit (loss) attributable to equity holders of the company per share equal to (0.31) baht.

    Important financial ratios

    1. Profit before Interest, Tax and Depreciation (EBITDA) ratio in 2020 is 9.61%, with a net profit attributable to equity holders of the Company in 2020 as percentage (23%), in line with the change in income mentioned above.
    2. EBIT / Interest Expenses in 2020 was 0.42 times lower than in 2019, which had about 2.49 times the interest expenses. It is the first year that the expenses on the lease are recognized as part of the finance cost. It is subject to the change in financial expenditures described above.
    3. The liquidity ratio in 2020 is 1.85 times decreased from the year 2019, which is 3.15
    4. Debt to equity ratio in 2020 is at 3.43 times, an increase from that of 2019 at 1.94 times. If calculating only interest-bearing debt per equity (IBD / E) in 2020, the ratio is only 3.02 times compared. With the year 2019 amounted to 1.51 times as a ratio of increased debt burden. Since the company has recognized the liability from the lease for the first year (%) which is in line with the change in revenue described above. And an increase from the drawdown from financial institutions for use in the development of projects that are under construction.
    5. Book value per share in 2020 is 1.47 baht per share, a decrease from 2019 with book value per share equal to 1.87 baht per share due to the performance of the year 2020 which decreased from the previous year. As a result of being affected as mentioned above.