Is The Worst Over For Rowsley Limited After Suffering S$36 Million In Losses In 2015?

2015 might be a year to forget for Rowsley Limited (SGX: A50).

The company saw its bottom-line crumble in that year as a net profit of S$49.4 million in 2014 had turned into a net loss of S$36.3 million. A big part of Rowsley’s loss had been due to the S$42.5 million in impairments it suffered during the year.

What happened to Rowsley’s business? And more important, is the worst already over?

Lifting the veil on the impairments

Rowsley had clocked S$83 million in revenue in 2015. In comparison, impairments of S$42.5 million seem huge. Let’s try to understand what had driven the company to clock such high impairment charges during the year.

First, Rowsley had to charge a S$5.22 million impairment loss in an investment it had made in an associate company, Streamax International Holding. Interestingly, this S$5.22 million impairment charge is in addition to a S$7.9 million impairment that Rowsley had made in 2014 for the same investment. According to Rowsley, the fundamental outlook for Streamax had “deteriorated significantly” in 2015 and crucially, the development does not appear to be “of a temporary nature.”

Second, Rowlsey also suffered an impairment of S$2.88 million on its investments in available-for-sale financial assets. These include the company’s stock holdings in other Singapore-listed companies such as F J Benjamin Holdings Ltd (SGX: F10) and Epicentre Holdings Limited (SGX: 5MQ).

Third, Rowsley had logged a collective impairment loss of S$34.3 million for its investments in RSP Architects Planners & Engineers and a 9.23 hectare plot of land in Malaysia’s Iskandar Johor region. The impairment related to the land had been taken “in light of the softening market conditions.”

The S$34.3 million impairment raises a question of whether Rowsley had overpaid for the acquisitions of RSP Architects and the Iskandar land. Back in 2013, Rowsley had inked an all-stock deal valued at S$428 million to acquire both.

Moving forward

Rowsley does not appear to be done with acquiring companies and making investments. In 2015, the company had invested in RSP Design Consultants (India).

In addition, Rowsley had made five investments in the United Kingdom in the second-half of 2015; the investments include stakes in a property development project, a hotel, a café, and a hotel management group. The company intends to grow its hospitality business “significantly” in the future partly through the acquisition and development of hotels.

In Rowsley’s other plans, the entire RSP business is positioning itself to win more public infrastructure business as well as more overseas proejcts

Foolish Summary

At the moment, Rowsley looks like it is still putting the different pieces of a jigsaw together for its future.

The company mentioned in its 2014 annual report that its vision is to “be a highly-acclaimed multi-disciplinary lifestyle real estate developer and consultant” and its mission is “To plan, design, invest in, develop and manage real estate developments for sustainable communities.” But, with Rowley’s hospitality investments in 2015 and the RSP group looking more toward public infrastructure projects, it’s unclear what the company’s direction really is, going forward.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.