Labour shortage impacts earnings recognition, says Sime Darby Property

• Sime Darby Property group managing director Datuk Azmir Merican said the company is facing construction worker shortage of at least 50% to fully accelerate property projects to meet the company's planned schedule.

KUALA LUMPUR (Aug 26): Sime Darby Property Bhd said on Friday (Aug 26) labour shortage presents challenges to the property developer to fully recognise its profit and revenue due to delayed works at its construction sites.

Sime Darby Property group managing director Datuk Azmir Merican said the company is facing construction worker shortage of at least 50% to fully accelerate property projects to meet the company's planned schedule.

"We do have challenges in terms of revenue recognition for our property development. We experienced lower site progress from April to May because of shortage of labour.

"Although we have quite a number of projects secured, we cannot accelerate these projects. And we also have a slightly low number of sales completed in terms of inventory," he said on Friday (Aug 26) during a virtual media briefing on the company's latest set of financials announced to Bursa Malaysia on Thursday (Aug 25).

On Thursday, Sime Darby Property said net profit leapt to RM105 million in the second quarter ended June 30, 2022 (2QFY22) from RM23.21 million a year earlier while revenue grew to RM615.61 million from RM501.97 million.

For the cumulative first half ended June 30, 2022 (1HFY22), Sime Darby Property's net profit jumped to RM156.56 million from RM89.31 million a year earlier while revenue was higher at RM1.1 billion compared with RM1.09 billion.

For 2QFY22, the developer declared a dividend of one sen a share, with a Sept 29 ex-date, to be paid on Oct 19.

On Friday, Azmir said the company managed to hand over five of its projects on time to buyers and that the group has another seven projects to be delivered in FY22.

"We have to work very closely with the subcontractors and ensure they have an adequate amount [number] of workers when we award them projects.

"We must have the confidence that when we launch a project, subcontractors are able to secure enough workers or they are [secured] from our existing pool of workers," he said.

Azmir said that although labour shortage is not an exclusive problem to Sime Darby Property, the increasing costs of labour and building materials are a double whammy for the company.

"We are also looking at alternative [building] materials to overcome [the] high cost of materials as well," he said.

Looking ahead, Azmir said revenue visibility for Sime Darby Property is strong on the company's higher unbilled new property sales at RM3.4 billion as of 1HFY22 compared with a year earlier.

"[A] 70% [portion] of these [unbilled sales] comes from township [projects] and 30% from integrated development," Amir said.

In a Thursday press statement attached to Sime Darby Property's financial results filing with Bursa, Sime Darby Property said it was on track to exceed its FY22 property sales target of RM2.6 billion based on the group's 1HFY22 RM1.9 billion property sales.

"This (RM1.9 billion) achievement marks a 48% [year-on-year] increase compared with the RM1.3 billion registered in the same period last year," said Sime Darby Property, which recorded RM1.8 billion worth of unbilled property sales a year earlier.

On Friday, Amir said Sime Darby Property expects homebuyers to be more discerning before they decide on their property purchases amid inflation and higher interest rates.

"Given the labour shortage issue, we expect buyers to be more discerning and [that] they want to buy from reputable developers like us who can complete the job and deliver quality products.

"If you look at the United States, despite interest rate hikes, their home ownership number was high too. We are seeing the same pattern here in Malaysia for the right products," he said.