ESR Group Limited Annual Report 2022 37 Rental income decreased by 17.1% from US$110.5 million in FY2021 to US$91.6 million in FY2022. The decrease in rental income in FY2022 was mainly due to the sell-down of nine China balance sheet assets into a core fund with a leading global investor during the year. Geographically, the Group’s top markets in Greater China, Japan, South Korea, Southeast Asia and Australia and New Zealand accounted for 94.5% of the Group’s revenue for FY2022. The other markets, including India and Europe, made up the remaining 5.5% of revenue for FY2022. PATMI AND EBITDA PATMI increased by 64.3% from US$349.4 million in FY2021 to US$574.1 million in FY2022. EBITDA3 increased by 60.9% from US$664.2 million in FY2021 to US$1,068.5 million in FY2022. Higher PATMI and EBITDA3, backed by the strength in the underlying fundamental of the Group’s New Economy business, were boosted by the increase in fee income, share of profits of co-investments in associates and joint ventures; and gains on divestment from balance sheet to ESR-managed funds in Australia and China. The Group recorded fair value gain on investment properties of US$195.4 million for FY2022 (FY2021: US$274.5 million), contributed mainly from the Group’s assets in China and Japan. The Group’s share of profits from joint ventures and associates increased by 34.9% from US$168.1 million in FY2021 to US$226.7 million in FY2022. The increase was mainly due to higher share of profits from the Group’s investments in China, as well as joint ventures and associates held by ARA which contributed to the Group’s results post-acquisition. Despite the ongoing rates hike at the macroeconomic level, the Group has managed to keep its weighted average interest rate cost for the year ended 31 December 2022 at 4.2% (FY2021: 4.1%) leveraging on its growth and access to well diversified funding sources. Overall finance cost increased by 36.0% from US$163.5 million in FY2021 to US$222.4 million in FY2022 in line with the increase in total borrowings from US$4.2 billion as at 31 December 2021 to US$5.5 billion as at 31 December 2022, mainly from consolidation of ARA. Note: 3. EBITDA is calculated as profit before tax, adding back depreciation and amortisation and finance costs (net). Administrative expenses increased by 103.2% from US$241.8 million in FY2021 to US$491.3 million in FY2022. The increase was primarily from the full year effect of ARA’s administrative expenses; as well as one-off costs relating to the acquisition of ARA of US$22.5 million and amortisation of intangible assets arising from acquisition of ARA of US$23.3 million. SEGMENT RESULTS FY2022 Segmental Results 46% Fund Management 27% Investment 27% New Economy Development Investment segment results decreased by 2.6% from US$342.5 million in FY2021 to US$333.6 million in FY2022, reflecting ESR’s success in pursuit of its asset light strategy as assets sold from balance sheet into funds to generate fee income under the fund management segment. The decrease was mainly contributed by reduced share of co-investment income due to sell down of South Korea assets into ESR KendallSquare REIT (in 2021), sell-down of China balance sheet assets and lower relative fair value gains from existing balance sheet assets. The decrease was partially offset by higher dividend income. Fund Management segment results increased by 188.4% from US$199.0 million in FY2021 to US$573.7 million in FY2022. The increase was driven by higher recurring fee revenue from higher AUM, record development starts, leasing fees and solid promotes. In addition, the segment also benefitted from ARA’s recurring and stable fee revenue; as well as disciplined cost management and economies of scale, and was able to manage increasing AUM by keeping operating expenses stable. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENT
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