Gadang Holdings Bhd says its property division recorded steady revenue growth in the financial year ending May 31, 2021, despite the challenging economic and operating environment.

"The property development sector was subdued due to weak economic conditions, where the industry saw a decline in the number of home seekers. The property sales and purchase process were halted due to movement restrictions. However, the property division successfully launched Maple Residence Phase 2 in June 2020, and received an impressive response from homeowners and investors," it said.

Maple Residence Phase 2 comprises landed homes in the Laman View integrated township sprawled across 121-acres of freehold land in Cyberjaya.

As at May 31, 2021, the division recorded RM162 million in total unbilled sales, it said in a filing with Bursa Malaysia recently.

For the 12 months to May 31, 2021, Gadang's revenue fell by 15 per cent to RM574.75 million from RM673.06 million in the preceding year.

Its pre-tax loss was down by 66 per cent to RM20.15 million compared to RM59.33 million posted in the preceding year.

Gadang said the decline in revenue and pre-tax profit was mainly due to lower contributions from the construction and property divisions.

Revenue for the property division increased to RM183.14 million compared to RM156.14 million in the preceding year. However, pre-tax profit fell to RM25.45 million compared to RM36.18 million in the preceding year.

Gadang said the property development division posted lower pre-tax profit due to lower profit margins from the sale of affordable residential projects and impairment loss on inventories.

Construction revenue was reduced to RM365.98 million compared to RM492.48 million in the preceding year. Pre-tax profit fell significantly to RM110,000 compared to RM33.72 million in the preceding year, mainly due to the completion of major projects in the preceding year and lower profit margins for the ongoing projects.

"The continuous impact of the Covid-19 pandemic has resulted in more stringent SOP, which suspended and deferred project progress, resulting in higher implementation costs for ongoing projects," said Gadang.

There was also higher overhead cost for the division due to extended time required to complete the projects, on top of additional Covid-19 related costs incurred, it added.

"Order book replenishment prospects are expected to be challenging due to the reduction in government infrastructure spending. The revival of some major infrastructure projects, such as the MRT 3, will play a crucial role in pump-priming the domestic economy in times of a downturn," said Gadang.

The construction division's current outstanding order book stands at RM425 million.

Gadang said that moving forward, the economic analysis is challenging, with outcomes depending largely on the duration of the Covid-19 pandemic, economic recovery, and current political situation.

The group anticipates continuing disruptions to the overall market environment.

"Given the constantly changing business environment, the group expects the coming financial year to be as challenging as the current financial year," it said.

In a separate Bursa filing, Gadang said that its wholly-owned subsidiary, Achwell Property Sdn Bhd (APSB), has entered into a conditional settlement agreement with Capital City Property Sdn Bhd (CCPSB) for integrated development in Johor Bahru.

The settlement agreement revised the payment of the final settlement sum and other matters relating to the settlement (FSA).

The integrated project involved the development of a retail podium, three tower blocks of office suites, and two tower blocks of hotel suites on an en-bloc development in Tampoi, Johor Bahru.

APSB and CCPSB entered a joint venture agreement to develop the project on December 26, 2013.

On February 25, 2020, Gadang was made to understand that Capital World Ltd (CWL), the ultimate holding company of CCPSB, had proposed to undertake a scheme of arrangement to implement and facilitate the restructuring of its debt obligations and liabilities.

CCPSB had on February 14, 2020, filed an application in the Kuala Lumpur High Court for an order to place itself under judicial management.

Gadang, meanwhile said that pursuant to the terms of the FSA, the APSB entitlement sum is now revised from a total value equivalent to 16.7 per cent of the final gross development value for the project and up to a maximum sum of RM323.99 million from the original sum to the revised amount of RM190 million, of which a total of RM150 million has been paid by CCPSB to APSB.

It said the proposed variation gives an opportunity for the group to recover a reasonable sum amidst significant uncertainties surrounding the outlook of the property market in Johor.