Keppel H1 net profit drops 59% to S$155 million on legacy rig impairments, M1 deal fallout

[SINGAPORE] Asset manager Keppel on Thursday (Jul 30) reported a 59 per cent drop in overall net profit to S$155 million for the first half ended Jun 30, down from S$378 million a year earlier.

The group’s results were dragged down by a S$375 million net loss in its non-core portfolio. This was hit by S$165 million in impairments on legacy rig assets – including recycled foreign currency translation losses – interest costs tied to legacy rigs and depreciation and amortisation adjustments following the termination of M1 Telco’s sale to Simba in May.

Group revenue surged 24.6 per cent on the year to S$3.8 billion, lifted by strong top-line expansions in its infrastructure and connectivity arms.

Looking past its non-core drag, Keppel highlighted that its continuing core business – which it labels “New Keppel” – posted a 25 per cent rise in net profit to S$530 million, from S$424 million the previous year.

This performance was lifted by higher contributions from sponsor stakes and co-investments, as well as commercial operations of the Keppel Sakra Cogen Plant.

The real estate segment posted a S$19 million net loss, reversing the year-ago S$98 million net profit. Revenue for the segment was up 2 per cent at S$97 million. The drop in profit was largely attributed to a loss from a dividend in-specie of Keppel Reit units. Excluding this anomaly, the segment would have been profitable at S$32 million.

Revenue rose sharply in the connectivity segment, up 93 per cent at S$682 million. The segment’s net profit increased 54 per cent to S$77 million. This growth was supported by customer commitments secured for the Bifrost Cable System fibre pairs and higher contributions from Keppel DC Reit.

Across the group, artificial intelligence is increasingly embedded into Keppel’s investment, asset management and operating activities. This, coupled with continued streamlining, has contributed to over S$100 million in recurring annual run-rate cost savings.

The group’s sharp bottom-line drop translated to an earnings per share of S$0.085, down 59.1 per cent from S$0.208 in H1 2025.

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Keppel declared an interim cash dividend of S$0.15 per share for H1 2026, unchanged from the year-ago period. It is also continuing its S$500 million share buyback programme, having repurchased 34.2 million shares for a total of S$356 million since July 2025.

The company’s free cash flow swung to a strong inflow of S$570 million, reversing an outflow of S$48 million in H1 2025.

New Keppel operations’ annualised return on equity (ROE) improved to 15 per cent, from 14.7 per cent a year earlier. Its net debt to earnings before interest, depreciation, taxes and amortisation ratio remained steady at 1.4 times. Overall group annualised ROE stood at 3.6 per cent due to non-core accounting hits.

Asset monetisation

As part of its accelerating asset-light strategy, Keppel said it carried out about S$1.7 billion of asset monetisation year to date in 2026, tracking well towards its full-year target of S$2 billion to S$3 billion.

The company’s non-core portfolio currently holds a gross asset value of S$13.7 billion, which it aims to substantially monetise by 2030. This includes establishing a clear pathway to monetise up to 10 legacy offshore rigs for about S$3.7 billion through the newly created Keppel Offshore Fund.

Marking an inflection point in its asset-light expansion, Keppel reported that its funds under management (FUM) expanded to S$106 billion as of end-July 2026, surpassing its end-2026 target of S$100 billion ahead of schedule.

The group is aiming to scale its FUM to S$200 billion by 2030. Asset management fee revenue reached S$200 million for the first half of the year, while the platform completed S$3.1 billion in acquisitions and S$2.4 billion in divestments across its private funds and listed vehicles.

Keppel added that it is focusing on an internal turnaround for M1 while continuing to explore opportunities for broader telco industry consolidation. This comes after the termination of M1’s sale to Simba in May.

“We continue to explore opportunities for consolidation, which we believe is needed for Singapore’s telco sector,” said Keppel. “Based on what we have observed in the region, operators that have undergone consolidation have typically seen a 10 to 15 per cent average revenue per user uplift, leading to more sustainable markets.”

Following the termination of M1’s sale to Simba in May after regulatory approvals were not obtained by the extended deadline, M1 has been reclassified back into continuing operations under the non-core portfolio.

Keppel has established a three-year business plan to structurally reset M1’s cost base and raise productivity, targeting annual run-rate cost savings of S$70 million by 2028. The telco has achieved S$4 million per annum in cost savings year to date and aims to reach S$10 million per annum by end-2026.

Shares of Keppel rose 2.9 per cent or S$0.34 to close at S$12 on Wednesday.