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Keppel Q2 profit drops 38.4% in absence of project en bloc sales
KEPPEL Corporation posted a 38.4 per cent drop in net profit to S$153.4 million for the second quarter ended June 30, largely due to the absence of gains from en bloc sales of development projects.
The conglomerate recorded a restated net profit of S$249 million for same period last year, according to the financial results released on Thursday.
The fall in its bottom line was largely a result of the absence of gains from en bloc sales of development projects. This caused the net profit of its property business to decline by 43 per cent year-on-year. In spite of that, the property division was the top earnings contributor.
Earnings per sharefell 38.7 per cent year-on-year to 8.4 Singapore cents from 13.7 cents.
The decline in net profit came despite a 17.2 per cent year-on-year rise in revenue to S$1.78 billion from S$1.52 billion.
Keppel Corp declared an interim dividend of eight Singapore cents per share for the first half of FY2019, payable on Aug 6. This is lower than the 10 cents it declared for H1 FY2018.
Net asset value per share dipped marginally to S$6.12 as at June 30, compared to S$6.20 six months earlier.
For the first half year, the conglomerate posted a net profit of S$356.3 million, 39.3 per cent below the S$586.5 million achieved a year ago, mainly due to lower contributions from en bloc sales of property projects which amounted to S$416 million in the same period last year.
Loh Chin Hua, chief executive of Keppel Corp, said in a results briefing webcast that the US-China trade tensions so far have had a limited, direct impact on the group.
Recurring income contributed S$145 million or about 40 per cent of net profit in the first six months, in part due to the higher contribution from telecom operator M1 resulting from a consolidation of its results, and higher contribution from its asset management business.
Mr Loh disclosed that M1 won more than 15,000 new customers within a month of launching a simplified plan in May to replace its previous 19 plans. This took M1's base to 2.25 million as at end-June, an increase of about 80,000 customers year-on-year.
On whether M1 will cut costs like its rivals, the telco's CEO Manjot Singh Mann said the move will "not necessarily be the same manner" - involving not just reducing headcount but also improving efficiencies in every part of the business.
But Keppel's offshore & marine business (O&M) has not changed its plan announced last quarter to hire more staff, despite the uncertain global economic outlook.
In fact, 1,190 new employees were hired in the second quarter to fill new positions as well as replace those who had left due to natural attrition.
Mr Loh said: "Even though ... the external environment has become more sombre, we do have an orderbook to execute. The workflow is expected to pick up at Keppel Offshore Marine this year, and continuing to the second half of this year."
New contracts secured by its O&M unit year-to-date amount to about S$1.9 billion, more than the S$1.7 billion for the whole of 2018.
O&M net orderbook, excluding Sete Brasil projects, went up from S$4.3 billion as at end-2018 to S$5.5 billion as at end-June - the highest since 2016 when the Sete rigs were first excluded from the orderbook.
However, net gearing of the conglomerate increased from 0.48 time at the end of 2018 to 0.82 time as at the end of June. This was mainly due to borrowings drawn down for the acquisition of M1 and the privatisation of Keppel Telecommunications & Transportation, and payment of the final dividend for FY2018.
Keppel Corp shares ended at S$6.59 on Thursday, down 11 cents or 1.6 per cent before the results were released.