Lian Beng's Q1 profit slumps 60.8%
Singapore
HIGHER unrealised exchange loss, impairment loss on Centurion Corp shares and lower contributions from its associates and joint ventures (JVs) led construction group Lian Beng to report steep declines in its fiscal first-quarter top and bottom lines.
Lian Beng on Thursday reported a 60.8 per cent slump in net profit to S$12.7 million for the three months ended Aug 31, 2016. This compared with a net profit of S$32.3 million a year ago.
Earnings per share fell to 2.53 Singapore cents, from 6.35 a year ago.
Its revenue also plunged 47.8 per cent to S$70.8 million, due to a decrease in revenue from the construction and ready-mixed concrete segments.
Although gross profit was higher than a year ago - thanks to higher profit recognition from the construction division - net profit was dragged down by higher "other operating expenses" and lower share of results of associates and JVs.
Other operating expenses increased from S$2.6 million in Q1 FY16 to S$5.4 million in Q1 FY17, mainly due to higher unrealised exchange loss from the valuation of loans to finance its investments in the United Kingdom, and impairment loss on investment securities due to the valuation of 38 million shares of Centurion, a property firm that owns and operates worker dormitories and student accommodation.
According to Bloomberg data, Lian Beng is the third largest shareholder in Centurion with a 5.14 per cent stake. Centurion's shares have fallen 23 per cent from S$0.435 in mid-October last year.
Its share of results from associates and JVs declined from S$28.6 million in Q1 FY16 to just S$8 million in Q1 FY17, mainly coming from the completion of the development projects NeWest and the Midtown and Midtown Residences, which were completed in May this year.
The group expects the construction industry to remain challenging due to high labour costs and keen competition. But it said that it should benefit from its investment in high- yield bonds as well as investment properties to generate stable interest and rental incomes going forward.
Lian Beng's executive chairman Ong Pang Aik said: "Our financial position remains strong, providing us the financial muscle to seek out property development and investment opportunities locally and overseas, and to continue our business expansion through acquisition, joint venture and/or strategic alliances."
Its shares closed half a cent lower at S$0.465 before its results release.
