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Venture Corp net profit up 165% in Q4 on record revenue, R&D boost

VENTURE Corp's net profit more than doubled in the fourth quarter, surging 164.5 per cent to S$143 million on higher research and development (R&D) revenue as the global electronics services provider hit more milestones in R&D projects for customers during the quarter.

Revenue in the three months ended Dec 31 was S$1.086 billion, up 27.1 per cent from the same period a year earlier. This is Venture's third straight quarter of revenue above S$1 billion.

Net profit margin in the fourth quarter was 13.2 per cent, or 12.1 per cent if a one-off gain on disposal of an associate was excluded. Venture's net profit margin has climbed quarter on quarter every quarter this year, and reached 10.5 per cent in the third quarter.

Fourth quarter earnings included a S$11.3 million gain on disposal of an associate. Excluding this gain, net profit was up 143.4 per cent at S$131.7 million.

Chief financial officer Alvin Ng told a results briefing at Venture's Ang Mo Kio headquarters on Wednesday evening: "R&D revenue this quarter was significantly higher, partly because of the milestones we had achieved. As a result when you deliver the work to the customers, you recognise the revenue as well as the cost.

"R&D is definitely a premium service, and one of the factors that makes our business very sticky. . . This explains why the fourth-quarter margin is on the high side."

Mr Ng added: "A lot of the design, sourcing of parts, the manufacturing process for the products, is all done by Venture. So the know-how actually rests with us and the customers focus on other things that they feel is their forte, but they leave the R&D, the manufacturing, the supply chain, everything to us."

For the whole of 2017, Venture more than doubled what it earned in 2016. Full-year net profit jumped 106.3 per cent to S$372.8 million, beating street estimates.

Revenue hit a record S$4 billion, up 39.3 per cent from 2016 and in line with street forecasts.

A big boost came from Venture's "test and measurement/medical and life science/others" segment, where revenue jumped 83.9 per cent to S$2.29 billion.

Once again, chief executive Wong Ngit Liong declined to reveal the identities of Venture's largest customers, except to say that Venture has "well over a hundred" customers.

"A big chunk of our customers is growing and they contribute 75 per cent of our revenue," he said.

A final dividend of 60 Singapore cents was declared, up 20 per cent from 50 Singapore cents in the same period a year earlier.

Venture had net cash of S$752.4 million at the end of 2017, up from S$499.7 at the end of 2016.

Mr Ng said: "Venture is still very hungry for growth. The next leg of development will be an ongoing, multi-year transformation. It will entail more intensive preparation and investment in the development of new engineering and advanced manufacturing capabilities.

"There's a lot of things we've got to do, starting from when we bought a building in the US."

On Feb 9, Venture Enterprise Innovation completed the acquisition of a freehold property in California for US$29.4 million. The group expects capital expenditure to rise in 2018.

Venture said it is confident that it is "well placed to create significant value" for its partners, although the business environment may remain volatile.

Fourth quarter earnings per share was 49.5 Singapore cents, up from 19.3 Singapore cents in the same period a year earlier. Full-year earnings per share was S$1.30, up from 64.8 Singapore cents in 2016.

Net asset value per share was S$7.609 as at Dec 31, up from S$7.031 at the end of 2016.

Venture shares rose 46 Singapore cents or 1.7 per cent to S$27.56 on Wednesday before results were released.