Keppel Q3 profit falls 15 percent

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Keppel reported a net profit of S$809 million for the nine months ended 30 September 2018, 18% higher than the S$688 million achieved a year ago. This was underpinned by stronger contributions from the Property and Infrastructure divisions, which more than offset losses incurred by the Offshore & Marine (O&M) and Investments divisions.

The Group’s 9M 2018 revenue of S$4,288 million was slightly lower compared with S$4,419 million for 9M 2017. Revenue recognition from the rigs sold to Borr Drilling, coupled with increased power and gas sales, were offset by lower contributions from property trading and asset management, a decrease in the O&M Division’s work volume, as well as the absence of the sale of investments.

For the first nine months of 2018, the Group achieved an annualised return on equity of 9.3%. Net gearing was 0.41x as at 30 September 2018, compared to 0.46x as at 31 December 2017.

Free cash inflow was S$828 million in 9M 2018 compared to S$1,042 million in 9M 2017.

The Group’s net profit for 3Q 2018 was S$226 million, 15% lower than the S$265 million for 3Q 2017, mainly due to lower contributions from the Investments and Property divisions, offset by stronger performance in the Infrastructure and O&M divisions. The O&M Division registered a net profit of S$2 million for 3Q 2018, an improvement from the losses incurred in the preceding three quarters.

Meanwhile, Group revenue of S$1,295 million for 3Q 2018 was 20% lower than the $1,617 million registered a year ago. Higher revenue recognition from ongoing O&M projects and increased power and gas sales were offset by lower contributions from property trading, asset management, as well as the absence of the sale of investments.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Keppel continued to deliver strong results in the first nine months of 2018, during which we announced our expansion into new markets and asset classes such as senior living, early education and Australian retail real estate.

“More recently, we announced our pre-conditional voluntary general offer, together with SPH, to gain majority control of M1 to drive business transformation and enable it to compete more effectively. We have also announced a scheme of arrangement to privatise Keppel Telecommunications & Transportation.

“These are strategic initiatives, which would further expand and enhance the Group’s earnings while positioning Keppel for long-term growth.”

Offshore & Marine
The Offshore & Marine (O&M) Division incurred a net loss of S$38 million for 9M 2018 as compared to net profit of $11 million in 9M 2017. This was mainly due to lower operating results, its share of associated companies’ losses as compared to share of associated companies’ profits in 2017, as well as the absence of gain from divestment of Keppel Verolme, partly offset by lower net interest expense. At the operating level, the O&M Division achieved a profit of S$20 million for 9M 2018. In the year to date, the O&M Division secured new contracts worth about S$1.4 billion.

Property
The Property Division, whose net profit grew by 110% year on year to S$764 million, remained the largest profit contributor to the Group for 9M 2018. This increase was due mainly to the en-bloc sale of development projects, the gain from the divestment of a stake in a commercial project in Beijing, as well as fair value gain on Nassim Woods which has been re-designated for redevelopment for sale. The positive variance was partly offset by lower contribution from China and Vietnam property trading, and a lower share of associated companies’ profits.

Infrastructure
The Infrastructure Division’s net profit was up 25% year on year to S$121 million for 9M 2018 mainly due to higher contributions from Environmental Infrastructure and Infrastructure Services, coupled with gains from the dilution of stakes in Keppel DC REIT following its private placement exercise and also from the sale of a 4.08% stake in the latter. The positive variance was partly offset by lower contributions from Energy Infrastructure and Keppel Infrastructure Trust, as well as the absence of a gain from the divestment of GE Keppel Energy Services Pte Ltd in 1H 2017.

Investments
The Investments Division recorded a net loss of S$38 million for 9M 2018, as compared to a net profit of S$217 million a year ago, due to its share of losses from associated companies as well as lower contributions from land sales in the Sino-Singapore Tianjin Eco-City and the asset management business. Keppel Capital continued to contribute steadily to the Group, although earnings were slightly lower due to higher expenses for growth initiatives and lower one-off performance fees.

In the nine months of 2017, the Investments Division had benefited from the share of profit from k1 Ventures, a write-back of provision for impairment of an investment, as well as profit from the sale of investments.

Financial Highlights

9M 2018
(S$ m)
9M 2017
(S$ m)
Change
(%)
3Q 2018
(S$ m)
3Q 2017
(S$ m)
Change
(%)
Revenue 4,288 4,419 (3) 1,295 1,617 (20)
Operating Profit  996 630 58 271 297 (9)
Net Profit  809 688 18 226 265 (15)
Earnings per Share 44.6 cents 37.9 cents 18 12.4 cents 14.6 cents (15)

* 3Q & 9M 2017 financial figures have been restated following the adoption of the new financial reporting framework, Singapore Financial Reporting Standards (International).

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