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Keppel nets profit of S$356m for 1H 2019

Keppel Corporation Limited (Keppel) reported a net profit of S$356 million for the half year ended 30 June 2019, 39% below the S$586 million achieved a year ago, mainly due to lower contributions from en-bloc sales of property projects which amounted to S$416 million in 1H 2018.

Compared to 1H 2018, the six months of 2019 saw improved performance at Keppel Offshore & Marine which returned to profitability, higher contributions from M1 following the consolidation of its results with the Group, as well as strong earnings growth at Keppel Infrastructure and Keppel Capital.

The Group’s 1H 2019 revenue of S$3,315 million, was 11% higher than the S$2,993 million achieved in 1H 2018, mainly due to higher sales contributions from Keppel Infrastructure, Keppel Capital and M1, offset by lower revenues from Keppel O&M and Keppel Land.

For the first six months of 2019, the Group achieved an annualised return on equity of 6.3%. Net gearing rose to 0.82x as at 30 June 2019, compared to 0.48x as at 31 December 2018, following the privatisation of M1 and Keppel Telecommunications & Transportation, as well as due to higher working capital requirements, the payment of the final cash dividend for FY 2018 and the recognition of lease liabilities. Free cash outflow was S$614 million in 1H 2019 compared to an inflow of S$873 million in 1H 2018 due to higher working capital requirements and lower proceeds from en-bloc sales.

The Group’s net profit for 2Q 2019 was S$153 million, 39% lower than the S$249 million for 2Q 2018, in the absence of en-bloc sales of property projects, partly offset by stronger performance from Keppel Offshore & Marine, Keppel Infrastructure and Keppel Capital. Group revenue of S$1,784 million was 17% higher than the S$1,523 million achieved a year ago, with higher contributions across Keppel Infrastructure, Keppel Land, Keppel Capital and M1.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Our efforts to position Keppel for growth in new markets have borne fruit in 1H 2019, with the Group securing new offshore wind energy contracts worth approximately S$720m and selling more than 700 homes in Nanjing, China, which is a new market for Keppel Land.

“In the year to date, we have invested about S$100 million in venture capital and high-growth businesses and startups in areas such as prop tech, China tech start-ups, enterprise & deep tech, edge data centre solutions and batteries for electric vehicles. Our efforts to tap new technologies and innovations will enhance the depth and breadth of our solutions for sustainable urbanisation and equip Keppel to stay ahead in this fast-changing landscape.”

Offshore & Marine
The Offshore & Marine (O&M) Division reported a net profit of S$10 million for 1H 2019, compared to a net loss of S$40 million a year ago, due mainly to higher investment income, lower net interest expense and a higher share of associated companies’ profits.

As at end-June 2019, the O&M Division won quality contracts worth about S$1.9 billion, higher than the total value of new orders secured in the whole of 2018. These include offshore wind projects worth about S$720m from established renewable energy customers, namely Tennet Offshore and Ørsted. As at end June 2019, the Division’s net orderbook stood at S$5.5 billion, the highest level since 2016, excluding projects for Sete Brasil.

Property
The Property Division recorded a net profit of S$262 million for 1H 2019, 57% lower year on year, due mainly to the lower gains from the en-bloc sales of development projects and lower contribution from Singapore property trading. The variance was partly offset by higher investment income and higher contributions from associated companies arising from fair value gains on investment properties.

The Property Division sold some 2,100 units in 1H 2019, up 52% from the same period in 2018, on the back of stronger performance in China and Vietnam. As it strengthens its presence in markets across Asia, the Property Division will also continue to pursue opportunities to unlock value and recycle its capital.

Infrastructure
The Infrastructure Division recorded a net profit of S$59 million in 1H 2019, underpinned by stronger performance across all of Keppel Infrastructure’s business segments – Energy Infrastructure, Environmental Infrastructure and Infrastructure Services. However, in the absence of a dilution gain arising from Keppel DC REIT’s private placement exercise in 1H 2018, the Division’s overall earnings were 11% lower year on year.

In 1H 2019, Keppel Infrastructure progressed steadily with the development of the Keppel Marina East Desalination Plant and the Hong Kong Integrated Waste Management Facility, both of which will contribute long term recurring income when completed in 2020 and 2024 respectively. Keppel Electric is currently the leading electricity retailer in the Open Electricity Market, having secured over 150,000 household customers.

Investments
The Investments Division recorded a net profit of S$25 million for 1H 2019, reversing a net loss of S$46 million a year ago. This was due mainly to a fair value gain from the remeasurement of previously held interests in M1 as at acquisition date, as well as higher contributions from Keppel Capital and the consolidation of M1’s results, which were partly offset by net interest expense in the current period as compared to net interest income in 1H 2018, a higher fair value loss on KrisEnergy warrants, charges related to the acquisition of M1, as well as a provision for impairment of an associated company.

As part of its business transformation, M1 has revamped its mobile offerings, and launched a simplified plan and a new website to enhance customer experience. Since the launch of the new One Plan in May, M1 secured more than 15,000 new customers within a month, taking its base to 2.25 million as at end-June 2019, an increase of about 80,000 customers year on year.

Financial Highlights

1H 2019
(S$ m)
1H 2018*
(S$ m) 
Change
(%) 
2Q 2019
(S$ m) 
2Q 2018*
(S$ m) 
Change
(%) 
Revenue 3,315 2,993 11 1,784 1,523 17
Operating Profit  482 766 (37) 160 280 (43)
Net Profit  356 586 (39) 153 249 (39)
Earnings per Share 19.6 cents 32.3 cents (39) 8.4 cents 13.7 cents (39)

• Annualised ROE was 6.3% for 1H 2019
• Net gearing was 0.82x at end-June 2019
• Free cash outflow was S$614m in 1H 2019 compared to an inflow of S$873m in 1H 2018
• Declared interim cash dividend of 8.0 cents per share for 1H 2019

* An agenda decision on a clarification in relation to capitalisation of borrowing costs by property developer under IAS 23 Borrowing Costs was finalised by the International Financial Reporting Standards Interpretations Committee during the year. As the financial reporting framework applied by the Group is equivalent to International Financial Reporting Standards, the agenda decision has relevant impact to the Group’s Property Division. Consequently, 2018 financial figures in this media release have been restated.

Full Report

Source: Keppel Corporation Limited

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