Full Year Results Financial Statement And Related Announcement
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The Group’s revenue is largely derived from project-oriented businesses and as such, quarterly results would not accurately reflect the full-year’s performance. Full-year to full-year comparisons are more appropriate for analytical purposes.
For 4Q FY2017, the Group registered revenue of $91.0 million, total profit of $17.0 million and profit attributable to equity holders of the Company (“net profit”) of $9.2 million. Although quarterly revenue was 19% lower year-on-year, total profit and net profit grew 135% and 124% year-on-year respectively. After adjusting for other gains and losses net of non-controlling interests, quarterly net profit would be 391% higher year-on-year.
For FY2017, the Group registered revenue of $433.8 million, total profit of $53.5 million and net profit of $33.3 million. Although full-year revenue was 11% lower year-on-year, total profit and net profit grew 30% and 18% year-on-year respectively. Net profit expanded at a slower pace than total profit due to higher contributions by Boustead Projects Limited to total profit, which resulted in the dilutive effect of the higher non-controlling interests on net profit. After adjusting for other gains and losses net of non-controlling interests, full-year net profit would be 9% lower year-on-year.
The significant positive impact from other gains and losses on both 4Q FY2017 and FY2017 is mainly attributable to Boustead Projects, primarily for the early termination of a lease agreement and the sale of an available-for-sale financial asset.
Each division’s revenue performance for FY2017 is summarised below.
Into a third year of recession, the severely depressed global oil & gas industries continued to adversely impact revenue at the Energy-Related Engineering Division, with revenue declining 25% year-on-year to $96.5 million. Despite the Organization of the Petroleum Exporting Countries’ significant cuts to global supplies, decisions on major oil & gas capital expenditures continued to be deferred.
For the tenth consecutive year, the Real Estate Solutions Division (under Boustead Projects) topped the revenue contributors among the divisions. In the face of a challenging and competitive business landscape, the division registered revenue of $228.3 million, 11% lower year-on-year mainly due to lower revenue contributions from both the design-and-build and leasing businesses.
Riding on the back of steady demand in Australia and South East Asia, the Geo-Spatial Technology Division achieved revenue of $108.3 million, 5% higher year-on-year.
The Group’s overall gross margin for FY2017 improved to 33% compared to 31% in FY2016. Nonetheless, gross margin pressure continues to mount.
Other gains and losses for FY2017 surged to $17.0 million, mainly boosted by other gains and losses at Boustead Projects, primarily for the early termination of a lease agreement and the sale of an available-for-sale financial asset.
Total overhead expenses for FY2017 marginally declined year-on-year to $93.8 million (selling and distribution expenses of $30.7 million and administrative expenses of $63.0 million) as the Group continued to apply prudent cost management measures.
Finance expenses for FY2017 dropped 40% to $2.5 million with the repayment of borrowings by Boustead Projects throughout FY2016, resulting in lower finance expenses in subsequent periods.
Share of loss of associated companies and joint ventures for FY2017 was comparable year-on-year at $2.7 million and largely due to the elimination of construction and project management profits attributable to projects in which Boustead Projects has entered into with an associated company and joint ventures.
Profit before income tax (“PBT”) for FY2017 increased 20% year-on-year to $67.7 million, mainly driven by higher other gains and lower finance expenses. A breakdown of PBT by divisions is provided as follows.
Despite significant challenges, all three divisions remained profitable in FY2017. PBT at the EnergyRelated Engineering Division for FY2017 was boosted by a $2.8 million foreign exchange gain, captured under other gains and losses. PBT at the Real Estate Solutions Division was boosted by $14.7 million in other gains and losses – net at Boustead Projects.
Total profit for FY2017 increased 30% year-on-year to $53.5 million, benefitting from lower income tax expenses as a result of higher taxable profit contributed by lower tax jurisdictions. The Group’s effective tax rate in FY2017 was 21% compared to 27% in FY2016.
Net profit for FY2017 increased 18% year-on-year to $33.3 million for reasons mentioned earlier.
In view of the Group’s FY2017 profit performance and Boustead Projects’ proposal of an inaugural dividend of 2.5 cents per share, the Board of Directors has proposed a final ordinary dividend of 1.5 cents per share payable in cash for shareholders’ approval. Together with the interim ordinary dividend of 0.5 cent per share, the total ordinary dividend for FY2017 would be 2 cents per share.
During FY2017, cash and cash equivalents (after taking into account the effects of currency translation) rose by $17.4 million to $276.5 million, largely driven by strong cash flows provided by operating activities.
Net cash inflow for operating activities amounted to $65.7 million, with a positive change in working capital of $0.3 million. Net cash outflow for investing activities amounted to $25.3 million, mainly due to $17.0 million in net loans to joint ventures and a related party, and $6.3 million in net purchase of available-for-sale financial assets. Net cash outflow for financing activities amounted to $20.5 million, mainly for $13.2 million in dividends paid to equity holders of the Company, $5.1 million in repayment of borrowings and $1.7 million in dividends paid to non-controlling interests.
At the end of FY2017, the Group’s financial position remained healthy.
Under assets, cash and cash equivalents climbed to $276.5 million, a modest increase from $259.1 million at the end of FY2016. Total other receivables and prepayments rose to $71.1 million, mainly due to receivables from the compensation for the early termination of a lease agreement and outstanding proceeds from the sale of an available-for-sale financial asset. Net contracts work-inprogress declined to $7.5 million due to increased progress billings to clients.
Total available-for-sale financial assets fell to $66.2 million, largely as a result of the sale of Boustead Projects’ of an available-for-sale financial asset. Investment properties declined to $134.8 million, mainly as a result of depreciation and an impairment loss on a property. Investments in joint ventures more than doubled to $32.4 million with the further extension of shareholders’ loans to joint ventures for the development of industrial properties for lease.
Under liabilities, total borrowings decreased to $88.4 million due to the scheduled repayment of borrowings by Boustead Projects in relation to the industrial leasehold portfolio.
The Group’s net asset value per share rose to 61.7 cents at the end of FY2017 from 58.3 cents at the end of FY2016, while the net cash position (i.e. net of all bank borrowings) stood at an improved $188.1 million at the end of FY2017, translating to a net cash per share position of 36.0 cents. In addition, the Group held $67.1 million in available-for-sale financial assets and financial assets held for trading at the end of FY2017, of which more than half of the amount is highly liquid.
In FY2017, the Group secured new contracts of approximately $180 million. The Group’s current order book backlog stands at about $225 million (unrecognised project revenue remaining at the end of FY2017 plus the total value of new orders secured since then), of which $79 million is under the Energy-Related Engineering Division and $146 million is under the Real Estate Solutions Division.
The current macro economic environment continues to be highly challenging and competitive, with a great amount of uncertainty contributed by global political events. In light of this, the Group will continue to apply prudent cost management measures.
The Group continues to search for acquisition and investment opportunities across its divisions in related business fields, as well as in potential new business fields. Given the Group’s strong net cash position of $188.1 million, available-for-sale financial assets and financial assets held for trading of $67.1 million, and untapped $500 million multi-currency medium-term note programme, the Group is in an excellent position to capitalise on any good acquisition and investment opportunities that may arise.
While the Group believes it will continue to be profitable in FY2018, the level of profit may not match that of FY2017 due to the current macro economic environment and the significant non-recurring gains registered in FY2017. Nonetheless, the Group’s healthy balance sheet and fundamentally-sound businesses place it in good stead to weather a prolonged challenging and competitive period.