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 performance. Full-year to full-year comparisons are more appropriate for analytical purposes.
For 4Q FY2018, the Group registered revenue that was 28% higher year-on-year at $116.7 million. However, total profit and profit attributable to equity holders of the Company (“net profit”) were 38% and 18% lower year-on-year at $10.5 million and $7.5 million respectively, due to a notable absence of other gains in 4Q FY2018 in contrast to sizeable other gains in 4Q FY2017.
For FY2018, the Group registered revenue that was 5% lower year-on-year at $414.1 million. Total profit and net profit were 23% and 24% lower year-on-year at $41.1 million and $25.4 million respectively, due to other losses in FY2018 in contrast to sizeable other gains in FY2017.
In 4Q FY2017 and FY2017, sizeable other gains were recorded mainly due to a tenant’s early lease termination compensation, a gain on disposal of an available-for-sale financial asset and related financial effects that benefitted the Group’s separately listed Real Estate Solutions Division (under Boustead Projects Limited).
For a comparative review of net profit after adjusting for other gains/losses net of non-controlling interests (“core net profit”), core net profit for 4Q FY2018 would have been approximately S$1.4 million or 23% higher year-on-year than 4Q FY2017. Likewise, core net profit for FY2018 would have been approximately S$4.4 million or 18% higher year-on-year than FY2017
Each division’s revenue performance for FY2018 is summarised below.
The global oil & gas recession continued for a third consecutive year, weighing down on the EnergyRelated Engineering Division’s revenue, which was a marginal 2% lower year-on-year at $94.9 million. The decline in the oil & gas business units’ revenue due to delays in major oil & gas expenditures by clients was mostly offset by the water & wastewater engineering business unit’s significant jump in revenue.
The Real Estate Solutions Division (under Boustead Projects) topped revenue contributors for the eleventh consecutive year, registering revenue that was 12% lower year-on-year at $201.3 million, on lower revenue contributions from both the design-and-build and leasing businesses amid the challenges of the industrial real estate sector.
Marking a new division record, the Geo-Spatial Technology Division lifted revenue 8% higher yearon-year to $116.6 million. This was achieved on steady demand across exclusive markets in Australia and South East Asia.
The Group’s overall gross profit for FY2018 increased 6% year-on-year to $151.8 million, with the overall gross margin improving to 37% compared to 33% in FY2017, largely due to the better gross margin achieved by Boustead Projects. Nonetheless, gross margin pressure remains present across the Group.
Other losses for FY2018 were $4.3 million, mainly due to currency exchange losses amounting to $5.0 million. This sharply contrasted with other gains for FY2017 of $17.0 million, mainly due to a tenant’s early lease termination compensation, a gain on disposal of an available-for-sale financial asset and related financial effects, along with currency exchange gains.
Total overhead expenses for FY2018 marginally edged up 1% year-on-year to $94.7 million (selling and distribution expenses of $33.5 million, and administrative expenses of $61.2 million). Rising overhead expenses due to team expansions at the Real Estate Solutions Division and Geo-Spatial Technology Division were offset by leaner teams at the Energy-Related Engineering Division, which right-sized in 4Q FY2017 in line with market conditions.
Finance expenses for FY2018 declined 21% year-on-year to $2.0 million, following the scheduled repayment of borrowings by Boustead Projects in relation to the industrial leasehold portfolio.
Share of loss of an associated company and joint ventures for FY2018 was 6% higher year-on-year at $2.9 million, largely driven by Boustead Projects eliminating construction and project management profits attributable to projects which Boustead Projects has entered into with an associated company and joint ventures.
Profit before income tax (“PBT”) for FY2018 fell 20% year-on-year to $54.0 million, mainly due to the shift from other gains to other losses over the two comparative periods as explained earlier, and partially offset by higher gross profit. A breakdown of PBT by divisions is provided as follows.
The PBT performance of the Energy-Related Engineering Division for FY2018 was affected by currency exchange losses, along with an allowance for impairment of inventories at an oil & gas business unit as a result of inventory obsolescence. Excluding these effects, the Energy-Related Engineering Division would have been profitable, along with the Real Estate Solutions Division and Geo-Spatial Technology Division.
Total profit for FY2018 declined 23% year-on-year to $41.1 million due to reasons mentioned earlier. The Group’s effective corporate tax rate was 24% compared to 21% in FY2017, arising from greater profit contribution in countries with higher corporate tax rates.
Net profit for FY2018 decreased 24% year-on-year to $25.4 million due to reasons mentioned earlier
In view of the Group’s better core net profit performance for FY2018 and Boustead Projects’ proposal of a final ordinary dividend of 1.5 cents per share, the Board has proposed a final ordinary dividend of 2 cents per share payable in cash for shareholders’ approval. Together with the interim ordinary dividend of 1 cent per share, the total ordinary dividend for FY2018 would be 3 cents per share, a 50% increase over that paid out for FY2017.
During FY2018, cash and cash equivalents (after taking into account the effects of currency translation) decreased $11.1 million to $265.4 million, largely as a result of net cash outflows for financing activities, partially offset by net cash inflows for operating and investing activities.
Net cash inflows for operating activities amounted to $42.6 million, after accounting for a negative change in working capital of $16.0 million.
Net cash inflows for investing activities amounted to $15.2 million, mainly due to $37.0 million in net proceeds from available-for-sale financial assets, offset by $17.9 million in additional loans extended to an associated company and joint ventures.
Net cash outflows for financing activities amounted to $67.4 million, as numerous capital allocations were performed including $17.9 million in the scheduled repayment of borrowings, $31.5 million in repurchasing shares of Boustead Singapore and Boustead Projects under the two companies’ respective share buy-back mandates, and $18.2 million in dividends paid to shareholders and non-controlling interests.
At the end of FY2018, the Group’s financial position remained healthy.
Under assets, cash and cash equivalents decreased to $265.4 million as explained under the earlier section on FY2018 Statement of Cash Flows. Total other receivables and prepayments fell nearly one quarter, mainly due to the receipt of proceeds from the disposal of an available-for-sale financial asset and a tenant’s early lease termination compensation. Inventories significantly decreased due to an allowance for impairment of inventories at an oil & gas business unit. Net contracts work-inprogress roughly doubled to $14.3 million due to uninvoiced work completed for clients. Total available-for-sale financial assets decreased, largely due to movements in the Group’s Cash Management Programme.
Under non-current assets, investment properties declined mainly due to depreciation. Investments in joint ventures rose in line with the extension of additional loans to joint ventures for the development of leasehold properties.
Under liabilities, total borrowings significantly decreased to $70.5 million following the scheduled repayment of borrowings by Boustead Projects in relation to the industrial leasehold portfolio.
The Group’s net asset value per share strengthened to 62.7 cents at the end of FY2018 from 61.7 cents at the end of FY2017, while the net cash position (i.e. net of all bank borrowings) strengthened to $194.9 million at the end of FY2018, translating to a net cash per share position of 39.5 cents. In addition, the Group held $59.9 million in available-for-sale financial assets and financial assets held for trading at the end of FY2018, of which about two-thirds of the amount is highly liquid.
The current macro economic environment continues to be highly challenging and competitive, with a great amount of uncertainty contributed by global political events. Nonetheless, the Group captured $313 million in contracts in FY2018 as compared to $180 million in FY2017. The current order book backlog stands at about $307 million (unrecognised project revenue remaining at the end of FY2018 plus the total value of new orders secured since then), of which $89 million is under the EnergyRelated Engineering Division and $218 million is under the Real Estate Solutions Division.
Given the healthier order book backlog and an improvement in the outlook across the sectors that the Group operates in, the Group is cautiously optimistic about business prospects. Global events in recent months indicate a slight improvement in the outlook for the Energy-Related Engineering Division. Meanwhile, stable business prospects are expected for the Real Estate Solutions Division and Geo-Spatial Technology Division.
With a healthy balance sheet and net cash position of $194.9 million, available-for-sale financial assets and financial assets held for trading of $59.9 million, and wide range of financing options, the Group upholds a robust position to capitalise on any good M&A and investment opportunities that may arise, both in traditional sectors as well as on potentially new fronts.
The Group expects to continue to improve its performance in FY2019.