United Engineers Limited

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Full Year Financial Statement Announcement For The Financial Period Ended 31 December 2015

Financials Archive

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Income Statement

Profit and loss

Comprehensive Income Statement

Comprehensive Income Statement

Statement of Financial Position

Balance Sheet

Review of Performance

Overview

With effect from 2015, the Group's main reporting segments are Property Rental & Services, Property Development, Engineering & Distribution, Technology & Manufacturing and Corporate Services & Others.

(Note: FY2014 included the results of Automotive and MFS Technology (S) Pte Ltd (MFSS) businesses. FY2015 did not have the results of Automotive and MFSS businesses as these businesses were divested towards the end of 2014.)

FY2015 compared with FY2014

Revenue decreased 42% to $1.9 billion in 2015 from $3.2 billion in 2014 mainly due to the absence of revenue contribution from the completed Austville Residences project which was recorded in 2014 based on the completion of construction method, as well as the absence of contributions from the divested Automotive and MFSS businesses. The decrease was partially offset by higher revenue contribution from the Group's NASDAQ-listed subsidiary, Multi-Fineline Electronix, Inc. (MFLEX).

As a result of the lower revenue, gross profit decreased 18% to $340.6 million in 2015. Gross profit margin increased to 18.3% in 2015 from 12.9% in 2014, mainly due to the positive contribution from MFLEX, which has turned around from a gross loss position in 2014.

Other income increased 125% to $43.7 million in 2015 from $19.4 million in 2014. This was mainly due to:

  • $6.6 million from the disposal of a manufacturing facility in China;
  • $5.4 million from the disposal of available-for-sale assets in Malaysia;
  • higher net disposal gains of $4.9 million from the sale of subsidiaries, associates and joint ventures; and
  • higher foreign exchange gains of $4.4 million.

Distribution costs decreased 53% to $46.2 million in 2015 from $98.6 million in 2014 and administrative expenses decreased 18% to $141.5 million in 2015 from $172.6 million in 2014 mainly due to the absence of expenses from Automotive and MFSS businesses which were divested towards the end of 2014.

Finance costs decreased 12% to $37.1 million in 2015 from $42.0 million in 2014 mainly due to lower borrowings.

Other expense decreased 34% to $31.7 million in 2015 from $47.9 million in 2014. This was mainly due to:

  • lower write down to net realisable value of $3.4 million in relation to certain development projects;
  • lower impairment charges on intangible assets of $5.5 million; and
  • absence of provision for foreseeable losses of $8.9 million in relation to certain overseas development project.

Share of profit from equity-accounted associates and joint ventures was $4.4 million in 2015 compared to loss of $0.3 million in 2014 mainly due to the positive contribution from a joint venture in Malaysia arising from the sale of a property in 2015.

Income tax expense decreased 81% to $6.6 million in 2015 from $35.3 million in 2014. The lower income tax expense in 2015 was mainly due to the write-back of over provision of prior years' income and deferred tax. In contrast, the higher income tax expense in 2014 was mainly attributable to the non-availability for group relief of losses incurred by certain overseas subsidiaries and a tax charge from the reversal of the deferred tax assets recorded by certain overseas subsidiaries.

The Group's attributable profit on continuing operations increased 122% to $102.2 million in 2015 from $46.0 million in 2014.

Financial position review

  • Interests in joint ventures decreased by $36 million mainly due to the dividend received from the Group's joint venture companies.
  • Current trade and other receivables decreased by $67 million mainly driven by improved collections in the Group's Technology business.
  • The decrease in assets and liabilities of disposal group classified as held for sale is mainly due to the completion of the disposals of UE Managed Solutions Pte. Ltd. (UEMS), UE ServiceCorp (Taiwan) Limited and Tangshan UE Shengxing Renewable Resources Co., Ltd in 2015.
  • Current trade and other payables decreased by $87 million mainly due to the decline of trade payables in the Group's Technology business as well as lower accruals for projects costs.
  • Total borrowings decreased by $273 million mainly due to repayment of external bank borrowings during the year.

Cash flow review

As at 31 December 2015, the Group had cash and cash equivalents of $482 million compared with $538 million in 2014.

During the financial year, the Group received progress billings of $256 million mainly from Eight Riversuites. The Group incurred total development expenditure of $165 million mainly for Eight Riversuites and the Group's China property development projects. In addition, the Group also utilised $116 million for dividends payments.

Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2014 to 31 December 2015 were the result of the Group's other ongoing operations.

Segment review

Property Rental & Services

Revenue decreased 8% to $139.0 million in 2015 from $150.6 million in 2014 mainly due to the absence of project management fees. Operating profit before interest decreased 15% to $68.8 million in 2015 from $81.0 million in 2014 as a result of lower revenue.

Property Development

Revenue decreased 54% to $402.0 million in 2015 from $881.2 million in 2014 and operating profit before interest decreased 59% to $18.4 million in 2015 from $44.7 million in 2014. The declines were mainly due to the absence of revenue and profit contribution from the completed Austville Residences project which was recorded in 2014 based on the completion-of-construction method.

Engineering & Distribution

Revenue increased 8% to $285.6 million in 2015 from $265.0 million in 2014 mainly due to higher contribution from the Group's environmental engineering projects. The increase was partially offset by lower revenue contribution from the liquefied petroleum gas distribution business. Operating profit before interest increased to $8.1 million in 2015 from $2.2 million in 2014 mainly due to improved margins recorded for certain ongoing environmental engineering projects.

Technology & Manufacturing

Revenue increased 10% to $971.1 million in 2015 from $879.6 million in 2014 mainly due to higher contribution from MFLEX. Operating profit before interest was $63.9 million in 2015 compared with an operating loss of $12.5 million in 2014 mainly due to the turnaround and positive contribution by MFLEX.

Commentary

The sustained impact of the property cooling measures, the global economic slowdown, as well as increased volatilities in the financial and commodities markets continue to weigh on the sentiment of the property markets in Singapore. The Group's China Property division is likely to continue to face challenging operating conditions amidst slower economic growth and weak demand in the property market in China. The accounting treatment on revenue recognition for certain projects using the completion-of-construction method will result in volatility in the recognition of revenues and profits. Nevertheless, the revenue generated from the Group's portfolio of investment properties will help to reduce this volatility.

Other Matters

On 5 February 2016, the Company announced the proposed disposal of its indirectly owned subsidiary, MFLEX to Suzhou Dongshan Precision Manufacturing Co., Ltd. The proposed disposal is subject to the fulfilment or wavier of certain pre-conditions including the approval of the shareholders of the Company to be obtained at an extraordinary general meeting.