United Engineers Limited

Email This Print This

Full Year Financial Statement Announcement For The Financial Period Ended 31 December 2013

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Income Statement

Profit and loss

Comprehensive Income Statement

Comprehensive Income Statement

Statement of Financial Position

Balance Sheet

Review of Performance

The Group's (excluding WBL Group) core businesses comprise Property Development, Property Rental & Services and Engineering & Construction.

Following the successful takeover offers for WBL which closed on 29 May 2013, WBL has become a 56.77% subsidiary of the Company. The WBL Group's results were consolidated with the UE Group's result thereafter.

WBL Group's core businesses comprise Automotive, Property, Technology and Engineering, Manufacturing & Distribution (EMD).

FY2013 compared with FY2012

Revenue increased 238% to $2.01 billion in 2013 from $595.7 million in 2012, mainly due to the consolidation of WBL Group's revenue contribution of approximately $1.37 billion. The higher revenue was also attributable to the increased rental from the Group's income producing properties, revenue recognition from Eight Riversuites and higher revenue contribution from the Group's listed subsidiary UE E&C Ltd.

Gross profit increased 61% to $313.5 million in 2013 in line with the increase in revenue. Gross profit margin dropped to 15.6% in 2013 as compared with 32.6% in 2012 mainly attributable to gross losses incurred by one of the listed subsidiaries of WBL Group, Multi-Fineline Electronix, Inc. (MFLEX).

Other income increased to $184.8 million in 2013 from $21.3 million in 2012. This was mainly due to:

  1. divestment gain of approximately $115.9 million from the sale of UE Bizhub EAST;
  2. the deemed disposal gain of approximately $21.4 million from available-for-sale financial assets (previously held directly and indirectly through an associated company, by UE Group) now accounted for as subsidiaries arising from the acquisition of WBL; and
  3. gain of approximately $12.3 million from the disposal of available-for-sale financial assets held by WBL Group.

Distribution costs increased to $78.4 million in 2013 from $12.2 million in 2012 mainly due to the inclusion of WBL Group's distribution costs of approximately $65.5 million.

Administrative expenses increased 116% to $183.0 million in 2013 from $84.9 million in 2012. This was mainly due to:

  1. inclusion of WBL Group's administrative expenses of approximately $50.3 million;
  2. higher staff and operating costs arising from the commencement of operation of UE Bizhub EAST and Park Avenue Changi, as well as operating costs incurred on the investment properties acquired in 2013;
  3. professional fee and related expense of approximately $7.6 million incurred in connection with the acquisition of WBL; and
  4. consent fees of approximately $4.5 million paid to UEL's Multicurrency Medium Term Note bondholders pursuant to the approval of amendments made to the MTN Trust Deed recorded in 2013.

Finance costs increased 93% to $32.4 million in 2013 from $16.8 million in 2012 mainly due to the finance cost incurred on borrowings to finance the acquisition of WBL and the property at 79 Anson Road. The increase was also due to the cessation of the capitalisation of interest expense arising from the completion of UE Bizhub EAST.

Other expenses increased to $103.6 million in 2013 from $13.7 million in 2012 mainly due to the impairment charge of approximately $87.3 million recorded by the Group to adjust its carrying value in MFLEX's assets to the recoverable amount. The impairment assessment was necessitated in view of recent announcement by MFLEX that it has undertaken a review of its manufacturing capacity to align its cost structure with net sales levels.

Income tax expense increased to $52.1 million in 2013 from $14.3 million in 2012 mainly due to higher expenses not deductible for tax purposes and non-availability for group relief of the losses incurred by certain overseas subsidiaries.

The Group's attributable profit increased to $118.1 million in 2013 compared with $72.2 million in 2012.

Earnings per ordinary stock unit (EPS) was 24.5 cents in 2013 as compared with 20.0 cents (restated) in 2012.

Net asset per ordinary stock unit stood at $2.84 as at 31 December 2013 as compared with $2.75 (restated) as at 31 December 2012.

Financial position review

  • The increase in the Group's property, plant and equipment, investments in associates, investments in joint ventures, inventories and properties held for sale as compared with FY 2012 was mainly due to the consolidation of WBL Group.
  • Investment properties increased by $667 million mainly due to the acquisition of the commercial property at 79 Anson Road and commercial office tower and industrial building at 450 & 452 Alexandra Road. The increase was partially offset by the sale of UE Bizhub EAST to the trustee of the Viva Industrial Real Estate Investment Trust. The sale was completed on 4 November 2013.
  • Intangible assets increased by $62 million mainly due to the intangibles and goodwill identified from the Purchase Price Allocation exercise carried out by the Group in relation to the acquisition of WBL Group.
  • Current trade and other receivables increased by $233 million mainly due to the consolidation of WBL Group's trade and other receivables of $375 million, which was partially offset by collection of the balance payment from The Rochester project upon obtaining the Certificate of Statutory Completion.
  • The increase in assets and liabilities of disposal group classified as held for sale relates mainly to the proposed sale of UE Orchard Pte Ltd and UE Somerset Pte Ltd to OCBC under a sale and purchase agreement with OCBC as announced in June 2010. The divestment of UE Orchard Pte Ltd and UE Somerset Pte Ltd is expected to be concluded by Q3 2014.
  • Current trade and other payable increased by $612 million mainly due to the consolidation of WBL Group.
  • Total borrowings increased by $1.34 billion mainly due to the drawdowns of loans to finance the acquisition of properties at 79 Anson Road and 450 & 452 Alexandra Road as well as the consolidation of WBL Group's borrowings of $533 million. The increase was also due to the drawdowns of loans to finance the construction of orchardgateway.

Segment review

Property Development

Revenue recorded in 2013 was contributed by the Group's latest private condominium development Eight Riversuites whereas revenue recorded in 2012 was in relation to the resale of apartment units from a completed project. The executive condominium development project currently undertaken by the Group, Austville Residences is accounted for based on completion of construction (COC) method. This project is expected to be completed in H1 2014. Operating profit before interest increased 85% to $3.7 million in 2013 from $2.0 million in 2012 mainly in line with the increase in revenue, as well as due to the write back of excess cost provisions on completed projects.

Property Rental & Services

Revenue increased 14% to $205.7 million in 2013 from $180.8 million in 2012 mainly due to rental contribution from UE Bizhub EAST, Park Avenue Changi and 79 Anson Road. Operating profit before interest increased 171% to $180.5 million in 2013 from $66.6 million in 2012 mainly due to the divestment gain of approximately $115.9 million from the sale of UE Bizhub EAST.

Engineering & Construction

Revenue increased marginally to $455.7 million in 2013 from $452.8 million in 2012 mainly due to contribution from the Group's listed subsidiary UE E&C Ltd. Operating profit before interest increased 58% to $62.4 million in 2013 from $39.5 million in 2012 mainly due to cost savings upon the finalisation of accounts on completed projects.

WBL Group

This represents WBL Group's results for the period from June 2013 to December 2013 following the successful takeover offers of WBL which closed on 29 May 2013. Revenue contribution for 2013 was primarily from WBL Group's Automotive and Technology businesses. Operating loss before interest was mainly due to gross losses arising from excess manufacturing capacity by MFLEX as a result of lower net sales, losses by the Property division as well as impairment loss taken up by the Group to adjust its carrying value in MFLEX's assets to the recoverable amount. These losses were partially offset by profits from its other business divisions.

Contribution by the various business divisions within WBL Group is as follows:

Review

Cash flow review

As at 31 December 2013, the Group had cash and cash equivalents of $889 million of which $291 million was contributed by WBL Group. During the year ended 2013, the Group received the balance payment from The Rochester and progress billings from Austville Residences and Eight Riversuites. These were partially offset by development expenditure of $338 million incurred for orchardgateway, Austville Residences, Eight Riversuites and WBL's China development projects.

The Group utilised $878 million in investing activities of which mainly $422 million was for the acquisition of the property at 79 Anson Road, $414 million for the acquisition of the property at 450 & 452 Alexandra Road and $312 million (net of cash acquired) for the acquisition of WBL Group.

The Group also received net proceeds of approximately $454 million from the Rights Issue (as defined in the Company's Offer Information Statement dated 27 August 2013). The entire net proceeds from the Rights Issue has been used to repay borrowings.

Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2012 to 31 December 2013 were the result of the Group's other ongoing operations.

Commentary

The on-going cooling measures by the Singapore and Chinese Governments will continue to weigh on the sentiment of home buyers. The progress of property development projects of the Group are on track. However, the accounting treatment on revenue recognition for certain projects using the completion-ofconstruction method has resulted in an uneven recognition of revenues and profits. The Group's expanded portfolio of investment properties will smoothen out the volatility associated with the accounting treatment in recognising the property development profits.

The Group remains optimistic about its construction and engineering businesses as the construction demand for 2014 is expected to remain relatively strong. With the tight foreign labour policies implemented by the Singapore Government, the Group will continue to strive to raise productivity through improving its work processes and introducing new technology in its operations and project execution.

Against a backdrop of the impact of policy changes in the Automotive industry in Singapore, the Group is cautiously optimistic that there will be sustained demand for WBL's luxury and premium marques due to its portfolio of diverse brands. At the same time, the Group will continue to focus on growing its automotive businesses and building its position as a leading premium car distributor in the Asia-Pacific region.

On 20 February 2014, the Group's subsidiary, MFLEX (which the Group has an effective interest of 37.1%) has announced its restructuring plan designed to return the company to profitability. In an effort to realign its manufacturing capacity and costs with expected revenue, MFLEX is consolidating its production facilities to reduce the total manufacturing floor area by approximately one-third. These changes are expected to be completed by end of June 2014.

MFLEX expects to record a total of approximately US$ 40 million to US$ 60 million in pre-tax charges for write-downs of production equipment and building that will be idled, severance costs to move and rearrange equipment and other costs and liabilities associated with the restructuring. The charges are anticipated to be taken during the next few quarters. The near-term cash outlay portion of these charges is expected to be less than US$20 million. In connection with these actions, MFLEX anticipates annual cost savings of approximately US$50 million, and expect to return to profitability excluding special charges toward the end of the year and to exit the year with strong operating cashflow.

MFS Technology Ltd will continue to explore new opportunities to engage with new customers and markets.

As part of the Group's on-going review in relation to its operations, the Group will continue to explore and capitalise on opportunities across all businesses to further unlock shareholder value.