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The Group's major businesses comprise Property Development, Property Rental & Services, Engineering and the businesses of its 67.6% subsidiary WBL, which primarily engages in China Property, Technology and Engineering, Manufacturing & Distribution (EMD). With effect from November 2014, WBL has divested its Automotive business.
At an EGM held on 28 November 2014, the shareholders of the Company approved the proposed disposal of UE E&C to Universal EC Investments Pte. Ltd. (UECI). On 29 December 2014, the Group announced that it has accepted the voluntary conditional offer made by UECI and UE E&C has thereafter ceased to be a subsidiary of the Company.
In accordance with FRS 105, Non-current Assets Held for Sale and Discontinued Operations, the results and the gain on disposal of UE E&C have been presented separately on the consolidated income statement as Discontinued Operation. As a result, the Group's Engineering segment now principally comprises the environmental engineering business.
FY2014 compared with FY2013
(Note: FY2014 included consolidation of WBL Group's twelve (12) months results from January to December 2014 whereas corresponding FY2013 only included consolidation of WBL Group's seven (7) months results from June to December 2013.)
Revenue increased 93% to $3.21 billion in 2014 from $1.66 billion in 2013 mainly due to the consolidation of WBL Group's revenue of approximately $2.01 billion (as compared with $1.37 billion in FY2013). The full revenue recognition from the property sales at Austville Residences (in accordance with the completion-of-construction accounting method) as well as higher progressive revenue recognition from the property sales at Eight Riversuites also contributed to the higher revenue in 2014.
In line with the increase in revenue, gross profit increased 80% to $414.6 million in 2014. However, gross profit margin decreased slightly from 13.9% in 2013 to 12.9% in 2014.
Other income decreased 89% to $19.4 million in 2014 from $179.7 million in 2013 mainly due to:
- Absence of the following disposal gain which were recorded in 2013
- These were partially offset by a net disposal gain of approximately $11.6 million from the sale of subsidiaries, associates and joint ventures in 2014.
Distribution costs increased 41% to $98.6 million in 2014 from $69.9 million in 2013 mainly due to the inclusion of WBL Group's distribution costs of approximately $95.5 million in 2014 compared with approximately $65.5 million in 2013.
Finance costs increased 33% to $42.0 million in 2014 from $31.6 million in 2013 mainly due to inclusion of WBL Group' finance costs of approximately $5.8 million in 2014 compared with approximately $1.8 million in 2013. The acquisition of UE BizHub WEST in Q4 2013 has also contributed to the increase in finance costs in 2014.
Other expenses decreased 50% to $47.9 million in 2014 from $95.4 million in 2013 mainly due to the absence in 2014 of the impairment charge of approximately $87.3 million recorded by the Group to adjust its carrying value of MFLEX's assets. This was offset by a write down to net realisable value of approximately $15.9 million and provision for foreseeable losses of approximately $8.9 million in relation to certain overseas development projects due to weak market conditions and expected delay in project completion.
The Group's attributable profit on continuing operations decreased to $46.0 million in 2014 compared with $89.5 million in 2013. The Group's overall attributable profit (continuing and discontinued operations) increased 5% to $123.6 million in 2014 compared with $118.1 million in 2013.
Financial position review
During the financial year, the Group disposed of the following subsidiaries, associates and joint ventures
- 100% stake in Delichem Pte Ltd;
- 78% interest in Suzhou Industrial Park Jian Wu Heng Ye Property Development Co Ltd (termed as JWHY) (held through its 67.6% owned subsidiary, WBL);
- effective 57% shareholding interest in MFS Technology (S) Pte Ltd;
- 100% stake in UE Orchard Pte. Ltd. and UE Somerset Pte. Ltd. (which undertook the orchardgateway project);
- 100% interest in Wearnes Automotive Pte Ltd and Associated Motor Industries (Private) Limited (held through its 67.6% owned subsidiary, WBL); and
- 68.2% interest in UE E&C.
(collectively known as Disposal of Subsidiaries)
Cash flow review
As at 31 December 2014, the Group had cash and cash equivalents of $538(2) million compared with $889 million in 2013.
During the financial year, the Group received progress billings of $348 million mainly from Austville Residences and Eight Riversuites. The Group also received $353 million from the settlement of loans extended for the orchardgateway project and proceeds of $397 million (net of cash disposed) from the disposal of subsidiaries, associates and joint ventures. Separately, the Group utilised $1.07 billion for the repayment of external bank borrowings and incurred properties development expenditure expenses of $335 million primarily for orchardgateway, Austville Residences, Eight Riversuites and WBL's China property development projects. The Group also utilised $131 million for the delisting offers for WBL Group and $59 million for dividend payments during the financial year.
Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2013 to 31 December 2014 were the result of the Group's other ongoing operations.
(1): Under Financial Reporting Standard 105 (FRS105), re-classification of the carrying value of assets and liabilities of disposal group as held for sale is required if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Such sale should be expected to qualify for recognition as a completed sale within 12 months from the date of such classification.
(2): After taking into account restricted deposits represented by cash placed in an escrow account by a listed subsidiary in compliance with SGX-ST's Rule.
Revenue increased 64% to $90.6 million in 2014 from $55.1 million in 2013 mainly due to higher contribution from the Group's environmental engineering projects. Operating loss before interest was $5.0 million in 2014 compared with a profit of $6.7 million in 2013 mainly due to project cost overruns and an impairment charge of approximately $3.0 million made by the Group against its carrying value of an environmental engineering plant in China, as well as the absence of disposal gain recognised in 2013 of approximately $3.0 million from the sale of a subsidiary in Hong Kong.
Revenue increased to $865.8 million in 2014 from $39.9 million in 2013 mainly due to the full revenue recognition for Austville Residences as well as higher progressive revenue recognition from the property sales at Eight Riversuites. Operating profit before interest increased to $54.2 million in 2014 from $3.7 million in 2013 mainly due to the contribution from Austville Residences and Eight Riversuites. This was partially offset by provision for foreseeable losses in relation to an overseas project due to weak market conditions and expected delay in project completion.
Property Rental & Services
Revenue increased 18% to $241.9 million in 2014 from $205.7 million in 2013 mainly due to full year rental contribution from UE BizHub WEST which was acquired in Q4 2013. Operating profit before interest decreased 53% to $85.0 million in 2014 from $180.5 million in 2013 mainly due to the absence of the divestment gain of approximately $115.9 million from the sale of UE BizHub EAST recorded in 2013, which was partially offset by full year profit contribution from UE BizHub WEST in 2014.
Operating loss before interest of $16.8 million in 2014 was lower compared with $125.2 million in 2013 mainly due to the restructuring effort undertaken by MFLEX to return the company to profitability and the absence of the impairment loss taken up by the Group in 2013 to adjust its carrying value in MFLEX's assets to the recoverable amount. The property division incurred a higher operating loss mainly due to write down to the net realisable value for two of its major development projects in China due to weak market conditions.
Contributions by the various business divisions within WBL Group are as follows:
(1): Consist of seven (7) months (i.e. June 2013 to December 2013) results. WBL became a subsidiary of the Group on 29 May 2013, and correspondingly, WBL Group was consolidated with the Group from the month of June 2013.
(2): Include MFLEX and MFS Technology Ltd group of companies.
(3): This relates to net gain/(loss) arising from dissolution/divestment of subsidiaries, associates and joint ventures as well as disposal of
Exceptional Items in 2014 mainly relate to losses incurred in relation to dissolution of subsidiaries and disposal of WBL Automotive Division, gains on divestment of WBL's investment in Suzhou Industrial Park Jian Wu Heng Ye Property Development Co., Ltd and MFS Technology (S) Pte Ltd.
Exceptional Items in 2013 mainly relate to gain from the disposal of investment in Amlogic Inc.
The ongoing property cooling measures implemented by the Singapore Government and the slower economic growth in China may continue to weigh on the sentiment of home buyers. 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 progressive revenue recognition of Eight Riversuites, which has sold over 90% of its available units and the Group's enlarged portfolio of investment properties will help to reduce this volatility.
On 6 February 2015, MFLEX has announced that following the completion of the restructuring in 2014, it intends to continue to reduce its cost structure to lower the breakeven revenue level.
On 27 August 2014, the Company announced that Oversea-Chinese Banking Corporation Limited (OCBC) and Great Eastern Holdings Limited (GEH) have entered into an exclusivity agreement with TCC Top Enterprise Limited (TCC) in connection with a possible transaction relating to their combined stakes in the Company and WBL, which may or may not lead to an offer for the shares of the Company and WBL (the "Possible Transaction"). On 14 February 2015, it was subsequently announced that OCBC, GEH and TCC are not able to reach an agreement on an appropriate transaction structure for the Possible Transaction and the exclusivity agreement whereby OCBC and GEH have entered into discussions on an exclusive basis with TCC in relation to the Possible Transaction has lapsed.