United Engineers Limited

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Q1 2016 Financial Statement Announcement

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

Q1 2016 compared with Q1 2015

Revenue decreased 35% to $333.6 million in Q1 2016 from $515.3 million in Q1 2015. This was mainly due to lower revenue recognition from Eight Riversuites, which has sold 98% of the total units, and lower revenue contribution from Multi-Fineline Electronix, Inc. (MFLEX). As a result, gross profit decreased 32% to $58.4 million in Q1 2016.

Other income decreased 91% to $1.0 million in Q1 2016 from $11.2 million in Q1 2015 mainly due to the absence of divestment and disposal gains in Q1 2016.

Administrative expenses decreased 10% to $34.4 million in Q1 2016 from $38.2 million in Q1 2015 mainly due to lower staff and related costs in Q1 2016.

Other expenses increased 113% to $5.0 million in Q1 2016 from $2.3 million in Q1 2015 mainly due to foreign exchange losses recorded in Q1 2016.

Share of profit from equity-accounted associates and joint ventures was $2.3 million in Q1 2016 compared to loss of $0.6 million in Q1 2015 mainly due to the share of profit from an environmental engineering associate in Singapore as well as lower share of losses from the overseas associates and joint ventures.

Income tax expense increased 33% to $2.2 million in Q1 2016 from $1.7 million in Q1 2015. The higher income tax expense in Q1 2016 was mainly due to non-availability for group relief of losses incurred by certain subsidiaries. The lower income tax expense in Q1 2015 was mainly due to the write-back of over provision for prior years' income tax.

The Group's attributable profit decreased 72% to $6.9 million in Q1 2016 from $25.0 million in Q1 2015.

The Group recorded attributable comprehensive loss of $16.3 million in Q1 2016 mainly due to the unrealised foreign exchange losses arising from the translation of its net investment in foreign subsidiaries because of the unfavourable movement of US Dollars and Renminbi against Singapore Dollars.

Financial position review

  • Current trade and other receivables increased by $106 million mainly due to the recognition of retention sums upon the completion of the Eight Riversuites project.
  • Properties held for sale decreased by $369 million mainly due to the completion of the Eight Riversuites project.
  • Total borrowings decreased by $204 million mainly due to repayment of external bank borrowings.
  • Current trade and other payables declined by $58 million mainly due to the decrease of trade payables in the technology business.
  • Other reserves decreased by $26 million mainly due to translation loss from net investment in foreign operations.

Cash flow review

As at 31 March 2016, the Group had cash and cash equivalents of $455 million. In Q1 2016, the Group received $376 million mainly from the progress billings for Eight Riversuites project and utilised $225 million for the repayment of external bank borrowings. Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2015 to 31 March 2016 were mainly the result of the Group's other ongoing operations.

Operation review

Property Rental & Services

Revenue increased marginally to $33.9 million in Q1 2016 from $33.8 million in Q1 2015. Operating profit before interest increased 25% to $18.2 million in Q1 2016 from $14.6 million in Q1 2015 mainly due to lower staff and related costs.

Property Development

Revenue decreased 75% to $43.7 million in Q1 2016 from $173.8 million in Q1 2015 mainly due to lower revenue recognition from the property sales at Eight Riversuites. Operating loss before interest was $0.4 million in Q1 2016 compared with a profit of $7.0 million in Q1 2015 mainly due to lower revenue and higher operating expenses incurred by the China operations.

Engineering & Distribution

Revenue increased 34% to $77.2 million in Q1 2016 from $57.8 million in Q1 2015 mainly due to higher contribution from the environmental engineering business. Operating profit before interest increased 26% to $4.9 million in Q1 2016 from $3.9 million in Q1 2015 mainly due to higher margin recorded for certain ongoing environmental engineering projects.

Technology & Manufacturing

Revenue decreased 28% to $164.4 million in Q1 2016 from $227.2 million in Q1 2015 mainly due to lower revenue contribution from MFLEX. Operating loss before interest was $11.3 million in Q1 2016 compared with a profit of $16.6 million in Q1 2015 mainly due to the losses incurred by MFLEX in Q1 2016 as a result of lower sales volume and gross margin mainly attributable to softness in the global smartphone market. This was partly offset by better performance from the precision engineering manufacturing operations in China.

Commentary

The global economic slowdown and the weaker economic prospects in Singapore coupled with the sustained impact of the property cooling measures will 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 against the backdrop of slower economic growth and patchy 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.